JUUL, the ubiquitous electronic cigarette, is enormously successful—and increasingly controversial. Hailed as a healthier alternative to cigarettes, JUUL is under fire for an increase in teen vaping. To make matters worse, JUUL pods are inconsistently priced and subject to little regulatory oversight. The FDA just threatened the company with new regulations if they don’t propose a compelling plan to curb teen vaping within 60 days. For all these reasons and more, here’s why JUUL should implement blockchain.
America’s Favorite E-Cigarette
In America, JUULs are everywhere. With an elegant design and the ability to deliver surprising amounts of nicotine from small, liquid pods, these inconspicuous vapes represent 68% of the e-cigarette market.
According to the Center for Disease Control and Prevention: 3.2% of Americans age 18+ use e-cigarettes and 15.4% have tried them. Young adults are especially likely to have smoked e-cigarettes. Almost a quarter of people between the ages of 18 and 24 have tried something like a JUUL. Furthermore, Americans age 18 to 24 were the most likely to routinely smoke them (4.5%).
And e-cigarettes are even more popular with teens. Not only are teenagers more likely to have smoked e-cigarettes than traditional cigarettes, but young people are four times more likely to switch to smoking traditional cigarettes after smoking electronic cigarettes for over a year, according to a study published in the American Journal of Medicine.
Teen Vaping JUULs
Specifically, 11% of American high school students and 4.3% of middle school students described themselves as regular e-cigarette users in 2017. This comes to around 2 million self-reported teen smokers, according to the Center for Disease Control and Prevention (CDC).
JUUL accounts for 60% of the e-cigarette market. As a result, teen vaping is turning into a PR and legal nightmare for JUUL, specifically. Though it’s illegal to buy JUUL products if you’re under 21, and the company has publicly stated that their products are only for adult smokers, JUUL teen vaping is widespread and shows no signs of stopping.
In fact, it’s so rampant that the FDA is getting involved. This morning, the FDA made an announcement that could have catastrophic consequences for JUUL. FDA Commissioner Dr. Scott Gottlieb called teen vaping an “epidemic,” and promised that they would take action.
#ICYMI: @US_FDA issued more than 1,300 warning letters and civil money penalty complaints to retailers who illegally sold e-cigarettes to minors. Learn more ➡️ https://t.co/Bzp4ewUJos pic.twitter.com/14Rx34DUYc
— HHS.gov (@HHSGov) September 13, 2018
Not only is the FDA clamping down on illegal vape sales to teen smokers, but they’re also re-thinking the legality of flavored e-cigarettes. For those who don’t know, the bulk of JUUL’s appeal, for adults and minors, is their fruity nicotine cartridge flavors.
Flavored E-Cigarettes
Flavored e-cigarettes are one of JUUL’s most popular products, especially for new smokers. According to a survey conducted by Johns Hopkins University discovered that 81% and 86% of teen and young adults tobacco consumers, respectively, first started smoking flavored e-cigarettes.
In other words, JUUL’s success is also its main obstacle: Adults buy JUUL products because they like smoking something fruity and discreet, but so do teens.
Along with the announcement that JUUL has to mitigate teen vaping, the FDA also explained that they’re re-considering the legality of flavored e-cigarettes. Not only would this measure curb teen vaping, but it would make smoking a JUUL a lot less appealing to adults, too.
If JUUL wants to retain its $15 billion value, they have to find a way to reduce the “epidemic” of teen vaping, while keeping their flavored e-cigarettes on the market. And they need to do it before the FDA, in essence, makes the bulk of their product line illegal.
Advertising
Studies have connected JUUL’s popularity with teenagers to advertising. Cigarette companies have been banned from TV advertising since the 1970s. But since e-cigarettes do not contain tobacco, it’s legal for them to advertise virtually anywhere.
E-cigarette advertisement has been prevalent since 2011. According to the CDC, 70% of middle and high school kids saw vapes advertised in 2014. Vape ads have been wildly successful at appealing to young people. A study published in Pediatrics found that 41% of participants between 12 and 13-years-old responded positively to at least 1 of the 5 smoking advertisements. Additionally, 50% of older teenagers were susceptible. And overall, e-cigarette advertisements were the most appealing of all.
JUUL markets their vapes as an alternative to smoking for adults (though the National Institute on Drug Abuse cites recent research that shows no correlation between JUUL use and quitting cigarette smoking). But many argue that JUUL has the opposite effect when it comes to teen vaping. In other words, while JUUL may help smokers wean themselves off cigarettes, smoking a vape can trigger a lifelong nicotine addiction.
In fact, 90% of smokers start before they turn 18. And 99% of smokers began smoking before 26 per the U.S. Surgeon General.
