Cigarette Decline Rates Accelerate As Juul Share Grows

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Cigarette pack volumes are declining at an accelerated rate while JUUL Labs’ sales volume, measured as a percentage of United States combustible cigarette market, has grown over the past year. Averaging syndicated data from IRI and Nielsen, industry standard data sets, we see cigarette volumes have experienced a year-over-year decline greater than 5 per cent in each of the last 4 months – a trend that has not been seen in the past 5 years of available data.

Volume declines for the tobacco industry have worsened over the last two months, with volume decline rates in excess of 7% year-over-year. As cigarette sales continued to tumble in November, JUUL Labs’ share of the combined cigarette market and JUULpod market increased to an average of 6 percent based on data from IRI and Nielsen.

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These sustained losses for the industry are unprecedented, as the major cigarette companies saw an annualized average rate of decline of only 1.9 percent from 2014 to 2017.

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Multiple factors have driven the long-term trend in cigarette declines, but the largest recent contributor, particularly over the past several months, has been the growth of JUUL products as a true alternative for smokers.

JUUL Labs’ share of the combined cigarette market and JUULpod market has grown from just over 1 percent in January to 6 percent for the month of November using the average IRI and Nielsen data. In total for 2018, the year-over-year increase in JUULpod sales volume is equal to roughly 60 percent of the total cigarette pack declines year-over-year. On average, JUULpod volume reached over 300 million pods, while the decline in cigarette pack volume exceeded 500 million. Common economic factors that have driven sharp declines in cigarettes in the past, such as federal and state tax increases, increased regulation, or outsized gas price increases, are notably absent over this time period.

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The impact of this disruption is significant, as even a 1 percent decline in cigarette volumes represents approximately 125 million packs of combustible cigarettes disappearing from the United States market. It has been well established that cigarettes are the leading cause of preventable deaths in the U.S. – almost twice as many Americans die from smoking-related illness than from obesity, alcohol, automobiles, and guns combined. The accelerating decline in cigarette consumption reinforces JUUL Labs’ mission to provide an alternative to the world’s one billion adult smokers.

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