$15 Billion Silicon Valley Upstart Takes on Big Tobacco in U.K.
(Bloomberg) -- Silicon Valley startup Juul Labs Inc. will begin selling its e-cigarettes in the U.K. this week seeking to replicate its runaway U.S. success -- though with a smaller nicotine hit.
A Juul starter kit -- including the device, a battery charger and four liquid pods -- will be available to buy online and in 250 vape stores in the U.K. this week. The closely held company is funding international expansion with a capital increase that’s expected to reach $1.2 billion, which would value the startup at $15 billion.
“There are 7.5 million adult smokers in the U.K. and they aren’t well served by the e-cigarettes that are out there,” Juul U.K. managing director Dan Thomson said Monday in an interview. “This is a huge opportunity for us.”
Juul has grabbed 68 percent of the U.S. e-cigarette market in just three years, according to the Nielsen research firm. The device’s rapid rise has convinced some investors that big tobacco is increasingly vulnerable as smokers ditch traditional cigarettes in favor of alternatives with lower health risks. The U.K. is the world’s second-biggest market for e-cigarettes, with sales of $1.7 billion in 2017, according to researcher Euromonitor.
The Juul is a slim device that looks like a flash drive. The liquid pods that users insert contain benzoic acid, which make it easier to deliver nicotine at a lower temperature without harshness to the throat. They contain 5 percent nicotine by weight, which is higher than other alternatives.
To comply with European regulations, Juul has lowered the nicotine content of its liquids to 1.7 percent in the U.K. The U.K. starter kit will be priced just under 30 pounds ($39.68).
“The reason Juul has been so successful in the U.S. is that it has really replicated the sensation of smoking,” said John Dunne, a director of the U.K. Vaping Industry Association lobby group’s board. “The big question is whether the experience will be the same at the lower level of nicotine.”
Juul’s U.K. launch is one of many the company is planning in Europe and Asia, co-founder and Chief Technology Officer Adam Bowen said Monday, without specifying which countries would be next. Juul is recruiting in Paris and Singapore, according to its LinkedIn page.
International expansion is attractive for Juul because of the comparatively onerous U.S. regulatory approval process for smoking alternatives, Bowen said. Philip Morris International Inc.’s application to be permitted to sell its iQos device in the U.S. was over 3 million pages long. Juul is currently working on a newer, Bluetooth-enabled version of its device that consumers can link to health and wellness apps on their smartphones that it plans to sell in its international markets.
Juul is focused on growth at the moment, but as a means of providing liquidity to investors and financing the business in the future, an initial public offering is “certainly a possibility,” Bowen added.
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