A Diamond in the Rough with James Monsees (JUUL) | Disrupt SF (Day 1)
5:46PM Sep 5, 2018
So with that, I'm going to be hosting our next chat. It is with Chief Product officer and co founder of JUUL labs. Please welcome to the stage James Monsees.
being here, man.
Alright, so for those of you that don't know, JUUL labs, oh man, there's so much to say. Raised more than 700 million in funding. Currently owns around 70 a little more than 70% of the market as an e cigarette company.
And run into a handful of of issues with that rapid growth. It's been on the market since 2015 now own 70% of the market. That's fast and with that comes a handful of trials and tribulations, so to speak. But before we get into that, I thought it would be first fun to pull the audience how many of you guys own a JUUL?
I see a few hands. And how many of you are familiar with JUUL?
Everyone. Okay, I hope so. Why don't you tell us why you started this company to begin with?
Sure. So, look, this started as a, as a graduate thesis at Stanford,
Adam and I were in this program called product design, and in the
sort of comfort of a higher academic institution, we were chartered with thinking about consumer products, basically any way we want. And we had this thesis that enabled us to go as broadly as we wanted to. So
nothing was more interesting to us at the time than smoking. Smoking is, after all, the cigarette represents probably the most the most popular, most successful consumer product of all time. And yet, simultaneously, it represents the leading cause of preventable death in the world. Um a billion people smoke globally and about half of them will die long term from preventable disease related smoking. That seemed like a really interesting area to explore.
And what we we quickly kind of hone down on was the concept of harm reduction had really not been applied to the tobacco space, what you've seen over the past hundred years plus is this stalemate between on the one side a product, the product cigarettes, everyone knows who knows what a cigarette is, right? So to say, right,
unfortunately, and for years, there has been cigarettes to kill half of all people use them long term and there have been smoking cessation products, FDA approved pharmaceutical products to help people quit, but those products are really only accessible even to those consumers. When you try to empathize with the needs of those smokers, what you find is the
those nicotine cessation products are really only even accessible to people that have that are down and out that are at the end of their rope. They're just done and they just want to get off cigarettes and about of all smokers want to quit at any given time. So you have leading product in a trillion dollar global market were those consumers don't want to use them,
So that's fascinating. And when we dove in to just look at why this hadn't happened before why, why is there not a better product for us? We were both smokers.
And the answer really was that there's been a ton of effort to try to build a safer cigarette. But no one really wanted a safer cigarette. We spent a ton of time interviewing people, not just ourselves, but other smokers around Stanford and sort of in the broader community and what we realized is no one wants a safer cigarette. Cigarettes are dead. Cigarettes are sale, they're stale, they're stigmatized. It's something that people want to move beyond.
If 70% of people want to quit one of the most holistic elements to what they really want to achieve by quitting what they mean, is get away from the iconography, get away from the smell, get away from the offensive nature of the product.
And also the fear, right? Like I smoked for a really long time. And I would go to bed at night, just like man, I'm gonna die from these.
You know, and then you wake up in the morning, you're like, I really want a cigarette. And it's a rough cycle to go through every single day.
It is. Yep, absolutely.
So part of what you did was you added the actual salts from tobacco leaves to make JUUL
feel and have the same kind of sensation as a cigarette, which I think is would you agree is the key kind of to the success of the device?
So it's interesting, there's been there have been a number of products that have come after JUUL
that have tried to pick up different elements. The design of the product, the sort of simplicity of use the pod based system,
not really temperature control as much for still the only product on market with closed loop temperature control. And yeah, that nicotine salts as well. And what we generally see is that none of those products really compete.
And the reason for it is the way we design the product is by having some empathy for the needs of these consumers. We prototype a lot, we test those elements against the needs of those consumers and then ultimately pack them all together. But certainly the nicotine salt chemistry was one of the big breakthroughs
was just a reconstitution of generally the way that nicotine exists in nature, right e cigarettes that have come before.
So look, if we look a little further back when we first started designing Juul
what we saw was even at that time, 60% there have been other e cigarette companies before us plenty, and some still exists, although most have been consolidated by major tobacco companies.
But 60% of consumers at that time, had tried cigarette smokers had tried e cigarettes
and didn't like them.
They didn't like them. There were a lot of reasons for that. But one of them was that they were basically using they're basically just using pharmaceutical grade nicotine free base nicotine just its most pharma
pharmaceutical, a pure version, and that doesn't really exist in nature. The nature what you find is the nicotine as its formed, and the plant tends to combine with organic acids to form stable salt, salt, which is a much more efficacious but also more palatable experience for consumers.
So in 2016 the FDA kind of changed the rules for manufacturers and said, we're gonna need to, we're gonna need to approve this. It's no longer going to be the wild wild west, you started the company in 2013.
Did you know that eventually, one day you'd get that note? Or you'd read the news and see that this was happening, or were you a little caught off guard? Did you think we're just going to keep doing this, it'll be fine that they don't regulate it. Now, why will they regulate it, then?
Yeah, that's a fascinating question.
for You're always welcome.
