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Juul Soars to $15bn Valuation

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E-cigarette maker Juul has reached a lofty valuation of $15 billion, during a time of increasing demand for its popular vape pen and interest among investors for equity in the fast-growing company. This comes as the San Francisco-based firm raises $1.2 billion in investment to expand into overseas markets, including Britain.

Currently, Juul vape pens — prized among consumers for their sleek design and the “pods” of which contain an array of flavours and pack a big nicotine punch — are only available in the United States and Israel. Juul launched just three years ago, but has already snared 68% of the burgeoning e-cigarette market in the US, according to data from research firm Nielsen. Many are viewing the vaping start-up as a powerful disruptor of the tobacco business.

“Juul’s success underscores the potential for disruptive technology to undermine U.S. tobacco’s reliable business algorithm,” said Morgan Stanley analyst Pamela Kaufman. Indeed, the latest figures show that Big Tobacco’s decline continues, with shares among giant cigarette-makers British American Tobacco, Philip Morris and Japan Tobacco having slumped 24%, 23% and 15%, respectively, so far this year. Investors, it seems, increasingly want out of tobacco and into vaping.

Hitting Tobacco Hard

Morgan Stanley analysts, in advice to clients considering investing in Juul, said the young company has been “driving a revival in the US e-cig market” and that sales of its vape pen “accounted for almost the entire incremental increase in US e-cig sales as a percent of total cigarette and e-cigarette sales in the last year … We believe Juul has become a growing headwind to US cigarette volumes.”

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Elsewhere, other financial firms are warning its clients about the risks of holding stock in traditional tobacco firms. “The US tobacco market is beginning to be disrupted by Juul,” said analysts at Citigroup, adding: “We don’t expect underlying cigarette trends to improve much in the rest of 2018.”

Juul started life in 2015 and is the brainchild of former smokers James Monsees and Adam Bowen, who used their background in product design to develop their vape pen. “When they could find no attractive alternative to cigarettes, James and Adam recognized a groundbreaking opportunity to apply industrial design to the smoking industry, which had not materially evolved in over 100 years,” the company says. “As smokers, they knew a viable alternative to cigarettes would have to offer a nicotine level found in no other alternative on the market. It would also have to invite its own ritual. The result was Juul.”

The Switch to Vaping

Juul will be entering the UK market at a time when vaping is on the rise and more people are using e-cigarettes to get off tobacco. A key driving factor in the shift from smoking to vaping is the official advice from health bodies advising smokers to take up vaping as one of the most successful ways to quit and become healthier. It’s part of a wider push in Britain to turn the country smoke-free by the end of 2022 — reducing smoking among adults to 12% or less nationwide and “with the aim of creating a smoke-free generation.”

New public health figures in England show that smoking levels in the country have fallen below 15% for the first time. There are now 6.1 million smokers in England, one million fewer than in 2014, and it’s estimated that around 3 million people are regularly vaping around the UK, with many easily getting their e-cigarette and e-liquid supplies from an online vape store.

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Now, as Juul expands its reach to the UK and around the world, vapers will have more choice than ever.