Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Hello and welcome to another episode of the Odd Lots Podcast.
Speaker 2: I'm Joe Wisenthal.
Speaker 3: And I'm Tracy Alloway.
Speaker 2: Tracy, have you tried a zin yet?
Speaker 3: No, I've resisted. Multiple people, including you, have offered me
Speaker 3: zin's before, and I have so far resisted the temptation.
Speaker 3: But I don't know how long I'm going to be
Speaker 3: able to hold out.
Speaker 2: For those who don't, I guess there are some There
Speaker 2: might be some people who don't know what a zin is. Actually,
Speaker 2: it occurs to me. It's a little pouch that people
Speaker 2: put under their lip on their gum, and it's filled
Speaker 2: with tobacco free nicotine salt. So it's sort of a
Speaker 2: smoking alternate or even a vaping alternative, And so people
Speaker 2: like who want nicotine can get it that way. But
Speaker 2: there's also like this big culture of it, like zen
Speaker 2: memes are everywhere now.
Speaker 3: Yes, and there have been times where it's been really
Speaker 3: hard to find them. Right, So, first of all, they're
Speaker 3: made by Philip Morris, is my understanding. But then secondly,
Speaker 3: sales have jumped like I can't remember the exact timeframe,
Speaker 3: hundreds and yeah, and so there have been shortages of
Speaker 3: this product, and if you go, you know, online, on
Speaker 3: certain subreddits in places like that, you can see people
Speaker 3: actively trying to find where they can get Zen's. There's
Speaker 3: also a lot of other nicotine delivery products nowadays too.
Speaker 3: There's obviously the vapes and elf bars. I had a
Speaker 3: this is a slight aside, I had a green tea
Speaker 3: flavored vape type thing.
Speaker 2: Yeah, it was.
Speaker 3: Great, and it made me feel so healthy. It's the
Speaker 3: only nicotine product that actually made me feel healthy.
Speaker 2: Do you remember, you know, speaking of nicotine and I'm
Speaker 2: fascy by nicotine. It always sort of goes in waves.
Speaker 2: I see cigarettes once again. I go to parties sometimes
Speaker 2: a lot of people are smoking. Do you remember the
Speaker 2: episode we did with Larry Hamptil years ago about Yeah,
Speaker 2: so he made an observation about the history of nicotine
Speaker 2: that like there was some Russian czar and like the
Speaker 2: fifteen hundreds or something like that, ye who threatened to
Speaker 2: cut off the noses of anyone who consumed tobacco. And
Speaker 2: I guess that didn't work. But it really shows that,
Speaker 2: you know, you have these like crackdowns and people get
Speaker 2: really anti nicotine consumption, but it really just doesn't go
Speaker 2: away like nicotine. It's Lindy nicotine consumption.
Speaker 3: I feel like we should just caveat this entire conversation,
Speaker 3: or at least I should.
Speaker 2: With you know, don't do drugs, folks.
Speaker 3: I do not endorse nicotine consumption. However, everything in the
Speaker 3: world is relative and on a continuum, and I can say,
Speaker 3: you know, when I was in high school in Japan,
Speaker 3: I used to smoke clove cigarettes. Like there were days
Speaker 3: where I would smoke like a whole pack of clothes,
Speaker 3: which is just insane when I think about it now,
Speaker 3: and so certainly relative to a pack of clothes, I
Speaker 3: feel better about some of these new nicotine products. The
Speaker 3: one that I kind of like, and we're going to
Speaker 3: talk about it now, is the gum.
Speaker 2: Yes, right, because Nicorette has existed for a while, but
Speaker 2: now we're seeing that more and more companies are doing
Speaker 2: it with different flavors and stuff like that. We are
Speaker 2: truly again, nicotine is definitely having a moment right now.
Speaker 3: Yes, and beyond personal preferences and consumption, it is just
Speaker 3: a really interesting business. So there are these new products
Speaker 3: being developed and sales of them have exploded in recent years.
Speaker 3: But then secondly, in the background. As with all nicotine
Speaker 3: and tobacco products, there's always the regulatory threat and what
Speaker 3: policymakers actually decide to do about these things, and the
Speaker 3: health considerations and things like that. So it's just a
Speaker 3: interesting industry to observe and talk about totally.
Speaker 2: And you know, you mentioned the Zin shortages, which are
Speaker 2: real because I've gone into stories and they just like
Speaker 2: don't have any et cetera. But there are all these
Speaker 2: other like ZIN competitors. There's Zemo, there's Zalt, there's Rogue,
Speaker 2: there's they have in them. Right, my guess would be
Speaker 2: will Zen exists, and so let's come up with a
Speaker 2: name that's sort of But anyway, we're going to be
Speaker 2: speaking with the CEO and co founder of yet another
Speaker 2: one of these nicotine pouches, because I want to actually
Speaker 2: understand how this business really works. And in fact, it's
Speaker 2: the company that makes the gum that you like.
Speaker 3: Yeah, so the gum. The reason I found it is
Speaker 3: actually because you gave me a sort of industrial quantity
Speaker 3: of it for some reason, and so I have it
Speaker 3: stored in a drawer at home, and uh, yeah, by
Speaker 3: all accounts, it's s seem to be increasing and so
Speaker 3: it is very emblematic of this new era of nicotine products,
Speaker 3: and we should talk more about what that business actually
Speaker 3: looks like.
Speaker 2: I am very excited. We have indeed the perfect guest
Speaker 2: we are going to be speaking with, John Coogan. He
Speaker 2: is the co founder of Lucy Nicotine, which is one
Speaker 2: of these ZIN competitors. They make the pouches, they make gums,
Speaker 2: they make something called breakers, which I don't really know
Speaker 2: what that is. I haven't tried it yet, maybe we'll learn.
Speaker 2: And they've been around since twenty sixteen, so long before
Speaker 2: the Internet, this Internet became flooded with memes about all
Speaker 2: of this stuff. He was early on the bandwagon, so
Speaker 2: to speak, or before there was even a bandwagon. And
Speaker 2: we're going to understand how this business actually works and
Speaker 2: why so many people are consuming this stuff. So John,
Speaker 2: thank you so much for coming on odd.
Speaker 4: Lots, Thanks for having me.
Speaker 2: On what is nicotine culture.
Speaker 4: Nicotine culture has evolved a lot, but right now, I mean,
Speaker 4: I think the Z internet is great portmanteau to describe it.
Speaker 4: It's certainly become a little fratty, a little broie, but
Speaker 4: that doesn't actually capture the broader nicotine user because there
Speaker 4: are millions and millions of nicotine users, and the average
Speaker 4: smoker is, you know, a gen xer or boomer, and
Speaker 4: they are definitely not posting zen memes on Instagram. But
Speaker 4: that's certainly what's driving this new wave of consumers moving
Speaker 4: down the continuum of risk and moving away from cigarettes,
Speaker 4: which I see as a very positive thing.