It's actually the company predates that quite a bit formed was originally plume back in 2007.
that FDA action is far from the only one we've seen, in fact, we've seen every FDA action ever in the tobacco space, because prior to HR 1256, which was I want to say 2009 or so I'm probably wrong about these.
I don't like you fact checking with me, but okay.
So at was was resolution that ultimately gave the FDA control at all of tobacco products. Prior to that there were no
he was an unregulated industry, at least from FDA is done, right. Yeah, FTC was involved, but there were no real quality standards for cigarettes.
For the most part, you didn't really need it. I mean, cigarettes were cigarettes were cigarettes and they've been effectively the same. And the last major innovation was the addition of a filter, right,
But then this new product or this new category came along the FDA is in it you guys are working on FDA approval right now.
but then there's another layer to the whole FDA story in April of this year the FDA sent you guys a letter and us to and said we're gonna investigate handful of other e cig manufacturers but you guys are the largest because we want to understand why miners are so attracted to the device and that seems to be kind of the central narrative right now with your company. Why do miners want this device how do we keep it out of their hands I want to ask in your opinion Why do you think teens want to
sure I mean look there's a long standing history
adult use products falling into the hands of minors
actually when you look at historic rates alcohol and cannabis use cannabis on the on the rise with teens alcohol is always the top
actually underage tobacco consumption cigarette consumption has fallen precipitously
20, in 2011, underage use cigarettes smoking
was about 16% were down at around seven today
last year in 2017.
And similar with adults actually in 2011 adult smoking rates were about 20% where they've covered for the last several decades with the introduction of E cigarettes actually work for consumers were down around 13, 13 and a half percent today, she's a tremendous decline,
you're saying you're down in youth use,
that's the seed that CDC data, right and underage, right? So, even in vaporisation products, actually the
There's still a decline
there was so in 2015, that was when we saw the peak of vaporisation product to use with underage consumers down since then. But the reality here is that I mean, any underage use of these products a problem and that's been a problem for a long time,
here's what we want to do, first of all, a couple, a couple steps that we think are just the right ones to do are evangelizing for tobacco 21. Meaning that all we should holistically across the United States move minimum age for tobacco sale age of 21. we've already taken the steps to do that on our website, we work very closely with Tom Miller who's the the Attorney General of Iowa and the founder of the truth initiative to advise the company on the best ways to market and understanding of what this product in
best way possible, right, we don't want to evangelize for this product. And it's a slippery slope there, right, I want to be very careful just to give you an example of that
actually tend not to engage directly and underage consumers, which we would need to do to reconcile usage data really well. But we're working with the FDA put together a study that they help us they would help us oversee, so that we can do that cautiously.
But long term. And I think this is the most important thing long term, this is a problem that there's never been a solution to all adult use products. But we're changing the nature of this universe
stick that you light on fire is a dumb product, potentially, the domestic products,
you know, when you have a stick that light the light on fire, and you sell that via brick and mortar retailer, you have a hard time controlling who actually buys
That's part of your problem. You can't track
who's buying your product. Because you've built this incredible distribution network, which on the one hand, has made you the most successful e cigarette company on the market. But you don't know who you're selling to.
Exactly. And that's the problem that we think we can they were confident now that we can solve and then look here, we are at disrupt. There's a lot of technologists here in this room. We're hiring
by applying but bringing modern technologies to this historically, you know, light on light stick on fire put in mouth inhale market Well, we can start to do is apply some of those technologies to things that aren't just moves, switching consumers of cigarettes, that's kind of phase one for us. But we can start to do is give consumers better visibility and control over their usage.
If a consumer wants to quit our product, we will give them the tool sets to do that in the most in the smoothest possible way. They want to reduce their usage. They can ask for it. And it's incumbent upon to give that to them. And for youths, we will be, we've been talking about this more publicly recently only some of it. Early next year we will be introducing a connected device version of JUUL. Now we can't do that in the US.
The moratorium on new product introductions. But actually, us we're in a few other countries right now, we will be introducing a connected device version of the product with an early version of some each, each getting techniques or sorry, youth prevention techniques. So what will happen is basically a consumer will pick up the there'll be asked,
connected and in turn for connecting it, they get visibility and control of their usage, they can ask to go this way or that way, whatever consumer wants, right, it's their device, it's their experience. And will also ask is for them to opt in to this youth prevention feature set. And at launch, what that will mean is if you distance yourself by your phone will carry our phones around. Basically it's two factor authentication for Julius but
your phone knows your age, your phone decides whether or not your rate fuses,
right. In this case, it will just be you have registered, right you've you've connected these two products, you're an adult that got access to this product, and you want to help keep this product out of the hands of youth. So if I drop my JUUL in this chair, and I walk away, and the next speaker that comes on is 12 years old, and they reach them, they're, they're not gonna be able to use the product. But if I come back and I pick it up, it'll be transparent to me.
