Juul, the Multi-Billion Dollar E-Cigarette Startup, Is Betting on Technology to Address the Scourge of Smoking
Juul isn’t the first electronic cigarette brand on the market, but in just a few short years, it has grown to become one of the world’s biggest. In the United States, its home country, Juul has cornered about 75 percent of the e-cigarette market, a staggering number considering the company was incorporated only in 2015.
Juul Labs Inc. was founded by Stanford University graduates James Monsees and Adam Bowen. Both were heavy smokers and during the course of a few weeks, they realized the habit was causing them harm, which eventually led them to develop a product that they believe would become a less harmful, more realistic alternative to quitting traditional cigarettes.
“It was primarily getting what they call product market fit, and getting a product that works for smokers,” said Bowen, who was in Manila recently to kick-off the brand’s big launch. The Philippines is Juul's second market in Asia after South Korea and 15th country overall.
“We've been at this for a long time. Juul is seen as this kind of new phenomenon, but the company has actually been around since 2007. And the project started a couple years prior to that. So it was about 10 years in total, between when we first started working and then launching the real disruptive product,” said Bowen.
A multi-billion-dollar business
The most recent estimates pegged Juul Lab Inc.’s valuation at around $38 billion and Bowen’s personal fortune at around $1.1 billion, according to Forbes. Still, Bowen was coy when asked if the company is already turning in a profit.
“What I would say is that the business model is profitable,” he said. “But what we do is reinvest the profit for growth and innovation. So we're continuing to reinvest in R&D for new products or new manufacturing, and to finance expansion into new markets.”
Bowen attributes the reason for Juul triumphing over its competitors to “a lot of trial and error and a lot of prototyping.” The 42-year-old said he and his team dove deep into many scientific disciplines and areas of engineering, some of which were foreign to them.
“We’re primarily engineers and designers, but we had to get the technical proficiency and chemistry and other aspects of the product,” he said. “So it was really a combination of the science, engineering and design, getting all of those elements right that caused for Juul the kind of unparalleled success in the U.S.”
Juul co-founders Adam Bowen (left), chief technology officer, and James Monsees, chief product officer
Bowen also stressed that many of the e-cigarette brands that were on the market prior to Juul were “big, complicated, difficult to use and difficult to understand,” which were issues he knew he needed to address.
“We knew from the beginning that the part that was really going to make a difference was that the product would have to be simple, because smoking is simple,” he said. “It's a box that you open up, you take out a cigarette, you put in your lips, you set fire to it. Of course, that's when the real harm kicks in, with the fire. But it is a simple product, in design and use. So we knew that we needed something that was comparably easy to use.”
How Juul works
As an e-cigarette, Juul works by mimicking the experience of smoking a traditional tobacco cigarette without the fire, ash and often odorous tobacco smell. It does this by converting liquid nicotine into a mist or vapor, which the user then inhales. Juul has also become popular because its pods come in flavors including mint, crème brulee, mango and fruit.
But the company hasn’t escaped criticism, particularly from government regulators who say e-cigarettes are just as—or even more harmful—than combustible cigarettes. Some countries, like Israel, have banned Juul outright, citing “grave public health risks.” In the U.S., regulators have accused Juul of marketing to teenagers, which the company has steadfastly denied.
“I think a lot of (the criticism) stems from a misunderstanding of the product and its intended use,” Bowen said. “Our product is intended solely for adult smokers. And no one else, not even non-smokers. Certainly not youth. That should be the starting point.
“Nicotine is not a carcinogen, despite what many people believe,” he added. “It is the combustion of tobacco that causes basically all of the harm from smoking. So if you can eliminate that, you've dramatically reduced harm. This is something that is not well-understood.”
There are many studies that have been published about both the benefits and potential harm of smoking e-cigarettes, but one that Bowen cited was one by Public Health England, which said that “vaping” or the colloquial term for smoking e-cigarettes, is 95 percent less harmful than tobacco and is therefore a good way for smokers to quit.
Bowen also addressed accusations that the company is marketing directly to teenagers and young people.
“We are adamant that the product is not intended to be used by youth,” he said. “That, in fact, puts in jeopardy our ability to fulfill our mission because we need to be able to continue to market the product to the intended audience, which is adult smokers. So if there's ever an opportunity to take less sales, less revenue, while furthering the mission of helping smokers, we will.”
Bowen cited the fact that they took certain flavors off the market that were seen to be popular with the youth, which meant the company took a major hit in sales. He added they were happy to do it if it meant curbing youth usage of the product.
Juul in the Philippines
About 50 percent of the world’s one billion smokers are in Asia, which explains Juul’s push in the region. In the Philippines, about 16 million people are smokers, representing a significant market for the company.
“Roughly 28 percent of the adult male population here smokes, and those smoking rates are increasing,” said Ken Bishop, president of Juul Asia Pacific South. “Because the product is so good, and the technology so differentiated, our strategy at the most essential level is to make the product available to consumers at a price point they can afford and in places where they shop. And so our goal is to be available wherever tobacco is available.”
Although Juul has been available through tobacco retail channels for some time, the company has opened a dedicated kiosk in Bonifacio Global City and will soon open a second one in Robinsons Galleria. The company says it is willing to work with local government regulators if and when they start knocking and inquiring about how Juul and e-cigarettes work in general.
“If you think about it, it's really remarkable that smoking has gone on for so long, with so little innovation,” Bowen said. “The last innovation in cigarettes or smoking was the filtered cigarette in the 1950s. There's not much to work with in the case of the cigarette because it's a rolled-up tube of tobacco that you set on fire, right? What more can you do?
“But here we've turned it into a very high-tech product, where you have microcontrollers and sensors and liquid chemistry and electronic heating elements, so there is a ton of opportunity for tech-based innovation and then expanding into software. So in terms of what's in store what's coming, we're working on a lot of powerful tools that will help people monitor and reduce their consumption (of cigarettes). There's a real opportunity to use innovation to address basically all the problems with smoking.”