Counterfeit JUULpods
Fake JUUL pods from juul
JUUL’s second biggest obstacle is inconsistency. After centuries on the market, cigarettes are highly regulated. Tax structures are already set up, and government graders inspect U.S. tobacco crops.
Conversely, JUULpods are manufactured all around the world. In other words, the only health and safety oversight to which they’re subject is their own. And cheaper, JUUL-compatible pods manufactured by third parties often comply to few, if any, health and safety requirements.
Is vaping bad for you? Today, we don’t understand the longterm effects of vaping. But according to a report published by the National Academy of Sciences, the majority of vapes contain toxins besides nicotine, like lead and other metals. The study was not JUUL-specific.
This week, JUUL announced that they’re filing trademark claims against 30 Chinese companies. These companies were selling counterfeit JUUL products on eBay. JUUL is trying to stem the tide of teen vaping of imitation, and potentially toxic, e-cigarettes. But combine a lack of health regulations and the inability to enforce these regulations overseas and you get a profusion of counterfeit JUUL products with unknown ingredients.
Price Inconsistency
And quality isn’t the only form of inconsistency when it comes to JUUL and vaping on the whole: JUUL product pricing seems completely discretionary.
Blocklr went to several JUULpod vendors in New York and found that a pack of four ranged from $13 to $20 at convenience stores within blocks of one another. At one, you could buy two packs (8 JUULpods) for $30.
Store employees were reticent to talk about JUUL pricing or JUUL sales in general.
How JUUL Should Implement Blockchain
The three main issues facing JUUL are the following:
- Stopping teen vaping without an FDA ban on flavored e-cigarettes
- Standardizing pricing
- Ensuring that products meet quality and health standards
Blockchain, a decentralized ledger of transactions that cannot be altered or deleted, has the potential to solve all these problems. Within its framework, anyone can build smart contracts, which are coded agreements with preset conditions that, once met, automatically enforce themselves.
Though blockchain is the technology behind bitcoin, a cryptocurrency that exists on a public ledger, its application in the private sector is increasingly prevalent. For example, De Beers, the diamond producer, and retailer is using blockchain. They’re applying smart contracts to streamline their worldwide supply chain and blockchain’s unchangeable ledger to track diamonds from mine to sale, thereby guaranteeing their value.
Diamonds and e-cigarettes aren’t as different as they appear; global supply chains have largely the same issues. On the whole, the diamond industry and JUUL need to provide quality assurance and proof that you aren’t overpaying to regulatory bodies and customers alike.
Problem 1: Age Verification
The most immediate problem facing JUUL is teen vaping. Due to the prevalence of teen vaping, the FDA has given the company 60 days to create a plan of action to curb underage use. Simultaneously, the FDA is considering outlawing flavored e-cigarettes. Undoubtedly, they will take further steps in that direction if dissatisfied with JUUL’s initiative.
Vape companies need to find a solution for underage e-cigarette purchases both in stores and online. In a study from 2015, 76.5% of almost 100 attempted underage online vape purchases were successful. In almost all cases, the delivery service did not verify the age of the customer. Instead, they left the delivery at the door.
Since then, JUUL has taken great pains to provide age verification on their website. To buy a JUUL vape or JUULpods, you must create an account. Not only do you have to provide your birthday, but a purchase requires the last four digits of your social security number.
But not everyone goes through JUUL’s official website. If you’re underage, you can go to eBay right now and buy a new JUUL and 4 JUULpods for $45. You can find a used one for less. This is cheaper than buying a JUUL for the original price of $35.99, and an additional $15.99 for pods. Additionally, you don’t have to provide a social security number, which you may not want to give out for identity theft reasons or because you’re underage.
In other words, despite JUUL’s attempts to secure their own website, they have little control over who buys their products after it leaves their warehouse, both in-store and online.
Blockchain For Age Verification
In place of a physical ID, which could be forged, SSN, which can be stolen, or passwords and third-party authentication, Civic gives you a QR code. They’ve already partnered with beer company Anheuser-Busch to create a blockchain-based beer vending machine.
In other words, the technology that guarantees a user’s age so they can buy alcohol could also work for online and in-store nicotine product sales.
Solution: Blockchain Age Verification App
JUUL could either partner with a preexisting blockchain identity verification company or create its own version. Every JUUL purchase would require providing identification with the app. Some of the benefits of a model like Civic’s would include:
- Buying something instantaneously with a code that guarantees that you are who you say you are.
- Securing your identity on a blockchain that is encrypted on your phone, rather than stored in a centralized entity. Today, you’re trusting JUUL with your SSN when you buy from their website.
Implementing age verification blockchain tech make it difficult to for teens to buy JUUL products. Having an identification code, backed by blockchain, would also make it easier for adults to make repeat purchases because they’d already been in the system.
