Sales volumes of actual tobacco products (not vaping, despite how America would like to term it) fell by almost 9% over the last year. The figure is reported to be in excess of tobacco company boardroom predictions and has signalled a flurry of activity – compounded by the threat to ban the sale of menthol tobacco products.
JUUL, thanks to the huge investment from Altria, has demonstrated continued growth. Its chief executive, Kevin Burns, claimed responsibility for the sustained drop in smoking popularity: “These changes in the US tobacco market are a testament to the success of Juul products in switching adult smokers off combustible cigarettes.”
The vape company achieved a growth in sales of 154% in the same period, which is good news for Altria as its year-on-year sales slumped by 9.7%.
Burns announced more bad news for the tobacco industry this week when he unveiled plans for a $125 million investment plan for South Carolina. The new assembly and packaging centre is set to create up to 500 new jobs as the company seeks to consolidate its dominance in the pod sector.
Imperial Brands reacted negatively by accusing JUUL of not being a vape product at all, but selling “legal highs”. The company also said the pods were being targeted at children.
Imperial Brands product portfolio includes:
Imperial Tobacco’s chief development officer said: “In the US, a very, very high strength nicotine product has been launched by one company which has started to be used almost as a legal high rather than as an alternative to smoking. It’s been picked up by a much younger demographic, which has introduced tension into that mix. The FDA do not want massive take-up among school-aged kids.”
Accusing a competitor of targeting children might seem a bit rich to some seeing as Imperial have been caught out for doing it too on multiple occasions. Last year, the Advertising Standards Authority upheld two complaints against them. It said the company was using terms “associated with youth culture”, and creating adverts that “would resonate with and appeal to people under 18”.
JUUL responded: “JUUL Labs was developed for adult smokers only and we are adamant that no youth or non-nicotine users should use our product. To prevent underage use, we not only comply with all local regulations but go further with our own industry leading policies.”
Focussing on its own products, Philip Morris International moved to combat similar accusations by suspending its marketing campaign on social media where it used online “personalities” to promote the IQOS heat-not-burn device.
This means sultry 21yr-old Alina Tapilina will no longer be able to demonstrate her scientific prowess by stating: “I finally have the new IQOS 3, and I can confidently say… the level of harmful substances is on average about 90 percent lower than in smoke”.
Ugly, old men might wish to consider starting an Instagram account as the young ladies were being paid up to $25,000 for a single post showing them holding an IQOS. JUUL has already blocked using social media “influencers” as part of its drive to be seen as being more responsible.
Philip Morris may not be acting altruistically; one of the conditions placed down by the Food and Drug Administration (FDA), when it allowed IQOS to go on sale in the States, was that the company has to hand over detailed analysis of the potential purchasers interacting with its online advertising.
The FDA’s decision could prove to be the greatest threat JUUL has faced so far. Vikram Rai, an analyst with Citigroup Inc., believes IQOS will attack JUUL sales in the same way JUUL has cut into the tobacco market.
State legislators may be inclined to treat IQOS favourably too, as the brand is classified as “tobacco” and sales will contribute towards the Tobacco Master Settlement Agreement annual payouts.