Speaker 3: So, speaking of Bros, you co founded Soilent before co
Speaker 3: founding Lucy, and I always thought of Soilent as the
Speaker 3: sort of I think someone wrote this at some point,
Speaker 3: but the slim fast for men? What was it about?
Speaker 3: What was it about nicotine products that attracted you to
Speaker 3: that space? You know, going from a company like Soilent
Speaker 3: and starting something new.
Speaker 4: It was a few things. So with Soilent, we just
Speaker 4: kind of stumbled into it. We were actually running out
Speaker 4: of money and hungry, and we needed a meal replacement
Speaker 4: to kind of help us stay healthy and provide for
Speaker 4: our food needs, and so we just kind of made
Speaker 4: this product. It went viral because we wrote this very
Speaker 4: edgy blog post about how our CEO quit eating food
Speaker 4: for thirty days straight and lived on this er members exclusively. Yeah. Yeah,
Speaker 4: And so it was the ultimate stress test. And so
Speaker 4: even though we were a new company, and we couldn't
Speaker 4: show that, oh we had one hundred thousand people consume
Speaker 4: our product, they all liked it. We were able to
Speaker 4: show that one person was able to consume it in
Speaker 4: the extreme, and so if this one guy can can
Speaker 4: use this product for thirty days straight, you can probably
Speaker 4: have it for you know, launcher and after snack, and
Speaker 4: so it went very viral. It was very controversial. But
Speaker 4: what we learned was that the market for meal replacement
Speaker 4: shakes and protein shakes was not oligopolistic or monopolistic in
Speaker 4: any way. We actually kind of learned this in a
Speaker 4: pitch with Peter Teel where we went in to present
Speaker 4: the company and he kind of laid out how the
Speaker 4: market would evolve and explain to us that this would
Speaker 4: be a potentially a very good business, but not a
Speaker 4: venture backable business. Of course, we wound up not taking
Speaker 4: his advice and raising a bunch of venture money and
Speaker 4: the company didn't do that well because of that. But
Speaker 4: we learned that it was much more important if we
Speaker 4: were going to be consumer products entrepreneurs to go into
Speaker 4: products that had moats. So in the nicotine space, there's
Speaker 4: a pretty significant regulatory mote, yeah, and also take things
Speaker 4: much slower. So we've been in business for eight years now,
Speaker 4: raised a lot less money, were much more profitable, much
Speaker 4: more cash flow positive, and we're trying to accumulate more
Speaker 4: brand power, more market power, more moats and that's really
Speaker 4: what motivated us. Of course, there was also the personal need.
Speaker 4: My co founder was quitting smoking. He didn't like any
Speaker 4: of the alternatives. It's kind of the classic story that
Speaker 4: you see in this in this category. And we thought
Speaker 4: that there was enough expertise among our team members to
Speaker 4: launch a product in a more regulated space. One of
Speaker 4: our co founders is a PhD from Caltech and had
Speaker 4: worked in biotech and dealt with the FDA on the
Speaker 4: cancer drug side of things, and so we knew that
Speaker 4: we could we could both work with the FDA but
Speaker 4: still do all the standard e commerce shipping shopify, you know,
Speaker 4: make a product, sell it online. The blocking and tackling
Speaker 4: of getting one of these businesses working.
Speaker 2: So, as I mentioned, you know, I've tried, I've consumed
Speaker 2: Zen in my life. I've consumed some of the others
Speaker 2: because they're all over the place and often you know,
Speaker 2: in zores and stuff. So I've tried them all. I'm
Speaker 2: going to be honest here, I'll pop one in my
Speaker 2: mouth from time to time. I have no idea what
Speaker 2: I'm putting in there, you know, it's like, oh, yeah,
Speaker 2: the cave, there's no tobacco. Whatever. What's a nicotine pouch?
Speaker 2: What's in it?
Speaker 4: Like?
Speaker 2: What am I sticking up in my gums?
Speaker 4: Yeah, it's pretty it's pretty simple. I mean, the goal
Speaker 4: of these products is really just to deliver pure nicotine
Speaker 4: and remove the tobacco and any of the nitrosamines or
Speaker 4: harm causing agents as possible. Now you can't. I mean,
Speaker 4: you could just take a vial of pure nicotine and
Speaker 4: drop like a liquid drop on your gums, but that's
Speaker 4: a terrible form factor. It doesn't really work. So what
Speaker 4: these products have done, generally speaking broadly, is they bind
Speaker 4: the nicotine to a like a bulking agent, usually a cellulose.
Speaker 4: We use microcrystalline cellulose, which is essentially just you take
Speaker 4: a tree, you grind it up, you get wood pulp.
Speaker 4: You chemically treat that a little bit to get kind
Speaker 4: of a powder. And so when you're done with the pouch,
Speaker 4: you notice that even though you might not be getting
Speaker 4: any nicotine from that, pouch, there's still something in there
Speaker 4: that's the cellulose. And then you also add flavors, maybe
Speaker 4: a sweetener. There's different things that you can do to
Speaker 4: increase moisture, adding different oils, but that's pretty much it.
Speaker 4: You want to keep the number of ingredients as low
Speaker 4: as possible because you only want to use ingredients that
Speaker 4: have been studied for years and years in the mouth.
Speaker 4: So when someone says, how do we know that oral
Speaker 4: nicotine is acceptable? While we can look at the data
Speaker 4: from Sweden, we can also look at what's happened with
Speaker 4: oral nicotine users in nicoret for fifty years, and then
Speaker 4: what about cellulose. Well, cellulose is used in a lot
Speaker 4: of products, same thing with a lot of these flavoring chemicals.
Speaker 4: So you take these flavors and if they've been used
Speaker 4: in sodas for fifty years and they're not causing cancer,
Speaker 4: well then that's a good case that you can go
Speaker 4: and make to the FDA that hey, this flavor is
Speaker 4: also is also to consume. And this is really important
Speaker 4: because as we saw during the vape crisis, the nicotine
Speaker 4: was not the principal agent of harm in the It's
Speaker 4: called evoli. The e cigarette and vapor acute lung injury
Speaker 4: kind of fiasco. What was going on was that there
Speaker 4: were a certain class of vapes that included vitamin e acetate,
Speaker 4: which was not safe to ingest into your lungs, and
Speaker 4: so that hadn't been tested. So all of these companies,
Speaker 4: zen every company in the space, wants to keep the
Speaker 4: number of ingredients as low as possible and only use
Speaker 4: things that have been studied for a really, really long
Speaker 4: time so they can go and make a really really
Speaker 4: strong case to the FBI.
