The Crowned Juul: Disruption in Big Tobacco

ThatOtherGuy's picture
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TLDR: Big tobacco has a non-consumer experience problem, and I think Juul solved it

Full disclosure: I've had phases of smoking cigarettes and vaporizers from time to time (not currently) and have NEVER owned a Juul although I have used one before. I am also not saying Juul is the only winner in this space; there's just a lot one can learn from how far Juul has gotten.

When I walk the streets of NYC today, there is a trend I cannot keep my eyes off of: Juul cartridges are the BEST seller at every smoke shop. For the uninitiated, Juul is an e-cigarette and instead of selling cartridges of cigarettes, you fill it up with cartridges.

I like to follow vice trends, not because I'm a fan of it but because we're in the midst of massive transformation in these industries. From a business perspective, tobacco's biggest problem isn't health. It's the non-consumer experience, and I think Juul solved it. My post is going to surround this point in 3 parts:

  1. The Problem: The tobacco experience is WAY outdated
  2. First movers: Early generations of vaping only solved half the problem
  3. Crowned Juul: How Juul addressed the real problem

Also a couple quick bonuses at the end:

  • 2 crucial lessons learned
  • Juul's interesting origins

The Problem
When we think of Big Tobacco, we think of traditional cigarettes like a pack of Marlboro or Camel. Outside of the packaging's evolution towards having the cover basically say "You will die", the product itself has never really evolved with modern times. Ironically, it's not the consumers themselves that have a problem with this; it's the NON-consumers. To non-consumers, smoking is:

  1. Unpleasantly smelly: There's a very distinct pungent odor with smoking and it not only sticks to the air, it sticks to your breath, your clothes, and your skin. Because of how strong the lingering smell is, many people find it unpleasant. There's also the cigarette butts lying around the streets that act like incenses for the public.
  2. Invading: Not only do some consider the smell unpleasant, they also consider it invasive to their nostrils. However, it's really the smoke from cigarette butts and people exhaling that people are most apprehensive to. In general, it's not pleasant to breathe in smoke because it irritates your lungs and other senses, especially if it isn't yours.
  3. Very obvious: The first two points package together to the most important problem of all: smoking is too obvious. People LOVE to judge others who make a scene in public and smoking has enough of an aura to "make a scene" to bypassers.

Some (a lot) of you might think I missed the real point and claim the the true problem is public health but I wholeheartedly disagree. We gradually kill ourselves with our own special bad habits everyday but as long as it doesn't affect others, it goes largely ignored. Smoking has been crucified so egregiously because non-consumers get an involuntary consumer experience of cigarettes.

First Movers
Before Juul, there were already TONS of vaping brands that have existed for years. In fact, there's an entire culture revolved around vaping and people would have insane custom vaporizers that could set different temperatures, blow more smoke, etc. The attitude towards customization is comparable to cars. To many vapers, they thought they solved the smoking problem that cigarettes have. "It's vapor! Not real smoke!" True, the smoke isn't actually material being burned which removes the problem of smell (some actually even smell really good!) BUT it still looks like smoke and because the smoke produced is often obvious, people who don't do it will continue to judge it.

Crowned Juul
Juul was introduced in 2015 and has since grown to 32% of e-cig market share. What could it have possibly done better than the hundreds of other vaping brands?

  1. Subtle, small, and discreet Cigarettes easily grab a person's attention. Most vapes still grab attention because it's visually obvious for a person to reach in, grab their oversized vape, and proceed to blow a giant cloud of vapor. Juul is smaller than your hand and far more low-key than competitors. It's hard to be annoyed at something that doesn't have your attention.
  2. Simple and easy: The more work it takes for a product to give you pleasure, the less interested you will be in it. Juul's consumer experience is as easy and quick-to-access as possible: suck your Juul and exhale. You don't have to go to a smoking designated area, keep a lighter around, or understand what buttons to press. If you buy your own, setup is easy too! Just insert the cartridge on top of the Juul and keep your Juul charged via USB. Anyone can learn how to use it in less than a minute.
  3. Also, subtle is sexy: My other post 3 Strategies Winning Brands Use On Social Media focuses on the death of pushing things on consumers and the rise of pulling them towards you. Juul is subtle enough to be ignored but just noticeable enough to pique a willful person's interest. You want people to find the Juul just seemingly harmless enough and not have the irritating smoke + heavy odor that make people already assume the negative experience of using it.
  4. Network effect: "Ok Kenny but any other company can come in and replicate the design." True, but what use is it if the cartridges are only distributed in certain areas? Juul seals its consumer loyalty by having cartridges always available in a nearby gas station or smoke shop (at least in New York). Consumers love knowing what they want is easily accessible in 24/7 locations that are nearby. If stores know consumers want Juul cartridges on a regular basis, they'll want to supply it, and consumers will be more loyal to Juul if it's supplied everywhere!