Problem 2: Pricing and Quality
But even if everyone needed to use an app to legally purchase JUULs, how would JUUL regulate the price and quality of their products? In essence, by moving the entire supply chain onto a blockchain.
Maersk’s Blockchain Platform
JUUL would not be the first billion dollar company to record all steps of its supply chain on the blockchain. International shipping giant Maersk recently built a blockchain platform with IBM.
Every year, Maersk ships $16 trillion worth of goods across international borders. Their network is complex and involves customs authorities, port operators, freight forwarders, shippers and carriers. Shipments must satisfy ever-evolving country-specific regulations and require negotiations. All this, Maersk estimates, costs 1/5 of the total price of shipping and slows down a shipment by 40%.
Today, Maersk has moved their supply chain onto the blockchain. When Blocklr spoke with them in August, they had already completed 158 million shipping events using blockchain technology. All in all, 90 global organizations had agreed to participate in their blockchain, including customs authorities.
And instead of negotiating individual deals with the help of third parties (lawyers, negotiators), Maersk uses smart contracts. These agreements are pieces of code with pre-set conditions for both parties. For example, once goods arrive in the right quantity and quality, the blockchain will release the funds to whoever dropped them off.
De Beers’ Blockchain Platform
De Beers has done something similar. Like Maersk, they’re putting their entire diamond supply chain onto their blockchain. The diamond company also has a massive international network that goes from mines to appraisers to stores to resales.
And, like vapes, this diamond company has faced public criticism and government action. In fact, they were not legally allowed to sell under their name brand in the U.S. because of their history with blood diamonds, meaning diamonds mined in conflict zones. De Beers needed a way to track their diamonds to ensure their value and guarantee their source.
On Tracr, their blockchain platform, De Beers gives each diamond an identification number. Each diamond’s color, clarity, cut, origin and transaction history links to that ID. This information cannot be modified and exists privately on their blockchain. This means that you cannot look up who bought a diamond unless you’re a member of the platform, meaning one of the steps in the supply network (mine, appraiser, retailer…).
Solution: Put the Supply Chain on Blockchain
Maersk, De Beers and JUUL all need the same thing: an unchangeable, universally accessible record of where each product, be it a shipment, diamond or vape, comes from. In essence, they need a way to guarantee its quality and price.
This means giving each product an ID number, facilitating its sale through smart contracts and storing all transactions on the blockchain. Here’s what a JUUL smart contract could look like.
JUUL Smart Contracts
1. First, the manufacturer launches the smart contract. The retailer could then input what and how much they want. The smart contract would include three conditions to which the JUUL retailer would have to agree before ordering:
- They can only recorder after their stock dwindles to a certain level.
- They have a specific price range and cannot charge customers less than X and more than Y.
- All JUUL sales require age verification through the JUUL app, which it automatically links to the JUUL product ID number on the blockchain.
2. Once the retailer meets the reordering conditions and inputs their order, the smart contract alerts the manufacturer. They would then complete the order.
3. Next, the courier would get involved. Though shipping prices fluctuate, the smart contract would automatically accept the lowest price proposed by the courier within a certain margin.
4. After the courier delivers the product to the retailer, the smart contract would automatically release the funds to the manufacturer and the courier. No time delay, and no need for trust.
5. When the retailer sells JUUL products, all transactions would be recorded on the blockchain. If they do not document a sale on the blockchain, they will not meet the threshold to order. In essence, JUUL vendors ability to keep selling JUULs would become contingent on how much and to whom they’re selling their products.
Recording all sales on a blockchain platform would allow JUUL to control to whom and how their products are sold. It would also provide valuable data about their customers, and could boost business if customers felt they were guaranteed a fair price and the company could trace the contents of your vape back to a specific factory.
Why JUUL Should Implement Blockchain
JUUL has less than 60 days to mitigate teen vaping. If they do not propose a comprehensive plan, JUUL could face an FDA ban on flavored e-cigarettes. In addition to government action, JUUL is also looking at the public backlash from the perception that they encourage teen vaping. Furthermore, JUUL could prevent future outcry by controlling pricing and encouraging consumer confidence.
But JUUL isn’t the first multi-billion dollar company to face public and government action. Like a diamond retailer and shipping company before them, JUUL could implement blockchain to record their supply chain, hold retailers accountable for selling to underage smokers and guarantee the price and origin of their products.
Building a JUUL blockchain is costly only in the short term. Long-term, blockchain could cut down on shipping prices and encourage consumer confidence. And these are only a couple reasons why blockchain is streamlining industries and contributing to unemployment.
By contrast, without the reliability of something like a blockchain ledger, JUUL is facing a flavored e-cigarettes ban and public upset. Both these outcomes would be bad for business.