Speaker 3: What's the difference between Lucy and nick Caret, which you
Speaker 3: just mentioned.
Speaker 4: So there's a few differences from our gum. So we
Speaker 4: have a variety of products. One is a nicotine lossenge
Speaker 4: that's actually approved as a smoking cessation aid by the FDA.
Speaker 4: The FDA has a number of ways that you can
Speaker 4: bring a nicotine product to market. One is through the
Speaker 4: drug pathway. That's what Nicorette went through. So Nicorette is
Speaker 4: an approved smoking cessation aid. We are our nicotine los
Speaker 4: ange is also an approved smoking cessation aid, so we
Speaker 4: can go and say this product is proven to help
Speaker 4: you quit smoking. Our gum goes through what's called the
Speaker 4: Tobacco Products Pathway, which is the pre market tobacco application pathway.
Speaker 4: There's also the modified risk Tobacco Product Pathway, which is MRTP.
Speaker 4: It's all very complex and there's a few different ways
Speaker 4: to bring products to market, but in terms of our gum,
Speaker 4: we have focused on differentiating around the brand. We recognize
Speaker 4: that when my co founder was quitting smoking, he noticed
Speaker 4: that Nicorette was working for him as a product ingesting
Speaker 4: nicotine orally was helping him not smoke. But when he
Speaker 4: pulled out a packet of Nicorette, everyone would say, why
Speaker 4: are you on this medicine? You must be a really,
Speaker 4: really bad smoker. So there was a lot of work
Speaker 4: to be done into destigmatizing nicotine gum and trying to
Speaker 4: trying to make it feel less medicinal and more aspirational.
Speaker 4: And then we've done a lot of work on the flavor, texture,
Speaker 4: and strength side. So Nicorette actually in the United States
Speaker 4: they sell a two milligram and four miligram gum. Internationally
Speaker 4: they do sell a six miligram gum. We found that
Speaker 4: the six miligram gum worked very well, and so in
Speaker 4: the United States we have also chosen to sell a
Speaker 4: six miligram gum, which is stronger, and if you notice
Speaker 4: what's going on in the pouch market, Zin sells a
Speaker 4: three miligram and six miligram product. Clearly, six miligram and
Speaker 4: stronger products are more effective for getting for convincing smokers
Speaker 4: to switch, and so we've been really interested in that,
Speaker 4: but obviously there's obvious there are also risks that come
Speaker 4: with that because it is a stronger product.
Speaker 2: Sitting aside the health questions about nicotine and so forth,
Speaker 2: how much are you seeing people consume any of these
Speaker 2: cigarette alternatives as a help to get people to quit
Speaker 2: smoking versus someone who wants to consume nicotine and maybe
Speaker 2: was never a smoker in the first place.
Speaker 4: It's hard to say. I mean, we do survey all
Speaker 4: of our customers when they come in, and about a
Speaker 4: third of them are former smokers or directly like the
Speaker 4: product that they used right before they ordered was cigarettes.
Speaker 4: Another third comes from e cigarettes and vapor products, so
Speaker 4: that's the product that they were using right before. And
Speaker 4: then another third is basically people that are coming from
Speaker 4: other pouches, like they've tried other brands and then they
Speaker 4: come to us because they've heard of us. Ideally it
Speaker 4: would be you know, one hundred percent cigarettes, but it
Speaker 4: is very, very difficult to target smokers. We actually tried
Speaker 4: on Facebook in the early days, and when we targeted
Speaker 4: people who were interested smoking, there was a lot of
Speaker 4: overlap with people who enjoy smoking meats. I don't know
Speaker 4: if that's like a Zuck thing, but it but it
Speaker 4: was very It was very tricky because if you are
Speaker 4: a smoker, it's not like you're following, you know, smoking
Speaker 4: pages on Instagram. You're probably just doing this in the background,
Speaker 4: and you can do some general, broad level correlations between Oh,
Speaker 4: smokers tend to be into this type of thing, they
Speaker 4: tend to be in this age demographic. But it's much
Speaker 4: harder to target than say, Okay, someone follows this particular band,
Speaker 4: I'm going to try and sell them a shirt with
Speaker 4: that band on the shirt. It's very direct. It's much
Speaker 4: harder to target smokers. But obviously, like everything that we
Speaker 4: do is focused on that because that's where the biggest
Speaker 4: impact for the mission is. But then also smokers spend
Speaker 4: the most money on nicotine every year, so there's the
Speaker 4: strongest economic incentive to go after smokers.
Speaker 2: By the way, Tracy, there are more cigarette memes to
Speaker 2: these days, like some Instagram act that I think, you know,
Speaker 2: it's like cool people smoking cigarettes and stuff like that,
Speaker 2: So that's on the on the rise. Anyway, let's not
Speaker 2: do that.
Speaker 4: That's very edgy. So yeah, exactly, Yeah, it's very edgy.
Speaker 4: So people are starting to you know what's boy with that?
Speaker 2: Ye, cigarettes are like the really hip one right now
Speaker 2: that all the Yeah, yeah, and.
Speaker 4: I can't support that anyway.
Speaker 3: Wait, so on this note, I mean, the amount of
Speaker 3: smokers in the world has declined dramatically, and if Lucy
Speaker 3: is in theory targeting people who are trying to stop
Speaker 3: smoking cigarettes, then is this how is this a growth
Speaker 3: market for sales?
Speaker 4: Oh, it's a huge growth market. So just to give
Speaker 4: you some background, the nicotine market in the United States
Speaker 4: is seventy five billion dollars. Fifty five billion of that
Speaker 4: is still cigarettes, so that's seventy two percent of the total.
Speaker 4: Now ten billion is smokeless which includes oral nicotine, but
Speaker 4: these pouch products, and I guess you would include our
Speaker 4: in this as well, that's only like two and a
Speaker 4: half billion, maybe three billion. The mass that like, still
Speaker 4: the majority of smokeless nicotine is those traditional tobacco pouches
Speaker 4: you might have seen, like dip or General Snooze, those
Speaker 4: types of products which oddly have a higher regulatory status
Speaker 4: with the FDA. Right now, Beach Match has two products,
Speaker 4: Zen and General Snooze. Zen has yet to be approved
Speaker 4: for PMTA, which is kind of like the level one approval. Meanwhile,
Speaker 4: General Snooze has both PMTA and MRTP, which allows them
Speaker 4: to say that General Snooze is less harmful than cigarettes,
Speaker 4: which is great because it probably is, and I agree
Speaker 4: with the FDA on that, but it's just interesting that
Speaker 4: the FDA has chosen to kind of fast track General Snooze.