There's 2 crucial lessons I've learned from Juul:

  1. You don't need to be a first mover or pioneer to succeed. In fact, it's MUCH more preferable to enter an industry as the second or third generation because you can avoid the crucial mistakes of the pioneers. People love talking about first mover advantage but it's important to also consider first mover disadvantages like unknown territory, unproven best practices, and uncertain regulatory environment.
  2. Easy to learn > features. Products that receive the best amount of traction remove as many customer friction points as possible. Even if your product has the best quality, technical features, and presentation, these aspects mean nothing if the consumer won't take time to learn how to use it. The more effort and education needed from the consumer, the lower your customer conversion rate will be.

You can view the full post here:

Comments (15)

Mar 23, 2018

Great post.

I've been very impressed with the Juul, its clear that a lot of thought went into its design.

Jul 3, 2018

They just got valued at $15Bn. I see quite a clear pathway for them to take over Big Tobacco

Jul 3, 2018

Good article I still smoke cigarettes at home.
Companies should start giving away branded Juuls/Vaporizers/Vape pens etc.
Did you write the actual article on the website.

Jul 3, 2018

Yeah this is my blog. And true, it essentially works as a razorblade model. I have friends who will spend the equivalent of a cartridge a day because it's so easy to use it anywhere and run out

Jul 3, 2018

Nice article, but is there an investment thesis here? Buyout by big tobacco? Competition from legalized MJ? Juul is still private I believe.

I'm still a fan of big tobacco stocks (Altria) with their massive dividends, amazing supply chains, and their $$$ + ability to pivot further into other areas such as legalized marijuana.

Most Controversial
Jul 3, 2018

Juul won't compete in cannabis because they were actually spun out from a cannabis vaporizer company called Pax which has a similar product to Juul but for cannabis oil.

I think a buyout would make sense. Brand loyalty is high in cigarettes and if you know your consumer is going to want to shift towards a "healthier" alternative, having something like Juul makes for a natural transition. In fact, I'd argue the LTV of a Juul smoker is far higher because the nicotine fix isn't disrupted by the necessity to go outside for a smoke break or something

    • 1
Jul 3, 2018

Out of curiosity, is a buyout really palpable for juul? I'd imagine from a branding standpoint Juul would want to avoid any association with tobacco companies as their entire mantra is to move people out of cigs etc. It's difficult to see management entertaining such a concept unless of course they receive such a gratuitous offer that their shareholders pressure them into taking it.

It seems as if a tobacco company decided to acquire juul it would be some kind of a bear hug offer to essentially remove them from the market and shelve them / hide them away, but then they could run the risk of cannibalized sales, with juul sales eating into their bread and butter tobacco product sales. Interested to hear your thoughts.

    • 1
Jul 31, 2018

Thanks for the article.
Quite inforamtive

Dec 30, 2018

Now that Altria just bought a stake in Juul...what are your opinions? For me, a nonsmoker before Juul, Juul is just so much easier with their pod system. No need to buy confusing parts or have a huge mod. Juul's sleek design and the other factors mentioned obviously seem attractive to Big Tobacco who have been getting whipped since the Barbarians at The Gate RLJ days I don't care that much that Big Tobacco has "infiltrated" Juul.

My soul is highly leveraged

Aug 5, 2019

Juul is so popular in our daily life. In fact,Juul itself is without any mistakes.

Just as the tools themselves are right, the fault lies with the people who use them.

So Juul chargers are very important for Juulers.

There are some chargers for them to choose.

Jmate PCC
Jmate P2
Jmate Car Charger

They are also Juul-compatible

Aug 14, 2019

LOL at whoever is using WSO to train their neural net, your bot needs a little work

Aug 14, 2019