1. Tobacco Industry: Big Tobacco vs Juul
Amanda Rushton
Jesse Prent
Jonathan Faerman
Winnie Hu

2. Traditional Cigarettes Vaping Products Hybrid Products
Three primary product categories in tobacco industry
Traditional Cigarettes
Vaping Products
Hybrid Products
Tobacco has developed substitute products to appeal to smokers looking to switch/quit

3. Tobacco Industry has faced a change in trends for the past 40 years
Health Consciousness
Perception
Convenience
R&D on hybrid products: IQOS
Mesh in development
Phillip Morris
Second movers: Released hybrid and vapes
British American Tobacco
Fast Followers: Hybrid products & Vape in the US
Japan Tobacco
Tobacco Industry reaction:
Traditional companies have reacted slowly and waited for market signals

4. Marketing Society Consumers
Market and regulations are changing rapidly
Marketing
Society
Consumers
Direct communication with customers is no longer possible
Tobacco is becoming against new lifestyles and smoking is no longer free
Health conscious consumers are looking for alternatives
Traditional companies have not adapted to the new environment

5. JUUL’s success threatens Big Tobacco’s ability to compete in vaping market
Juul: 80% of market share
Technology
Nicotine salt formulation
Discrete Size
Flavors
“Clean”
Marketing
Social Media
Style
Not as much regulation
“Meme” culture
Inconclusive medical studies
Others
Juul
Declining tobacco sales means long-term success in vaping or further diversification is necessary

6. How Big Tobacco has reacted to JUUL
R&D
Product innovations that can compete with JUUL
Acquisition
Altria purchased 30% stake in JUUL
Altria investing in cannabis industry
Marketing
Leveraging marketing budget and distribution capabilities  convenience and awareness

7. British American Tobacco
Tobacco companies must adapt to changing perceptions of tobacco and vaping
Approach
Strategic
Phillip Morris
(+ Altria)
Managerial
Japan Tobacco
Inc.
British American Tobacco
Compliance
Risky Red Zone
Defensive
Issue Maturity
(in public realm)
Latent
Emerging
Consolidating
Institutionalized
Focus on

8. British American Tobacco
Tobacco companies must adapt to changing perceptions of tobacco and vaping
Approach
Strategic
Phillip Morris
(+ Altria)
Managerial
Japan Tobacco
Inc.
British American Tobacco
Compliance
Risky Red Zone
Defensive
Issue Maturity
(in public realm)
Latent
Emerging
Consolidating
Institutionalized

9. British American Tobacco
Tobacco companies must adapt to changing perceptions of tobacco and vaping
Approach
Strategic
Phillip Morris
(+ Altria)
Managerial
Japan Tobacco
Inc.
British American Tobacco
Compliance
Risky Red Zone
Defensive
Issue Maturity
(in public realm)
Latent
Emerging
Consolidating
Institutionalized
Focus on developing ethical leadership that can sustain organization beyond tobacco

10. (Between 1 and 2 packages daily)
Why Tobacco companies should care? Because there is a lot of money involved
Tobacco Smoker
Size of the market:
1 in 10 adults smoke 2M
Yearly Spend
LTV (40 Years)
Margin (30%)
$5,000
$200K
$260K
(Between 1 and 2 packages daily)
$120Bn
Adults are rapidly switching to Vape and is already penetrated on younger population

11. How Big Tobacco initially reacted to the disruption
Slow product innovation
Increased R&D spend, acquisitions
Imperfect products pushed to market
Product Innovation
Exploited lack of regulations
No ethical use lobbying power
Regulatory Environment
Lifestyle marketing
Unsubstantiated health claims
Marketing

12. Tobacco industry needs to reinvent itself
Tobacco alternatives meeting the market demands of present and future consumers
Market
Strategic Focus
Product
Innovation
Boring product
Lack of innovation in tobacco industry has stayed the same for centuries
Adaptation
Long history of success for tobacco without need for change
Market
Next generation of consumers looking for exciting and healthier product
Tobacco industry needs to reinvent itself

13. Invest in product development
Criteria
Feasibility
Profitability
Sustainable Growth
Enter New Industry
Innovate Product
Ethical Leadership

14. Public backlash for hypocrisy
Risks can be mitigated!
Risks
Mitigation
Contingency
Public backlash for hypocrisy
Invest marketing and rebranding campaign
Spin off
Regulatory limitations
Invest in lobbying
Develop additional products
Expensive to innovate product
Invest in more R&D
Acquire smaller player

15. Big Tobacco should have taken an ethical leadership approach
Technology to improve safety: app-based age verification
Partnerships with independent labs for health studies
Medical applications: aerosol administration of medicine
Product Innovation
Work with governments to shape regulations
Collaborate with other regulating bodies to explore medical applications
Regulatory Environment
No lifestyle marketing
Use substantiated claims only
Increase transparency to improve public relations
Marketing