JUUL Me Once, Shame On You
The modern vaping instrument was pioneered in China by Hon Lik in the early 2000’s. Vape pens were packaged, distributed, and sold by 2004. The vaping industry grew seemingly out of nowhere, and has progressed to becoming an outright epidemic.
While there are a variety of vape brands out there, we’ll be focusing on JUUL.
Why?
For one, it just sounds cool to say (JUUL), it seems like something to be treasured.
And JUUL seems as if it is valued by many, its customers, partners and other existing tobacco industry heavyweights. JUUL has been capitalizing on this quickly growing industry and seems to be leading the pack.
But where did it come from? How did it become so popular?
That’s what we’ll want to cover.
The History of JUUL
JUUL wasn’t always its own company, it was spun out of PAX Labs and Pax Labs was Ploom.
Here’s the story.
Ploom was a concept that came out of the minds of two students at Stanford (Bowen and Monsees) who had a Masters course product design thesis on making waves and changing up things in the traditional cigarette industry.
The thesis was compelling.
They decided that they would act on it and they got to work on it immediately.
They created their initial product, tested it out and raised money from angel investors in 2007.
Then they became official.
They started off as Ploom and launched their initial product (Ploom ModelOne) in 2010.
Two years later, they launched Pax, a product that received positive reviews from the blogosphere.
They then sold their intellectual property to a Japanese partner in 2015.
They then had enough funds to open up Pax Labs, and become full owners of their company.
They conducted a raise in excess of $40M and released a line of products. They unveiled the JUUL in mid 2015.
They saw growth across their product lines but saw a rapid rise in JUUL sales over the course of 2017.
Their growth continues in 2018 with the founders minted as billionaires. This growth didn’t happen overnight. The founders focused in on an industry that was ripe for disruption, acted, and took the right steps to be where they are today.
An Overview of PAX Labs
PAX Labs has been around for more than about eleven years now, it was founded in 2007. The company is based in San Francisco and focused on the manufacturing and distribution of electronic vaporizers.
PAX Labs has raised several rounds over the course of its history, its investors include firms such as Evolution Corporate Advisors, Tiger Global Management, and E Squared Capital Management.
Its most recent round consisted of more than $15 million in financial capital and from the looks of it, funds are being put to good use.
**PAX Labs was rewarded by the market for building on several decades of research by cigarette manufacturers and innovations put forth by Hon Lik.**
PAX Labs Product Line
PAX Labs introduced four products, the PAX 1, PAX II, PAX III, and the popular PAX Era. Each new release came with new innovations and added convenience for PAX consumers. The PAX II and PAX III can provide the user with the ability to vape tobacco or the given materials and even substitute plant matter as well.
The PAX Era focused solely on users who wanted a pen for marijuana indulgence, users are able to purchase the Era and specific cannabis concentrate to enjoy a possibly better experience.
The company continues to innovate, it even released a mobile application, allowing users to take more control of the vaping experience.
JUUL is a USB-shaped product that was rolled out by PAX Labs in 2015, the entire starter kit is as cost-efficient and is said to be as effective (thanks to their integration of benzoic acid and nicotine salts) as traditional cigarettes.
JUUL is built with a customer-centric approach. Users don’t need any extra knowledge to operate a JUUL, it’s stupid simple.
The JUUL line was a hit and the JUUL division was divested in 2017. The independent company grew rapidly and now has currently more than 600 employees.
JUUL itself has raised a bit of money as well, they’ve received in excess of $12 billion over the course of their existence. Their latest investment of $12.8 billion from Altria (the parent company of popular cigarette firms) place them among top consumer startups such as AirBNB, Uber, and other popular startup unicorns.
The product is available online and in stores all over the United States, you’ll likely be able to find it at your local 7–11 or gas station.
JUUL is estimated to have revenues of at least $1 Billion Dollars.
A Deeper Dive
The figures noted above are not eye-popping or not surprising at all. As a matter of fact, many would say that these investments and valuations are well deserved.
JUUL owns about 70% of the growing $16 billion vape market.
The bet by traditional cigarette manufacturers is that cigarettes are out and vaping is in.
Cigarettes are supposed to die with the old while vaping will rise with the young (the marketing is targeted toward the young).
The vape pen is perceived as a gift to those that want do away with the social and potential health issues of cigarettes.
New fangled mobile applications and tech-oriented vaping is far more convenient, streamlined, and socially acceptable in modern society. The JUUL looks cool, is easily concealed and comes with flavors that are to die for.
Users of the vape can find solace in the fact that they aren’t an intrusion to those around them and can find that they have a large community of people who are interested in participating as well.
They can vape and not disturb others as they know the vapors are there but for an instant, leaving almost no trace.
The lure of vaping is that it is a greatly improved product and process while being socially acceptable, it is an activity that you must indulge in with others.
JUUL: Behind the Growth
JUUL’s insane growth comes from its social aspect (no social ramifications, it’s cool bro), the fact that it’s supposed to be healthier than smoking cigarettes (not smoke, tar, or carcinogens just the feel good) and its overall feasibility. There’s nothing to ash, no residue, the vape and vapor is there one moment, and gone the next.
JUUL is compared to the Lambo or the Apple of vape products. It is a status symbol and it has a closed system (you have to place JUUL pods in your JUUL).