Speaker 4: I mean, it's an older product, so it's easier to
Speaker 4: you know, run the data on I suppose. And then
Speaker 4: e cigarettes and vapor that's a five billion dollar category,
Speaker 4: but it's declining, and it's declining faster than cigarettes. So
Speaker 4: over the last year, the cigarette market has declined by
Speaker 4: five percent, whereas the e cigarette vapor market has declined
Speaker 4: by something around ten percent. And the decline in vape
Speaker 4: is actually accelerating. So just in the last month it
Speaker 4: went down sixteen percent. And so the way we see
Speaker 4: the market growing is that this fifty five billion dollars
Speaker 4: cigarette market that should be zero, right, and it's getting there.
Speaker 4: It's five percent, and the actual the declines are accelerating.
Speaker 4: So every year there's something like a billion dollars of
Speaker 4: value that's up for grabs, and we're hoping that almost
Speaker 4: all of that codes to oral nicotine if someone is
Speaker 4: switching from smoking.
Speaker 3: But I guess what I'm getting at is is there
Speaker 3: like a generational cliff risk where you mentioned baby boomers earlier,
Speaker 3: but where older smokers, you know, stop buying cigarettes all together,
Speaker 3: either because they age out of the market or because
Speaker 3: you know, governments around the world have breast desire to
Speaker 3: get people to stop smoking. And is that a risk
Speaker 3: for nicotine gum sales.
Speaker 4: Yeah, it could be in the sense that, like the
Speaker 4: overall nicotine market could decline over the next one hundred
Speaker 4: years and we could be talking about, you know, in
Speaker 4: twenty sixty, we could be talking about a US market
Speaker 4: that's not seventy five billion, but twenty five billion. I
Speaker 4: think if you look back to the pre cigarette era,
Speaker 4: humans were consuming nicotine, and I think that there will
Speaker 4: be a continued trend there just because of the way
Speaker 4: the nicotinic receptor has evolved. In the brain and the
Speaker 4: desire for humans. I mean, Joe mentioned that nicotine consumption
Speaker 4: is Lindy in some ways, and I think that's right.
Speaker 4: We just made a terrible mistake during the Industrial Revolution
Speaker 4: by building the cigarette rolling machine, which allowed us to
Speaker 4: ramp up the burning ash that we were inhaling to
Speaker 4: the point where people were smoking twenty cigarettes a day.
Speaker 4: But over time, we do think that there will continue
Speaker 4: to be some amount of ambient nicotine use. I don't
Speaker 4: think it'll ever be everyone. And you can just tell
Speaker 4: from talking to people that some people nicotine they really
Speaker 4: enjoy it, and some people don't get anything out of it.
Speaker 2: I have a lot of questions I want to just
Speaker 2: get afore we get I want to learn more about
Speaker 2: how these packs are as symboled and market and sold.
Speaker 2: But before we do that, I just want to get
Speaker 2: a slightly understand the regulatory environment for nicotine a bit more.
Speaker 2: If I start a pouch company, A like, what do
Speaker 2: I need to do to be able to legally sell it?
Speaker 2: And then B you know, I've been wondering about this
Speaker 2: for a while, and since you know the business, I'm
Speaker 2: just going to ask you. Even though it's not pouch
Speaker 2: or gum related. You know, the FDA went after Jewel
Speaker 2: and rapidly massively constrained what it's able to sell. I
Speaker 2: think some of that's been actually loosened a little bit.
Speaker 2: But then so they killed Jewel more or less, and
Speaker 2: then you just saw this explosion of disposable vapes. And
Speaker 2: those vapes taste like candy. I mean, Tracy mentioned the
Speaker 2: green tea ones, but they have ones that really taste
Speaker 2: like you're inhaling cotton candy, and they're disposable. People trash
Speaker 2: them all over the place. So there's got to be
Speaker 2: all sorts of like waste because whatever in those batteries.
Speaker 2: So they basically opened the door to these candy flavored
Speaker 2: ones that are significantly more wasteful and they end up
Speaker 2: on landfills or in gutters and in sewers and something.
Speaker 2: How did that happen? Like what was it that, like
Speaker 2: the elf bar like from China or whatever was able
Speaker 2: to become massive even while Jewel was so heavily constrained.
Speaker 3: Good question.
Speaker 4: Yeah, let me give you a little bit of the prehistory. Sure,
Speaker 4: and we can work we can work up to the
Speaker 4: Jewel story. So cigarettes were unregulated for the entire twentieth century.
Speaker 4: But in the fifties, sixties, seventies, Surgeon General warning comes out.
Speaker 4: People start learning that cigarettes cause cancer. There's the Master
Speaker 4: Settlement Agreement in the nineties where all of the tobacco
Speaker 4: companies came to create a settlement with the US government.
Speaker 4: The basis for this was, you know, billions and billions
Speaker 4: of dollars paid to American governments, essentially because the tobacco
Speaker 4: companies were placing a negative externality on the healthcare system. Yeah,
Speaker 4: and so that was it wasn't it wasn't a necessarily
Speaker 4: like a moral judgment, even though you could argue that
Speaker 4: it should have been. It was you are causing cancer,
Speaker 4: which is putting stress on the healthcare system, so you
Speaker 4: need to pay the government for that cost. And then
Speaker 4: after that there were a lot of restrictions, mostly on advertising,
Speaker 4: so mostly FTC related now an FCC related now. Later
Speaker 4: in early two thousands, the vaporizer is invented by this
Speaker 4: Hans Licks in China, and a company called Enjoy starts
Speaker 4: building really popular e cigarettes for the United States. These
Speaker 4: get popular and the FDA wants to regulate them. The
Speaker 4: FDA makes a claim that Enjoy is a combined drug
Speaker 4: and medical device product, and it's delivering nicotine for the
Speaker 4: purpose of smoking cessation, which is or cigarette addiction prevention.
Speaker 4: So cigarette addiction is a disease and this product was
Speaker 4: designed to relieve that disease, which makes it a drug
Speaker 4: and medical device. That case went all the way to
Speaker 4: the Supreme Court and Enjoy actually won, So the FDA
Speaker 4: lost and the Supreme Court said that the FDA could
Speaker 4: not regulate e cigarettes. Shortly after, this didn't make any
Speaker 4: sense in this so Enjoy actually went out of business
Speaker 4: because they had a whole bunch of import restrictions while
Speaker 4: they were fighting this case, so they went bankrupt. Eventually,
Speaker 4: a hedge fund guy bought the company, turned it around,
Speaker 4: and they just got approved and now it's a multi
Speaker 4: billion dollar company. But the Obama administration in two thousand
Speaker 4: and two thousand and nine passed the Tobacco Control Act
Speaker 4: the TCA. This gave the FDA regulatory authority over all
Speaker 4: nicotine containing products. Essentially, now the FDA, they have a
Speaker 4: number of regulatory sub organizations within the overall organization. So
Speaker 4: there's drug, medical device, there's veterinary, there's biologics, there's a
Speaker 4: whole bunch of different there's supplements, you know, the protein
Speaker 4: powders that you get, and they all regulate things slightly differently.
