Juul sounds out Indonesia for expansion, other Asian countries in its sights
* Juul officials held talks with Indonesia govt in Oct
* Indonesia gains 10 pct of tax revenue from traditional
* Smoking widespread in Indonesia where there are few
By Fanny Potkin and Chris Kirkham
JAKARTA/LOS ANGELES, Nov 13 (Reuters) - Juul Labs Inc is
exploring selling its compact vaping devices in Asia and has
sounded out government officials in Indonesia, one of the
world's most smoker-friendly countries, although gaining
approval there could face significant hurdles.
Expansion into Asia would provide the fast-growing firm with
new markets at a time when it faces increased regulatory
scrutiny in the United States and Israel over the potential
health risks of its products' high nicotine content.
Juul representatives held discussions with the Indonesian
government last month about introducing its vaping devices, the
country's finance ministry officials told Reuters.
Indonesia has one of the world's highest rates of smoking
among adults and teenage boys and imposes no penalties for
selling cigarettes to minors. It also has a population of 260
million, making it a highly attractive market for tobacco and
A person familiar with Juul's plans said executives for the
San Francisco-based company are concerned authorities may be
reluctant to grant approval due to likely opposition from the
traditional tobacco industry, which provides much of Indonesia's
Tobacco taxes accounted for nearly 150 trillion rupiah
($10.2 billion) or about 11 percent of national tax revenue in
2017, government data showed. Each province also imposes taxes
Juul is also worried its argument that vaping is healthier
than smoking will not hold much sway in Indonesia, which is not
as concerned as other countries about health issues, said the
person, declining to be identified as the discussions were not
Juul representatives reached out to the finance ministry to
discuss how it would be taxed on any sales of devices there, the
Indonesian officials said.
The government needs to examine the domestic e-cigarette
market to determine how a foreign player such as Juul could hurt
local small and labour-intensive e-cigarette firms, said
Sunaryo, a senior official in Indonesia's customs and excise
office, who like many Indonesians uses only one name.
"We will need it to study it," he said, adding he wasn't
sure Juul would comply with a regulation that requires
e-cigarette devices and liquids to be sold separately.
Juul also would need approval from Indonesia's Food and Drug
Agency. Officials at the agency said Juul had yet to be in
Other Asian countries the three-year old firm is actively
considering for expansion include India, South Korea and the
Philippines, the person familiar with Juul's plans said.
In addition to Indonesia, Juul filed trademark applications
for those countries between April and October 2018, as well as
in Malaysia and Singapore, according to a Reuters review of
government filings. It opened its first Asia office in Singapore
So far Juul, currently valued at $16 billion, is available
only in the United States, Canada, the UK and Israel. It has
plans to enter Russia later this year.
Juul said in a statement to Reuters it is "proactively
learning more" and engaging with local officials in Asia "to
understand and hear their views." It does not have immediate
plans to launch in any Asian country, it said. Juul spokeswoman
Victoria Davis declined to elaborate.
A TAXING QUESTION
Indonesia is one of only a handful of United Nations member
states that has not signed on to the World Health Organization's
global treaty that sets standards for tobacco control.
Roughly two-thirds of Indonesian men smoke tobacco daily,
and more than 21 percent of boys aged 13-15 smoked cigarettes
regularly, according to a WHO report last year.
E-cigarettes, available in Indonesia since at least 2013,
are a small but growing market. The customs office estimated
there are about 300 unsupervised liquid makers known as brewers
in Indonesia, producing various liquid products to more than
4,000 vape stores and 900,000 smokers.
Philip Morris International Inc, maker of Marlboro
cigarettes, which now controls about a third of Indonesia's
market through its stake in Sampoerna, does not offer any of its
non-combustible cigarette products in Indonesia.
That includes its IQOS device, a heat-not-burn tobacco
product, according to a company spokesman, who declined to
comment on why it has not introduced the product.
In October, the government imposed a 57 percent tax on
electronic-cigarette liquids, on par with taxes on traditional
cigarettes. But tax collection, particularly from smaller
companies, is difficult in Indonesia and new rules are often
Juul now commands nearly 75 percent of U.S. e-cigarette
market share, up from 13.6 percent in early 2017, according to a
Wells Fargo analysis of Nielsen retail data.
Its products, like most electronic cigarettes, vaporize a
liquid containing nicotine. One Juul pod contains as much
nicotine as a traditional pack of 20 cigarettes, according to
the company's U.S. marketing.
Juul liquid in the U.S. has a nicotine concentration of 59
milligrams per milliliter, much higher than the liquids
typically sold in earlier versions of e-cigarettes and nearly
three times the allowable limit in the European Union.
In August, Israel banned Juul devices with nicotine
concentration of more than 20 mg/mL, citing "a grave risk to
public health." Juul is appealing that decision and currently
offers a lower nicotine-strength electronic cigarette in Israel.
In September, the U.S. Food and Drug Administration opened
an investigation into Juul and other electronic cigarette
companies, citing the rising number of teens who appear to be
using Juul and other vaping devices. This week it is expected to
issue a ban on fruit and candy-flavoured e-cigarettes sold in
convenience stores and gas stations.
In its statement to Reuters, Juul said its products are
intended for adult use only, and that it aims to "improve the
lives of the world's one billion adult smokers" by providing an
alternative to cigarettes.
($1 = 14,665 rupiah)
(Reporting by Fanny Potkin in Jakarta and Chris Kirkham in Los
Angeles; Additional reporting by Tabita Diela, Yuddy Cahya and
Agustinus Beo Da Costa in Jakarta, Aditya Kalra in New Delhi,
Hyunjoo Jin in Seoul, Karen Lema and Neil Jerome Morales in
Manila and Joseph Sipalan in Kuala Lumpur; Editing by Vanessa
O'Connell and Edwina Gibbs)
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