US$15 billion Silicon Valley upstart takes on big tobacco in UK

(Bloomberg pic)

LONDON: Silicon Valley startup Juul Labs Inc. will begin selling its e-cigarettes in the U.K. this week seeking to replicate its runaway US 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 UK this week. The company is funding international expansion with a capital increase that’s expected to reach $1.2 billion, which would value the startup at US$15 billion.

“There are 7.5 million adult smokers in the UK and they aren’t well served by the e-cigarettes that are out there,” Juul UK managing director Dan Thomson said Monday in an interview. “This is a huge opportunity for us.”

Juul has grabbed 68% of the US 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 favour of alternatives with lower health risks. The UK is the world’s second-biggest market for e-cigarettes, with sales of US$1.7 billion in 2017, according to researcher Euromonitor.

To read more on big tobacco’s answer to Juul, click here

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% 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% in the UK The UK starter kit will be priced at just under 30 pounds (US$39.68).

“The reason Juul has been so successful in the US is that it has really replicated the sensation of smoking,” said John Dunne, a director of the UK 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 UK launch is the first of many the company is planning in Europe and Asia, co-founder and chief technology officer Adam Bowen said Monday.

The company 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.