Twelve years ago, e-cigarettes couldn’t be found in America. Three years ago, Juul didn’t exist. But last Friday, Marlboro manufacturer Altria bought a 35 percent stake in the vaping juggernaut for $12.8 billion. The deal values Juul at $38 billion, a similar market capitalization to that of Target, MetLife, Delta Air Lines, and Ford. Fifteen hundred Juul employees split a $2 billion dividend as a result, becoming instant millionaires overnight.
Juul was an inviting target for Altria because it has captured close to three-quarters of the total e-cigarette market, according to Nielsen data, up from only 2 percent in 2016. Revenues for Juul increased almost 800 percent from 2017 to 2018, with its most explosive growth happening among teenagers. While e-cigarettes don’t contain cancer-causing tobacco, they do hook users to a drug that’s hard to quit. By one measure, nearly 20 years of falling cigarette use among 12th-graders has been wiped out by the rise of Juul.
The return to nicotine addiction among adolescents is happening alongside the rapid-fire monopolization of a brand-new market. While traditional tobacco companies all tried their hand at e-cigarettes, there was no legacy of dominant players in the sector and no major barrier to rivals. The fact that an industry established a decade ago so quickly whittled down to one dominant player, which an incumbent cigarette giant then bought into, suggests that our Second Gilded Age is a monopoly-creation machine.
Juul devices look like thumb drives and can be recharged in a USB port. Users insert “pods,” which contain as much nicotine as a pack of cigarettes. Flavors include traditional tobacco styles like menthol, but also mango, fruit, cucumber, and creme. The vapor is odorless and evaporates quickly. The company maintained an active social media presence promoting vaping, with fan accounts driving the virality even further.
You could say that Juul just built a better mousetrap, but all of Juul’s elements seem designed to appeal to teenagers, who can conceal the devices easily, take quick puffs at school or at home, and enjoy the dessert-like flavors. Because the prices are fairly high — $20 a device, and $30 for a four-pack of pods — Juul’s spread has been largely limited to affluent teens. But “juuling” has become a verb, a sure sign that the brand has taken over a market.
And while juuling isn’t as dangerous as smoking tobacco, it carries its own health risks while delivering a highly addictive substance that a savvy company can translate into overwhelming profit. Instead of the original intent to convert adult smokers, Juul appears to be tapping into a generation of new nicotine users. (...)
For Altria, the play is clear: Use Juul as an escape hatch if declining cigarette sales continue, and perhaps as a gateway back into cigarettes, as addicted teens chase a nicotine fix. It wasn’t the only cigarette company with the idea; Altria beat out British American Tobacco for Juul in a bidding war, according to the Financial Times. Another escape hatch is marijuana. Earlier in December, Altria also took a $1.8 billion stake in Cronos, a Canadian cannabis grower, seeking to capitalize on legalization efforts. Similarly, AB InBev, the maker of over 500 beer brands, just reached a deal with cannabis company Tilray to create pot-infused drinks for the Canadian market.
Juul was an inviting target for Altria because it has captured close to three-quarters of the total e-cigarette market, according to Nielsen data, up from only 2 percent in 2016. Revenues for Juul increased almost 800 percent from 2017 to 2018, with its most explosive growth happening among teenagers. While e-cigarettes don’t contain cancer-causing tobacco, they do hook users to a drug that’s hard to quit. By one measure, nearly 20 years of falling cigarette use among 12th-graders has been wiped out by the rise of Juul.
The return to nicotine addiction among adolescents is happening alongside the rapid-fire monopolization of a brand-new market. While traditional tobacco companies all tried their hand at e-cigarettes, there was no legacy of dominant players in the sector and no major barrier to rivals. The fact that an industry established a decade ago so quickly whittled down to one dominant player, which an incumbent cigarette giant then bought into, suggests that our Second Gilded Age is a monopoly-creation machine.