Speaker 4: The Tobacco Group was new and they took some time
Speaker 4: to spin up. So by twenty sixteen they had put
Speaker 4: into place what's called the pre Market Tobacco Application Process,
Speaker 4: the PMTA, and so all new products that were brought
Speaker 4: to market would need to submit what's called the PMTA
Speaker 4: to the FDA, and then the FDA would review that
Speaker 4: and say is this suitable for the protection of public health.
Speaker 4: If it is, they will approve it and you will
Speaker 4: be able to continue selling this product. Otherwise they will
Speaker 4: give you what's called a marketing denial order, which means
Speaker 4: that you cannot sell your product in the United States. Now,
Speaker 4: there was a grace period for products that were on
Speaker 4: the market before twenty sixteen, so that includes our products,
Speaker 4: that includes Zen, that includes Jewel, So all of these
Speaker 4: products they still had to file the pmtas, but they
Speaker 4: had a grace period where they could continue to sell
Speaker 4: while the FDA approved and reviewed those applications. Now, so
Speaker 4: if you want to start a product now, you cannot
Speaker 4: sell a single unit in the United States until the
Speaker 4: FDA gets back to you with your application. So to
Speaker 4: your question of if you want to start a pouch company,
Speaker 4: we just can't. If you wanted to do it legally,
Speaker 4: what you would have to do is you'd have to
Speaker 4: raise some money, develop your product, run a whole battery
Speaker 4: of tests, including stability tests, which could take a year,
Speaker 4: because you need to wait around to see if the
Speaker 4: product is different at month twelve than month one. Then
Speaker 4: you submit that data and the huge packet it's you know,
Speaker 4: thousands and thousands of pages to the FDA. They review it.
Speaker 4: You're at the back of the queue. This could take
Speaker 4: tens of millions of dollars. There's rumors that bigger companies
Speaker 4: have spent hundreds of millions of dollars on these applications.
Speaker 4: And I mean, Zin's been on the market since twenty fourteen.
Speaker 4: I'm not exactly sure when they submitted their PMTA, but
Speaker 4: you know it's been five six years since pmtas first
Speaker 4: were submitted. The FDA is prioritizing vapes first because of
Speaker 4: the vape crisis, which we'll go into about duel, and
Speaker 4: they're also organizing based on market share. So theoretically Zin
Speaker 4: should be the first oral product that they review and
Speaker 4: so your new pouch, the you know, the odd lots pouch,
Speaker 4: that's that's going to be at the back of the queue.
Speaker 4: And so it could be three, four or five years.
Speaker 4: No one really knows, but it requires a lot of
Speaker 4: a lot of time. Now with the Jewel story, there
Speaker 4: are a bunch of fascinating things with that that we
Speaker 4: could go into. Essentially, they were on the market before
Speaker 4: twenty sixteen, so it was legal for them to sell
Speaker 4: that product. It got really really popular twenty eighteen twenty nineteen.
Speaker 4: Around that time, we have the vape crisis EVOLI as
Speaker 4: it's known in the industry, and there were I think dozens,
Speaker 4: if not hundreds of deaths that were attributed to acute
Speaker 4: lung injury from vaping or e cigarette use. Now, the
Speaker 4: CDC came in studied everything. It turned out that it
Speaker 4: was related mostly to these marijuana cannabis vapes that had
Speaker 4: the vitamin E acetate ingredient. No one's ever proven that
Speaker 4: Jewel killed anyone. I don't think that they did, but
Speaker 4: that's conjecture. Nevertheless, there was kind of a pan about
Speaker 4: two separate issues. One was people in the abstract were
Speaker 4: dying from vapes as a class of product from the
Speaker 4: vitamin eestate. And then separately, underage users were adopting jewels
Speaker 4: in mass and so before Jewel was introduced, about twenty
Speaker 4: percent of underage kids we're using vapor products, and within
Speaker 4: a few years of Jewel being on the market, that
Speaker 4: number climb to almost forty percent. And so this data
Speaker 4: is collected through what's called the NYTS, the National Youth
Speaker 4: Tobacco Survey, So pediatricians across the country are required to
Speaker 4: ask kids when they come in I think it's thirteen
Speaker 4: to eighteen. They asked them have you used nicotine products?
Speaker 4: They ask a lot of questions, but this is for
Speaker 4: tobacco specifically. They ask have you used nicotine products? What
Speaker 4: products have you used? Have you used over the last
Speaker 4: thirty days? Have you ever tried this product? Have you smoked?
Speaker 4: What brands? They ask all these different questions. It's all
Speaker 4: compiled into this great data set that then is used
Speaker 4: for regulation. And so the E cigarette numbers were spiking.
Speaker 4: Now cigarette use was declining, which is great. We don't
Speaker 4: want underage kids smoking, but we also don't want them
Speaker 4: using nicotine at all because until you're a full grown adult,
Speaker 4: your brain's still developing. And most importantly, if you start
Speaker 4: using nicotine at fifteen sixteen, you're going to be addicted forever.
Speaker 4: It's going to be something that's very ingreat It's the
Speaker 4: same thing with gambling, it's the same thing with drinking.
Speaker 4: Like the underage there are reasons we have age restrictions
Speaker 4: on all of these things. Now, fortunately the industry has
Speaker 4: moved forward in many ways, and tobacco is now twenty
Speaker 4: one plus. It's kind of crazy to think that back
Speaker 4: during the jewel craze, you could just ask like a
Speaker 4: cool senior to go out and buy you jewel legally
Speaker 4: on their lunch break. Now it's twenty one plus, which
Speaker 4: is I think, much better. But obviously people are still
Speaker 4: worried about bleedover because there are eighteen year olds with
Speaker 4: fake IDs who can figure out how to get something
Speaker 4: that's like plus. And if you look at the underage
Speaker 4: alcohol use rates, that's at something like fifty percent, and
Speaker 4: same thing with cannabis, it's something around fifty percent. And
Speaker 4: so Jewel received because of all this pressure. They were
Speaker 4: fighting with the FDA. They were submitting their their products
Speaker 4: and they got into this battle with the FDA, who
Speaker 4: at that time was run by Scott Gottlieb, Trump appointee,
Speaker 4: former venture capitalist at Nea, very very sharp guy, but
Speaker 4: he was kind of warning them that hey, this is
Speaker 4: getting out of control. You need to do something. And
Speaker 4: then they took money from Altria and kind of got
Speaker 4: in bed with Big Tobacco. Jewel was they had a
Speaker 4: lot of kind of weird marketing stuff in the early
Speaker 4: days that came out, stuff like visiting schools and then
Speaker 4: also they were like they had a sister company that
Speaker 4: was originally part of their company that was selling cannabis vapes,
Speaker 4: which is kind of crazy time just like yeah, it's
Speaker 4: just like it doesn't it's crazy.