Right? Another piece of what you're working on. Alongside this new product is this $30 million initiative
is focused on curriculum and educating the public on Andrea juice and adult responsible use, etc, etc. Part of that was a curriculum to go into high schools and middle schools help teachers teach students about the dangers of nicotine when you're when you're young. And I was reading a story recently that one of the middle school principals who received these emails called it preposterous she said that JUUL Labs is a deceptive company. So I guess my question is, do you feel like with everything that's happened around this conversation, the brand itself has been tarnished to the point where even the most well intentioned actions are not going to be effective.
If the burden is very high on us
as as frankly it should be. I mean, it's it's a very realistic scenario to be in
the bad the bad actions. Owners of this industry for the past hundred plus years
are not going away in full force anytime soon. And it's very reasonable for parents to be concerned about anything related to smoking being something that their kids might pick up. It is
It's very reasonable for someone who runs a school right, to be concerned that hey I don't know if these guys are actually doing the right thing. And I think it's incumbent upon us to ultimately prove our good intentions. The beauty of this is that we do have, we have a very different incentive structure as a company then a big tobacco company.
We are, so you mentioned earlier, we're over 70% of the e cig industry in the US. But that represents only about 4 to 5% of the US tobacco industry. And in turn that represents less than half of 1% of the global tobacco market.
And our goal, our mission is to eliminate combustible cigarettes. So we're in infancy. This is just getting started. What that means is really to get any degree of additional traction with consumers for this company to continue to grow, we need to do
We need to do the right thing for consumers. We need to listen to them and we need to provide solutions to long standing problems that they've seen with the industry. And we need to have a better reputation.
I understand that but at the same time for just full transparency, I am your ideal customer. I smoked for 10 years, I got on the JUUL about a year and a half ago. It's in my pocket right now. And I haven't smoked a cigarette sense
in a lot of things.
Yeah, thank you.
So I can't say that as an adult. As a year old. That has worked for me, but at the same time, I am no less addicted to nicotine. I understand. I've done I've done the research and you know, I have it right here. Public Health. England says that e cigarettes are 90 90% less harmful than combustible cigarettes. Recently, the American Cancer Society you know, half heartedly endorsed they've been over cigarettes based on the kind of lack of knowledge around this so it's agreed they being
less harmful than using a combustible cigarette but at the end of the day are still selling a product that promotes an addiction. an addiction is not healthy. Yeah. So how do you how do you approach that?
So. So I'm going to repeat myself a little bit but I'm gonna try to answer your question as directly as possible the first part of this for us the first part of this mission was to make a product that can dethrone cigarettes that can ultimately be more controllable
better in every measurable way including a safe is absolutely possible people were are willing to move away from cigarettes on to something that's better and never looked back. And it sounds like we're at that point with you. But that can't be the end state of this company.
We cannot be holding people hostage, so to speak, and nor should anyone feel that way the way that they may have felt with cigarettes in the past. So using using new technologies, what we plan to do very soon actually is offer customers like you the ability to say this is where I want my experience with JUUL to go I want to drop my usage by 20% in the next two weeks there will be a machine learning algorithm is going to smooth that out for you you don't even really have to think about it you request it but we make it as easy for you as possible
I'm going to go over and they're going to be people backstage are upset with me but we're just gonna stay here I'm
like 50 years ago there were all these advertisements around cigarettes being like this will make you relax like you're going to be a better wife if you smoke and like all that bullshit sorry. Damn So close. It's been 2 hours folks,
is there a piece of you because we only have the information we have now music industry has been around for like 10 to 15 years but your product has only been around for like as it as it exists now. Like two years, three years we don't know what 60 year old Jordan who's been using a JUUL for 30 years, we'll think about your company or will have to say about it, or what my doctor will have to say about it. Is there a piece of you that's concerned about the long term effects because you just can't know right now
the hardest. The hardest thing about answering a question like that is it Scott Gottlieb read he runs the FDA talks about a spectrum of risk, right on the one end is cigarettes on the other end is FDA approved nicotine cessation products? We're certainly somewhere on that spectrum of risk. So our nicotine cessation products right there on the spectrum of risk?
Look, if you're not if you don't feel like you need nicotine, or you know, you can get off smoking Don't be on a spectrum of risk, right? That's not exactly that's not a spectrum you want to be on per se, but
FDA approved, but nicotine cessation products are as safe as the FDA can possibly oversee them to be I think we're we're all better off rate is a group of people knowing that there are organizations willing to dive in and make something that represents that end of that end of the spectrum, and it's incumbent upon us to bring that product as close to it as possible. You mentioned
Public Health England number, well, that was a minimum number,
we strive to go a lot further than that. We are the only we are the only small form factor product on market certainly the only one of any consequence with closed loop temperature control. We're the only one that knows what temperature the products actually driving at, which enables a lot more
Yeah, and consumer experience consistency of consumer experience that is among multitude of technologies that we want to bring here to make to be as close to that safest end of the spectrum possible.
But we're just getting started. We're going to strive to do that all day long. Yeah, I mean, I feel
I feel a responsibility at this point to make sure that we're as close to that end of the spectrum as we can possibly be.
You should. That's good. All right. We're out of time. I appreciate it. James.
Thanks so much.