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The Rise of JUUL Could Slow Down Indonesia’s Booming Tobacco Industry

Indonesia is considered one of the most “smoker-friendly” countries in the world but that does not mean it’s safe from the e-cig trend.

by Meera Navlakha
16 August 2019, 9:16am

Image via Flickr.

JUUL is showing no signs of slowing down. After capturing the hearts (and lungs) of United States’ teens, the e-cigarette company is threatening the tobacco industry in Indonesia.

Analysts from stocks and brokerage firm Maybank Kim Eng said in a report published in July that vapes will prove to be tough competition for tobacco retailers in Indonesia.

“Though we still believe that clove cigarettes will dominate Indonesia’s cigarette industry for some time to come, competition from electronic options may dent their share in some categories such as high-priced mild and white products,” states a report by Maybank analysts Janni Asman and Isnaputra Iskandar.

The biggest new player is JUUL. It partnered with local retailer PT Erajaya Swasembada and launched standalone stores in Jakarta and Bali in July.

“Although vaporizing e-cigarettes have expanded rapidly in Indonesia in the past three years, JUUL is the first high-profile brand to enter the market,” said the analysts.

And there’s a reason an e-cigarette powerhouse like JUUL would set its sights on Indonesia. According to CNBC, the country is amongst the most “smoker-friendly” in the world, with one of the highest rates of smoking among adults and teenage boys.

About two-thirds of Indonesian men smoke some form of tobacco daily and it is legal to sell cigarettes to children.

According to Statista, Indonesia’s cigarette industry is expected to make $24.1 billion in 2019 alone, and that it has an annual growth rate of 4.8 percent. According to Industry Minister Airlangga Hartanto, Indonesia also exported $931.6 million worth of cigarettes in 2018.

Despite these numbers, the analysts said e-cigarettes have the potential to dent the booming industry.

They predict that 3-5 percent of the cigarette market will face e-cigarette competition.

“We hope that our product presence in Indonesia can provide an alternative for adult smokers,” said JUUL Labs founder and Chief Product Officer James Monsees, in a press release.

JUUL was lunched as part of San Francisco-based company Pax Labs in 2015. It eventually spun out in 2017 and now operates independently. It has since gained a cult-like following, particularly among teenagers who find its various flavours appealing. It's also popular for its sleek appearance that's easy to hide, considering it often gets confused for USB thumb drives.

This has worried various members of the health sector, who have warned that it exposes kids to large amounts of nicotine and long-term health issues such as abdominal pain and vomiting.

In July, JUUL Labs Chief Executive Officer Kevin Burns even issued an apology addressed to parents for the e-cigarette's popularity among teenagers.

The company is now facing some trouble in the States where the Food and Drug Administration (FDA) has began cracking down on the company by conducting undercover sting operations targeted at JUUL retailers. They have also ordered JUUL to handover company documents. San Francisco is also set to ban JUUL next year unless it gets FDA approval.

Still, this has not stopped JUUL from growing in other parts of the world.

The company was valued at $38 billion dollars in December last year and is aggressively expanding in Asia. Apart from Indonesia, it has also opened stores in the Philippines and South Korea, and plans to launch in India.

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