Speaker 2: There's a good documentary on Netflix. Basically like they went
Speaker 2: into schools and the like don't vape kids, and then
Speaker 2: everyone went out and vaped. It seemed very strange and
Speaker 2: I was shocked by it.
Speaker 4: Yeah, yeah it was. It was very very poorly executed,
Speaker 4: and yeah, they just made a ton of mistakes and
Speaker 4: they became kind of the tall poppy, the you know,
Speaker 4: the the sacrificial lamb for our society, for the for
Speaker 4: the sin of underage nicotine use. They became somewhat of
Speaker 4: a scapegoat in my opinion, because after Jewel was quote
Speaker 4: unquote banned. Now, what actually happened was they received a
Speaker 4: marketing denial order from the FDA. The FDA essentially rejected
Speaker 4: their PMTA. That meant that they needed to stop selling
Speaker 4: their products nationally, and they'd actually already stopped selling flavored products,
Speaker 4: so the mango jewel pods that were so popular, they
Speaker 4: had voluntarily pulled those off the market. They've still kept
Speaker 4: those off the market voluntarily. They legally could sell those,
Speaker 4: but Jewel got a stay of the marketing denial order
Speaker 4: in the courts, so they were able to continue selling.
Speaker 4: And if you look at Jewels numbers, they're still doing
Speaker 4: about a billion dollars in sales, and they've never really
Speaker 4: stopped doing a billion dollars of sales because they were
Speaker 4: only off shelves for a couple of weeks while the
Speaker 4: marketing denial order was in effect. It got stayed in
Speaker 4: the court and then most recently it got reversed because
Speaker 4: now they're not the biggest problem. And it's interesting if
Speaker 4: you look at the some of the social media posts
Speaker 4: that announced the Jewel ban quote unquote, yeah, the comments
Speaker 4: are all from former Jewel users, like former kids that
Speaker 4: used it joking about, like, why are they banning Jewel?
Speaker 4: Don't they know We've moved on to el bar and
Speaker 4: all of our favorite products. And that's where we get
Speaker 4: into the story of the new disposable market, which is
Speaker 4: now the second largest class of products after cigarettes.
Speaker 3: Talk about what elf bar did or is doing that
Speaker 3: is different to Jewel.
Speaker 4: It's hard to explain exactly what elf bar is because
Speaker 4: it's kind of a hydra of companies. Like the IP
Speaker 4: has been sold so many times, they've rebranded a million times.
Speaker 4: There's also puff bar and puff stick, and essentially what
Speaker 4: these companies do broadly, I'm not speaking about any particular company,
Speaker 4: but broadly, the strategy has been to instead of engage
Speaker 4: with the FDA directly and file the PMTA, wait for approval,
Speaker 4: then market your product. They've just said, let's push this
Speaker 4: product as many play this is possible, get it into
Speaker 4: every independent store that maybe doesn't care about the regulatory
Speaker 4: status of these products. Let's just flood the market with
Speaker 4: these products. And if we get shut down, what's going
Speaker 4: to happen is that we're essentially just have a front
Speaker 4: company that's just a couple random American citizens that are
Speaker 4: acting as a front for us in the US. The
Speaker 4: FDA is not really going to be able to shut
Speaker 4: them down. They're going to try and shut us down
Speaker 4: at the ports. All we need to do then is
Speaker 4: just set up a new company structure and import under
Speaker 4: a different label. So that's how you see the evolution
Speaker 4: of these things, where like I don't even think elf
Speaker 4: bar is on the market anymore. I think it might
Speaker 4: be called like elf Tech.
Speaker 2: Yeah no, there's like what they all look the same
Speaker 2: under like different names, and I'm like, is it exactly?
Speaker 4: So they're all made in the same Shenzen Like the
Speaker 4: core company behind elf Bar's shenzhen I Miracle Company. Just
Speaker 4: a hilarious name, but it's like the Miracle. But then
Speaker 4: also I which I think is like an Apple Friends,
Speaker 4: it's very convoluted. But the shenzhen I Miracle Company, they
Speaker 4: have a massive facility where they make this stuff and
Speaker 4: then they just find a new front man. And I
Speaker 4: get emails every single day from a new random Gmail
Speaker 4: account that says like huff bar five hundred puffs, like
Speaker 4: would you like to white label this? Because they're looking
Speaker 4: for someone that has American citizenship distribution lines and can
Speaker 4: order their products. And then get them into stores, and
Speaker 4: so they're they're really it's not just like a normal
Speaker 4: spam campaign. It's very sophisticated. It always gets through Gmail
Speaker 4: spam filter for me, and I finally created a filter
Speaker 4: that actually cut them out, you know, but eventually, like like,
Speaker 4: this is the game that they're running. And so if
Speaker 4: you look at the stats, the leading disposable vape company
Speaker 4: might be doing one hundred million dollars in sales or
Speaker 4: two hundred million dollars in sales, so they don't have
Speaker 4: anywhere near the brand awareness as a ZIN which is
Speaker 4: doing two billion in sales. But if you think of
Speaker 4: them as this aggregate hydra, then it is a massive,
Speaker 4: massive category. And so the fundamental reason why this is
Speaker 4: happening is because the Center for Tobacco Products at the FDA,
Speaker 4: this is a new organization. I mean, they only got
Speaker 4: authorization via the Tobacco Control Act in two thousand and nine,
Speaker 4: and they've really only been super active in twenty sixteen,
Speaker 4: and then of course in twenty twenty, the FDA had
Speaker 4: to completely pivot the entire organization to dealing with COVID,
Speaker 4: and so resources have been tight. And so even though
Speaker 4: they have the ability to review pmtas and issue marketing
Speaker 4: granted orders or marketing denial orders. They don't necessarily have
Speaker 4: enough field agents to go to every store in America
Speaker 4: and make sure that all the stores and all the
Speaker 4: products on the shelves are legal and approve and they
Speaker 4: so they can kind of do stuff at the ports,
Speaker 4: and they can. That's what I find.
