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FORTUNE.COM // NOVEMBER 2019
that resembled pens, armed with recharge-
able batteries; finally came the USB-drive-
like products that Juul has made ubiquitous.
These devices are modifiable, with parts that
can be replaced and interchanged. That’s why
Juul’s most common device can also be used
to vape black-market THC cartridges.
Those permutations make the size of the
opportunity hard to pin down. “This market is
hard to measure because of things like online
sales, sales through unmeasured channels,
including vape shops,” Piper Jaffray analyst
Michael Lavery tells Fortune. Wells Fargo’s
Herzog estimates that nicotine e-cigarettes will
reach $9 billion in U.S. sales this year. Mari-
juana vaping cartridges and pens are expected
to ring in $2.5 billion in 2019 sales, according
to cannabis tracking firm BDS Analytics. And
that’s just the legal ones; taking the illicit THC
market into account could double the figure.
What’s certain is that the market is growing
fast. Between 2012 and 2016 (the most recent
figures available), average monthly e-cigarette
sales spiked 132%, growing to 1,547 units
per 100,000 people in 2016, according to
the Centers for Disease Control. By the end
of 2017, Juul alone was selling 3.2 million
devices each month, says the CDC.
The Juul juggernaut not only attracted
Altria’s investment but also helped prompt
merger talks between Altria and Philip Morris
International (PMI)—the company that Altria
spun off in 2008. Those talks fell apart as the
e-cig controversy swelled. Juul seems to be in
retrenchment mode; it directed Fortune to a
statement in which it committed to “respon-
sible leadership” and combating “unacceptable
levels of youth usage.” But Altria and PMI,
which still collaborate on all kinds of tobacco
products, may have a secret weapon tucked
into their vests. It’s called “heat not burn”
technology—and it could buoy the industry if
vaping becomes untenable.
FOR A MAN WHOSE JOB is selling smokeless
tobacco devices, Jacek Olczak makes buying
smokeless tobacco devices sound like a
huge hassle.
Olczak is the chief operating officer of PMI,
and the device he’s pitching is the IQOS (“EYE-
cose”), a heat-not-burn device. Such devices
deliver nicotine using a pellet made up of
finely ground and reconstituted tobacco. (PMI
calls its version a HeatStick.) After users place
a stick into the stylus device, a small internal
blade heats the tobacco to a temperature hot
enough to release a nicotine-laden vapor but
not hot enough to set the tobacco on fire. As
with a vaping device, there’s no combustion,
so there’s no ash or smoke.
The IQOS, which looks like what would
result if Apple’s Jony Ive designed a ballpoint
pen, made its U.S. debut in early October at a
minimalist IQOS-branded store in an upscale
mall in Atlanta. But obtaining one, as Olczak
describes it, is no casual affair. You can order it
online, Olczak says, but you have to pick it up
at a store. You’ll have to prove you’re 21. You’ll
also have to testify that you’re an active smoker
trying to quit. You could lie about that, but
PMI says customers will be asked about how
long they’ve smoked, how often, and which
brands they purchase—to test their bona fides.
“I started smoking when I was about 22,”
says Olczak, a native of Poland. “I want to
target adult smokers.” He also wants to build a
PMI hopes to get about
40% of net revenue
from smokeless
products by 2025.
NE W FL AVOR
An IQOS store
in Athens,
Greece. The
first U.S. IQOS
store opened
in Atlanta on
Oct. 4.
DAVID ROSE
—PANOS PICTURES PANOS/REDUX
