2/1/24, 4:36 PM
`July 5, 2018, 8:39 AM PDT
`Imperial Takes on Juul as Big Tobacco Faces Upstart Rival (2)
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`Imperial Takes on Juul as Big Tobacco Faces Upstart Rival (2)
`
`Sam Chambers
`Bloomberg Editorial
`
`Company is launching nicotine salt pods in U.S. and U.K.
`
`Juul’s rapid growth has sparked selloff of tobacco stocks
`
`By Sam Chambers
`
`(Bloomberg) --
`Imperial Brands Plc is launching a vaping product to compete with Juul Labs Inc., as
`Chief Executive Officer Alison Cooper steps up efforts to reassure investors that
`smoking alternatives are an opportunity rather than a threat.
`
`This month the maker of Winston cigarettes is releasing new vaping pods in the U.S.
`and U.K. containing nicotine salts, which allow the stimulant to be absorbed into the
`bloodstream more rapidly than when using a conventional e-cigarettes. The nicotine
`formulation is similar to that used by Juul, which has grabbed a 68 percent share of
`the U.S. retail market for vaping devices in just three years, according to Nielsen.
`
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`Photographer: Jason Alden/Bloomberg
`“The type of experience Juul delivered was definitely a step forward,’’ Cooper said in
`an interview at Imperial’s headquarters in Bristol, England. “Smokers weren’t
`switching completely in to vaping before because the experience wasn’t satisfying
`enough. That’s what we are trying to achieve.”
`
`The rise of a new entrant in the U.S. and last year’s 18 percent decline in the
`cigarette market in Japan, where heated-tobacco devices have become popular,
`have investors worried that an industry known for steady profit growth faces an
`increasingly uncertain future. Imperial’s shares have fallen 17 percent in the past
`year.
`
`Cooper told investors this week that Japan was the only market where she expects
`rapid disruption for the tobacco industry and that the popularity of e-cigarettes in the
`U.K. and the U.S. means overall nicotine consumption is growing there.
`
`Juul gives vapers a hit comparable to that of a cigarette because it contains benzoic
`acid, which makes it easier to deliver nicotine at a lower temperature without being
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`Imperial Takes on Juul as Big Tobacco Faces Upstart Rival (2)
`2/1/24, 4:36 PM
`harsh to the throat. After its success in the U.S., the startup vape brand is expanding
`internationally. To fund that effort, the company is said to be raising $1.2 billion in a
`financing round that would value it at $15 billion. Juul’s slim device, which looks like
`a flash memory drive, has captured the imagination of young consumers as word
`spreads via social media.
`
`“For big tobacco it’s really problematic because that’s the generation they need to
`get,” according to Bloomberg Intelligence analyst Ken Shea.
`
`Juul’s popularity with teenagers has put the company on the radar of the U.S. Food
`and Drug Administration, which has requested information from the company on why
`its product is widespread in high schools.
`
`“We have a comprehensive marketing code in which we adhere to strict guidelines to
`ensure that our marketing is directed toward existing adult smokers,” a Juul
`spokeswoman said via email.
`
`Burning Cash
`The U.S. is the world’s biggest e-cigarette market -- and the only one in which
`Imperial is profitable. But Juul’s rise caused Imperial’s market share to fall by more
`than half to 8 percent since last year, according to Wells Fargo.
`
`Imperial is reducing the number of components in its MyBlu vaping device and
`automating the production, which will cut manufacturing costs by two-thirds, Cooper
`said. Users of the new pods will be able to insert them into existing MyBlu systems.
`
`Returns from next-generation products will make a “significant step forward’’ in the
`company’s financial year ending 2020, the CEO said. British American Tobacco
`Plc expects its cigarette alternatives business to break even this year and deliver
`substantial profit by 2022.
`
`Amid doubts over big tobacco’s position in smoking alternatives, Imperial is looking
`further afield by participating in a $10 million fundraising by cannabis research firm
`Oxford Cannabinoid Technologies. The deal followed Imperial’s appointment of
`Simon Langelier -- who chairs a medicinal cannabis company -- to its board last
`year.
`
`“Cannabis is going to be a very regulated space and we very much have capabilities
`in terms of regulation,’’ Cooper said. Further legalization of recreational use could
`also present “interesting’’ consumer opportunities, she added.
`(Updates with Juul comment in ninth paragraph.)
`To contact the reporter on this story:
`Sam Chambers in London at schambers7@bloomberg.net
`
`To contact the editors responsible for this story:
`Eric Pfanner at epfanner1@bloomberg.net
`Thomas Mulier
`
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