Speaker 3: Why don't they stop it at the import stage? I mean,
Speaker 3: my experience of shipping goods from Hong Kong to New
Speaker 3: York is that they go through everything, right, like you
Speaker 3: can't have medications, you can't have food. Agents will stop
Speaker 3: and go through boxes or at least sample the boxes.
Speaker 3: Why don't they stop them there?
Speaker 4: Yeah, so they try, but it's very difficult because if
Speaker 4: the hold at the port is for one company's name
Speaker 4: and it's under a different company's name, it can be
Speaker 4: very hard to get through. The FDA hasn't really figured
Speaker 4: out how to create a blanket ban on everything that
Speaker 4: you know is a nicotine containing disposable device. And some
Speaker 4: of them might be legal, you know, some of them.
Speaker 4: Some of them might have been on the market before
Speaker 4: twenty sixteen. They might have pmtas in I don't know.
Speaker 4: I'm sure that there's some disposable company that's taking things
Speaker 4: very very seriously and they shouldn't be blanket banned at
Speaker 4: the ports necessarily.
Speaker 2: This is so fascinating because I actually I once wanted
Speaker 2: to do we should do like an elf Bar episode,
Speaker 2: and part of the issues we couldn't find a guess
Speaker 2: because like it didn't seem like anyone even understood this
Speaker 2: company and what it is.
Speaker 4: Oh, it's really really hard. It's really really hard. Your
Speaker 4: story is crazy too, Yeah, I mean the puff Bar
Speaker 4: story is potentially more interesting because there's a Wall Street
Speaker 4: Journal article about the founders and they're these guys who
Speaker 4: people they kind of came out of nowhere, and they
Speaker 4: didn't have the same story as like Adam Bowen and
Speaker 4: jamesons use it. But they're like they're pictures on their
Speaker 4: Instagram of them like driving Ferraris and McLaren's on like
Speaker 4: the freeways and it's like these guys are bawling and
Speaker 4: then they got, you know, shut down. But there's a
Speaker 4: whole bunch of rumors swirling in the industry about, oh,
Speaker 4: like what exactly happened there? Did they just like take
Speaker 4: the money and run? But like it's not like a
Speaker 4: traditional startup where oh yeah, they were investors and then
Speaker 4: they sold the company. It's much more like they made
Speaker 4: a bunch of money and they ran with it or
Speaker 4: something like that.
Speaker 2: So we just have a couple of minutes left and
Speaker 2: I just want to you know, the actual business of
Speaker 2: the pouches, like, how did so let's say Tracy and
Speaker 2: I want to start our nicotine a lots branded pouch, right,
Speaker 2: lots lots Yeah, we got to start it with a
Speaker 2: Z like Zemo corsult setting aside all the regulatory issues.
Speaker 2: Is there like a Taiwan semiconductor for pouches that I
Speaker 2: just like, we give them our brand, do we give
Speaker 2: them our flavors and they make it? Like walk us
Speaker 2: through the manufacturing supply chain.
Speaker 4: I was joking with you about Helsingborg Sweden is kind
Speaker 4: of the Taiwan of niicten pouches. Zen, of course, is
Speaker 4: a Swedish match product. Swedish Match is a former matchmaking company.
Speaker 4: They literally made matches to light cigarettes, and then over time,
Speaker 4: once cigarettes started declining, they needed other products and Sweden
Speaker 4: adopted these smokeless oral nicotine pouches. It's been incredible for
Speaker 4: getting Sweden smoke free there's a bunch of incredible data
Speaker 4: about how Sweden now has the lowest lung cancer rates
Speaker 4: in all of Europe. But there isn't necessarily a TSMC
Speaker 4: in the sense that there's not one scaled coman factorer
Speaker 4: that everyone is using. Zin of course, has their own facilities.
Speaker 4: They have a number of facilities, and they just this
Speaker 4: week announced that they're investing I think six hundred million
Speaker 4: dollars in a Colorado facility. They already have an American
Speaker 4: facility as well as several others across the globe. It's
Speaker 4: not an incredibly complex process. It is just at the
Speaker 4: end of the day blending up six or seven ingredients
Speaker 4: that are powders and then they need to be dumped
Speaker 4: into a bag. We have a slightly more complicated process
Speaker 4: with our Breakers product because we put a capsule in
Speaker 4: the pouch. And so the history of these products is
Speaker 4: that it used to be people would just chew loose
Speaker 4: leaf tobacco. Then it was ground up tobacco. This is
Speaker 4: the dip spit cup that you've seen probably the baseball players. Eventually,
Speaker 4: Swedish Match and a couple other companies took the ground
Speaker 4: up tobacco product put it in a pouch. That's where
Speaker 4: you get general snooze. Camel snooze, and snooze became very popular,
Speaker 4: especially in Sweden. Now, the modern oral category that we've
Speaker 4: been talking about, the zins of the world, the vellows,
Speaker 4: the rogues, the lucy's, these they don't contain any tobacco
Speaker 4: leaf whatsoever, which is great, it's a huge step forward.
Speaker 4: But the problem has always been that tobacco leaf, although
Speaker 4: it did contain carcinogens, it also contained moisture, and so
Speaker 4: a snooze product was generally more moist When you take
Speaker 4: out the tobacco leaf, you take out the moisture. And
Speaker 4: so the number one complaint that we found was that
Speaker 4: these tobacco, these tobacco free pouches, they would dry your
Speaker 4: mouth out. And so we put a capsule that has
Speaker 4: liquid inside in the pouch. Oh the breakers. Yeah, and
Speaker 4: so it's somewhat similar to a camel crush the cigarette
Speaker 4: where you crush the capsule and it releases flavoring. Same idea,
Speaker 4: add the flavor and moisture back into the pouch in
Speaker 4: order to kind of get give all the benefits of
Speaker 4: the moist pouch that oral tobacco users enjoyed without adding
Speaker 4: back any tobacco leaf. And so that's a little bit
Speaker 4: more complex for us because we actually have to have
Speaker 4: a machine that drops a little capsule into each pouch
Speaker 4: and then seals the pouch. And sealing the pouches is
Speaker 4: very tricky. You can see that some brands when you
Speaker 4: open up the tin, it's just everywhere. It's a little
Speaker 4: bit of a mass. But in general, you know, these
Speaker 4: products are fairly easy to scale. It's much less complex
Speaker 4: than vapor products, which essentially.
Speaker 2: Less complex than semiconductor manufacturing.
Speaker 4: For sure, certainly less complex than semiconductor manufacturing. I mean,
Speaker 4: jewels tagline was like the iPhone of vaping, and obviously
Speaker 4: there's a lot. There is literally a semiconductor in a jewel.
