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 Juul disclosed its Indonesia plans to Reuters as the news
organization was inquiring about the company's marketing to younger
customers there and in the other two Asian countries where it
operates - the Philippines and South Korea. A Reuters review of
Juul's Asia marketing found that the firm has promoted e-cigarettes
in ways similar to those that raised the ire of regulators in the
United States.
Juul said in a statement that it would suspend Indonesia sales
"indefinitely" until it could ensure that online and traditional
retailers there will "increase and enforce age restrictions and
compliance measures."
The firm's decision to retreat from the world's fourth most populous
nation - which has not been previously reported - marks a major
setback for Juul's larger plans to expand in Asia. The region has
been seen as critical to the company's growth amid mounting U.S.
legal and regulatory problems over its role in the nation's youth
vaping epidemic.
Juul had launched in Indonesia just seven months ago because it was
attracted to the nation's permissive regulatory environment,
according to a former employee and another source familiar with its
Asia sales strategy. The company had targeted customers aged 19 to
35, according to those two sources and a current Juul employee.
A Juul spokesman said the company only wants adult smokers to use
its products.
The Indonesia decision comes after Juul said last month that it was
"reviewing our strategies and operations" in South Korea - where the
company has faced regulatory scrutiny - because of disappointing
sales. Juul has also held off on planned expansions in the
Netherlands and New Zealand. The company said it is taking a
"methodical approach" in reviewing its overseas operations on a
country-by-country basis.
In Asia, Juul has continued to sell the fruit- and dessert-flavored
nicotine "pods" that it has voluntarily pulled from U.S. store
shelves amid a hail of criticism over their appeal to youth. In
Indonesia, Juul has marketed its products in movie theaters and
malls frequented by young people, selling its e-cigarettes at kiosks
and in sleek, Juul-branded retail shops that mimic Apple stores. The
firm has also hired "ambassadors" - often attractive young women -
to promote Juul in bars and nightclubs. As recently as last month,
Juul was installing kiosks in Jakarta office buildings catering to
young tech employees and running advertisements for Juul flavors in
office elevators.
Retailers in Indonesia and the Philippines have allowed online sales
of Juul devices and pods with no age verification, according to a
Reuters review of Juul products advertised for sale on Asian
e-commerce platforms. Juul said it did not authorize any sales
without verification and has a team that works to remove
unauthorized online listings.
Juul did not answer detailed questions from Reuters about its Asia
marketing efforts and their appeal to young people. The company said
in a statement that it is "committed to advancing the long-term
potential for harm reduction for adult smokers while combating
underage use."
In recent months, the company's stricter approach to marketing in
the United States has made it difficult for those in overseas
markets such as Indonesia to market in the same way and meet sales
targets, the employee said. The company has taken a more cautious
approach to international expansion under new CEO K.C. Crosthwaite,
the person said, compared to an earlier approach of opening new
markets as fast as possible.
The company is exploring expansions in Vietnam and Japan later this
year, the employee said. A Juul spokesman confirmed the company is
monitoring the regulatory environment in Vietnam but said it
currently has no plans to launch there. The spokesman declined to
comment on Japan.
A LOSING BET ON INTERNATIONAL MARKETS
International expansion has been seen as crucial to Juul's future as
the company's U.S. problems have caused investors to slash growth
forecasts. Marlboro maker Altria Group Inc - which bought a 35%
stake in Juul Labs Inc in December 2018 for $12.8 billion - has
since marked down its value by a total of $8.6 billion.
Altria executives were initially bullish on Juul's international
prospects. In an earnings call soon after the Juul deal, Altria CEO
Howard Willard said he expected Juul's international revenue and
profits to eventually be "as large as or larger than the U.S.
opportunity."
Those prospects have dimmed, however, as some overseas regulators
took note of the widespread criticism of Juul in the United States.
India banned e-cigarettes last fall, citing the U.S. epidemic of
youth use, and countries such as Malaysia are considering similar
restrictions.
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But Indonesia - until now - had been seen as one of the company's biggest
opportunities. The country of nearly 270 million people has among the world's
highest smoking rates and weakest regulations, imposing no penalties for selling
cigarettes to minors.
In an interview with Reuters in July, when Juul launched in Indonesia, the
company's executive running the Asia Pacific region, Ken Bishop, acknowledged
that attracting young adult smokers was important to its success there.
"That is typically where we see the initial interest," he said, adding that
eventually the product would appeal to "any demographic" including longtime
smokers.
Bishop also emphasized the importance of preventing sales to teenagers.
MARKETING AT MOVIES, DANCE CLUBS
Just before a November screening of the movie Charlie's Angels in downtown
Jakarta, Indonesia, teenagers who filled the theater watched one ad for an
e-commerce site that featured Korean boy band BTS, another for spicy instant
noodles, and a third for Juul e-cigarettes.
"Odor-free, tar-free, mess-free," the voiceover said as colorful displays of
mint and mango flavors for the "#1 Vaporizer in America" flashed across the
screen.
Juul said that Charlie's Angels was a 17-and-up film in Indonesia and that it
has stopped cinema advertising in the last two months. Juul did not answer
questions on what age group it aimed to reach with the movie ads or why it
stopped them.
Juul hired its 150 "brand ambassadors" through a marketing firm to promote its
products in night clubs, restaurants, supermarkets and convenience stores,
according to the three people familiar with its Asia marketing strategy. Through
a contract with Indonesian marketing firm Nava Plus, the ambassadors charged
2000 rupiah (the equivalent of $0.15 in U.S. dollars) for sample hits on a Juul
at places such as the swanky Omnia Bali nightclub. Nava Plus did not respond to
requests for comment.
Such efforts reflected the goal of reaching customers in their 20s and early 30s
by pitching the device as a trendy lifestyle product, according to the three
sources. The campaign mirrors early U.S. promotions at music festivals and other
events catering to young people, which have since become a focus of government
investigations into Juul's marketing.
Juul has denied it ever targeted teenagers in any country, but the company has
acknowledged that those early U.S. campaigns focused on young adults aged 25 to
34 - a strategy company executives later called a mistake.
Instagram posts last August promoting Juul's largest Asia store in Town Square
Cilandak, a Jakarta mall, evoked a club scene, with dance music playing in the
background of a promotional video with the staff, and slogans reading "come now
and feel the experience." Juul said the Instagram post was developed by the
mall, not the company, without explaining how Juul store employees were featured
without its consent. The company said it requested that the post be taken down
after Reuters inquired about it.
The Town Square store is located across from an ice cream shop. Near another
Juul store, in the upscale Plaza Indonesia, a miniature train takes children
through the mall.
Juul has also launched its own branded stores and kiosks in Indonesia, South
Korea and the Philippines, which have a sleek, modern vibe. Buyers can engrave
their names for free on Juul devices, and the shops are staffed by vendors who
are typically in their 20s, wearing black-and-white uniforms embroidered with
the Juul logo. They almost invariably serve customers about the same age, three
clerks at Juul stores in popular Jakarta malls told Reuters.
The flavors Juul stopped selling in the United States amid criticism remain a
hit among young Juulers in Asia. Sungwon Cho, a 26-year old photographer in
Seoul, started using Juul in April because it was more convenient than
traditional cigarettes and "didn't smell bad."
"I like the sweet taste," he said. "It feels like I am vaping a candy or jelly."
(Reporting by Chris Kirkham in Los Angeles, Fanny Potkin in Jakarta and Neil
Jerome Morales in Manila. Additional reporting by Sangmi Cha in Seoul, and
Stanley Widianto and Jessica Damiana in Jakarta.; Editing by Vanessa O'Connell
and Brian Thevenot)
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