JUUL once and you’ll JUUL for life. It’s inherently addictive, the nicotine makes you feel good and doing it with your friends makes it even better.
JUUL is not reinventing the wheel, they are just making a better one, they’re just building on top of decades of research and failed experiments done by traditional cigarette makers. They just happened to get it right.
JUUL is inherently youthful (it’s marketing is too), its cool, its sleek and it’s a new way of doing something that’s been done for centuries and as such JUUL is catering to a wide base of potential users.
But just how wide is this base of potential users?
There are more than one billion smokers in the world today. Cigarette smoking has been on an aggregate decline in the United States and across the world.
JUUL just might reverse this trend, they won’t be smokers, they’ll be vapers.
The BBC states that, “The number of vapers has been increasing rapidly — from about seven million in 2011 to 35 million in 2016.”
Market research group Euromonitor estimates that the number of adults who vape will reach almost 55 million by 2021.
That’s still a small fraction of the entire billion plus cigarette smoking market.
The Truth Initiative states that young adults and younger generations prefer this new mode of stress relief.
In 2017
“Between 2011 and 2017, e-cigarette use significantly increased among youth in high school and middle school. The 2017 National Youth Tobacco Survey found that 11.7% of high school students and 3.3% of middle school students used e-cigarettes in the last 30 days, compared with 1.5% of high school and 0.6% of middle school students who reported current use in 2011.”
Many young e-cigarette users do not know what is in the products they are using. A recent study found that 98.7% of all e-cigarette products sold at convenience stores, supermarkets, and similar outlets contain nicotine. Yet many young people aren’t aware that the products they use contain nicotine. In fact, 60% of teens incorrectly reported e-cigarettes as being comprised primarily of flavoring.
This shows us two points.
Vape market penetration is still in its early stages and people on aggregate believe that it’s a healthier and cleaner experience.
JUUL is Great Marketing…but the Product Sells Itself
Buying a JUUL is a pleasant experience, you feel like you’re purchasing an Apple product, great packaging, and great design overall. You are, after all, making another tech purchase.
You’ll treasure your JUUL, it’ll be there for you when others aren’t.
People are usually always there when JUUL is around and that’s how the gospel of JUUL reaches more people.
JUUL marketing is all social.
It’s a mixture of Twitter, Instagram, Youtube (many videos have substantial views), influencer blogs posts, and affiliate marketing. Users of these social media platforms are somewhat tech-savvy and likely lean on the younger end of the age spectrum.
The company created a great product, then created multiplier marketing strategy, made the product lifestyle oriented, and let it take off on its own.
Business Insider states that “JUUL decided not to pursue a conventional marketing campaign and instead threw ‘a really great party’”. No, seriously.
At the party, guests were encouraged to take photos and post them on social media accounts using the hashtag #LightsCameraVapor. Juul also posted images from the party on its social media accounts, which have since been removed, that featured a photo of five young women posing with Juuls on a white background.
JUUL also has to rely on a bit of word of mouth marketing as well.
You’ll run into a few JUULers at parties, in your high school, on your college campus, your workplace, restrooms, libraries, etc.
Public and covert JUULers are everywhere.
Profitability
Reports from Axios and others suggest that JUUL is profitable. Their revenues come from their devices and their pod replacements. Revenues are increasing on a year to year basis by a factor of at least 400% per year. 2016 revenue was $60 million, 2017 revenue was around $245 million, and 2018 revenue is expected to be in excess of $1 billion.
JUUL is said to have significant margins on their products and should be a profitable entity (something that’s a feat in a unicorn world that loses money hand over fist).
The JUUL Way
A compelling interview with Mercury News (published in September of 2018) sheds light on the mission and approach of JUUL to the market.
When asked about its mission and how it will work toward it, one of the founders (Monsees) said this:
“You can think about this in two phases. The first phase is proving the value and creating a product which makes cigarettes obsolete. We hope to create an incredible gulf of product differentiation between what we do and what cigarettes represent.
The second phase is to further separate the technical capabilities of these platforms to controllable platforms.
Cigarettes are the dumbest of dumb devices because it’s literally a stick you light on fire. Using modern tools, techniques and the internet of things, we are able to hone in on issues that have been most harmful to smokers. So far, Juul is not a connected-device product. But we do have an e-commerce end, so we get some visibility into consumer purchasing patterns, and that has been partly helpful for us to see what age our smokers are — average is mid-30s, by the way — and what flavors do best to keep users from going back to smoking cigarettes.”
Monsees reiterated the growth potential of the market as well.
“We do have 70 percent of the U.S. e-cigarette industry, but that is only 4 to 5% of the total U.S. tobacco market and less than half-percent of the worldwide tobacco market.
So our relationships with tobacco companies are different than some people might expect.
Within our small subset, we are the pinnacle, but we are still a small player.
There is some interest from tobacco companies who want to get in touch with us and work with us in the future. And we will talk with all those companies to change the nature of this business because we are really glad to see leadership from major tobacco companies who, too, want to see combustible cigarettes go away.”
JUUL has been in the works for sometime now and it doesn’t seem like they’ll be stopping anytime soon.
The company specialized in the act of getting your nicotine hit great again and they look like they’re here to stay.