This is not how markets are supposed to work. Regulators had — and still have — multiple opportunities to prevent both concentration in the e-cigarette market and profiteering off children. But competition authorities have taken such a hands-off attitude toward the economy, that we’re on the verge of witnessing Big Tobacco co-opt the very sector that was supposed to kill it off.
When launched in 2015, Juul was another of Silicon Valley’s attempts to “disrupt” an established market — in this case, cigarettes. The company, based in San Francisco, positioned itself as a savior for public health, because unlike cancer-causing tobacco sticks, vaporizer devices distribute nicotine without tar or other carcinogens. In fact, the original intention of e-cigarettes when patented by a Chinese pharmacist in 2003 was to convert tobacco users. Juul claims it “has helped more than one million Americans switch from cigarettes.”
By the time Juul came on the market, the major cigarette companies were all experimenting with their own e-cigarettes. Lorillard acquired a brand named blu, which at the time was the market leader. Altria acquired Green Smoke and launched its brand MarkTen. R.J. Reynolds created Vuse. British American Tobacco had a brand called Vype. There were also numerous other competitors, including Ruyan, E-Swisher, Logic, and NJOY. But because America has effectively abandoned competition policy, it took only two years for Juul to take over the market. Altria, in fact, discontinued its own e-cigarette brands this month, prior to taking a stake in Juul. (...)
When launched in 2015, Juul was another of Silicon Valley’s attempts to “disrupt” an established market — in this case, cigarettes. The company, based in San Francisco, positioned itself as a savior for public health, because unlike cancer-causing tobacco sticks, vaporizer devices distribute nicotine without tar or other carcinogens. In fact, the original intention of e-cigarettes when patented by a Chinese pharmacist in 2003 was to convert tobacco users. Juul claims it “has helped more than one million Americans switch from cigarettes.”
By the time Juul came on the market, the major cigarette companies were all experimenting with their own e-cigarettes. Lorillard acquired a brand named blu, which at the time was the market leader. Altria acquired Green Smoke and launched its brand MarkTen. R.J. Reynolds created Vuse. British American Tobacco had a brand called Vype. There were also numerous other competitors, including Ruyan, E-Swisher, Logic, and NJOY. But because America has effectively abandoned competition policy, it took only two years for Juul to take over the market. Altria, in fact, discontinued its own e-cigarette brands this month, prior to taking a stake in Juul. (...)
Juul devices look like thumb drives and can be recharged in a USB port. Users insert “pods,” which contain as much nicotine as a pack of cigarettes. Flavors include traditional tobacco styles like menthol, but also mango, fruit, cucumber, and creme. The vapor is odorless and evaporates quickly. The company maintained an active social media presence promoting vaping, with fan accounts driving the virality even further.
You could say that Juul just built a better mousetrap, but all of Juul’s elements seem designed to appeal to teenagers, who can conceal the devices easily, take quick puffs at school or at home, and enjoy the dessert-like flavors. Because the prices are fairly high — $20 a device, and $30 for a four-pack of pods — Juul’s spread has been largely limited to affluent teens. But “juuling” has become a verb, a sure sign that the brand has taken over a market.
And while juuling isn’t as dangerous as smoking tobacco, it carries its own health risks while delivering a highly addictive substance that a savvy company can translate into overwhelming profit. Instead of the original intent to convert adult smokers, Juul appears to be tapping into a generation of new nicotine users. (...)
For Altria, the play is clear: Use Juul as an escape hatch if declining cigarette sales continue, and perhaps as a gateway back into cigarettes, as addicted teens chase a nicotine fix. It wasn’t the only cigarette company with the idea; Altria beat out British American Tobacco for Juul in a bidding war, according to the Financial Times. Another escape hatch is marijuana. Earlier in December, Altria also took a $1.8 billion stake in Cronos, a Canadian cannabis grower, seeking to capitalize on legalization efforts. Similarly, AB InBev, the maker of over 500 beer brands, just reached a deal with cannabis company Tilray to create pot-infused drinks for the Canadian market.
by David Dayen, The Intercept | Read more:
Image: Gabby Jones/Bloomberg via Getty Images