Speaker 4: There is not a semiconductor in any nicotine pouches. Now,
Speaker 4: now these disposables, they've gotten so cheap that you can
Speaker 4: buy one that has an LED screen or LCD screen
Speaker 4: on the outside and it shows you all these things.
Speaker 4: That's crazy, but it is a simple process. But there
Speaker 4: hasn't been major concentration in the co manufacturing space because
Speaker 4: most of the big tobacco companies have wanted to make
Speaker 4: it themselves.
Speaker 3: Setting aside the very opaque worlds of elf bar, what
Speaker 3: is raising financing like for something like a Lucy Goods
Speaker 3: Because I can see, on the one hand, okay, maybe
Speaker 3: you could make a sort of health argument where at
Speaker 3: least you're arguing that this is a product for people
Speaker 3: who are addicted to cigarettes to try to move on
Speaker 3: to something that has fewer side effects. But on the
Speaker 3: other hand, I have to imagine that anything with the
Speaker 3: word nicotine in it, there's probably some wariness, and there's
Speaker 3: probably investors out there who are very, very worried about
Speaker 3: being perceived to be getting people hooked on an addictive substance.
Speaker 3: So what is that like? What do you do when
Speaker 3: you go out to investors and what are the concerns
Speaker 3: that they have there? And who do you actually raise
Speaker 3: money from.
Speaker 4: Yeah, it's been tricky. There's a lot of venture capital
Speaker 4: firms that have what are called vice clauses in their
Speaker 4: limited partner agreements, and a lot of those vice clauses
Speaker 4: are very broad. They say things like no weapons, no
Speaker 4: drug products, no sex products, these types of things. Now,
Speaker 4: over the years, there's been a kind of a steady
Speaker 4: flow of companies that have kind of defied those vice
Speaker 4: clauses and role is a famous example in the defense
Speaker 4: space where a lot of venture funds went back and
Speaker 4: revisited their vice clauses because they kind of realized that
Speaker 4: they were written in a blanket way. And I think
Speaker 4: the vice clause broadly is kind of a mistake for
Speaker 4: venture capitalists to lean on because it doesn't allow them
Speaker 4: to actually engage with the moral question of what is
Speaker 4: the impact of this company. You know, it would be
Speaker 4: crazy if a VC said, hey, we have a fraud clause,
Speaker 4: we will never invest in a fraud It's like, obviously
Speaker 4: that's the case, But it's incumbent on the venture capitalists
Speaker 4: to assess the fraudulent nature of the business and avoid
Speaker 4: investing in an FTX or at arause, right, And the
Speaker 4: same process should be run for quote unquote vice companies,
Speaker 4: and that should allow you to determine that maybe Anderil
Speaker 4: is a good company and is doing a positive thing
Speaker 4: for the world, even though yes, it would trigger a
Speaker 4: traditional vice clause. More broadly, I think that derivor of
Speaker 4: decision to invest in something like this is that this
Speaker 4: is such a such a narrow market in the sense
Speaker 4: that if you're investing in B to B software, there's
Speaker 4: a new unicorn every six months. There's a new unicorn
Speaker 4: in the nicotine space once a decade maybe, and rarely.
Speaker 4: So even if you are an investor and you see
Speaker 4: something that's promising, it's not really something that you can
Speaker 4: build a career around. Where oh, yeah, you were the
Speaker 4: first investor in jewel and so you get all the
Speaker 4: deal flow for the next ten jewels. That doesn't happen,
Speaker 4: whereas that certainly does happen in B to B software.
Speaker 4: And so I think the bigger difficulty has just been
Speaker 4: with the market structure and the desire of venture capitalists
Speaker 4: to participate in this particular industry, because it's not something
Speaker 4: that's a gold mine that you can just, you know,
Speaker 4: build a whole career around.
Speaker 2: I just have one last question. You're in addition to
Speaker 2: founding Lucy, He's according to your Twitter profile, you're an
Speaker 2: entrepreneur in residence at the founder's fund, Peter Teal. You
Speaker 2: mentioned Teal earlier when you were talking about Soilan in
Speaker 2: Zen culture. I think there was an article that all
Speaker 2: of jd Vance's staffers are big are big Zin consumers.
Speaker 2: I know this is like a blanket statement. It certainly
Speaker 2: doesn't nearly encompass every nicotine user at all. But just
Speaker 2: from your perspective, how would you describe the synthesis of
Speaker 2: nicotine consumption and conservative politics more broadly?
Speaker 4: Oh, it's really hard. I think it's probably something around
Speaker 4: the edginess that comes with saying something like nicotine is
Speaker 4: not bad for you. It's kind of this, it's kind
Speaker 4: of this secret that people love to learn about. They
Speaker 4: have this chemical exactly exactly, and so it's very countercultural.
Speaker 4: And if you pull people broadly, people believe that nicotine
Speaker 4: is what causes cancer in cigarettes, and that's actually a misconception.
Speaker 4: And that's why if you look at a tin of
Speaker 4: zin or a tin of lucy, the warning just says
Speaker 4: this product contains nicotine. Nicotine is an addictive chemical, whereas
Speaker 4: on tobacco products it says this product causes cancer. And also,
Speaker 4: you can look at the California prop sixty five, is
Speaker 4: that it lists cancer parsonogenically.
Speaker 2: Everything cancer, cancer and.
Speaker 4: Comtory basically but not but not these nicotine p which is, like,
Speaker 4: you know, notable. I think because obviously California is a
Speaker 4: very careful state, as they should be with this stuff.
Speaker 4: I think that might be part of it. The other
Speaker 4: part of it is, if you look at the lineage
Speaker 4: of where oral tobacco has been popular, the the baseball
Speaker 4: players and the hockey players that were dipping in the
Speaker 4: nineties and early two thousands, that tends to be a
Speaker 4: more red state phenomenon, and so the earliest adopters. It's
Speaker 4: always hardest to get someone to switch form factors. It's
Speaker 4: easy to get someone who's already using a tobacco pouch
Speaker 4: to use a tobacco free pouch because it's fundamentally the same,
Speaker 4: the same shape of product in their pocket, the same
Speaker 4: feeling in their lip. It's much harder to get someone
Speaker 4: who's maybe vaping in a blue state to switch over.
Speaker 4: Although obviously it's happening now, I really hope that it
Speaker 4: doesn't become a culture war issue, or that culture war
Speaker 4: issue subsides, because we don't want to wind up with
Speaker 4: a situation where all of a sudden, smoking becomes important
Speaker 4: to the left and we're seeing Democrats drop dead because
Speaker 4: of some protest of Tucker Carlson, like who cares, it's
Speaker 4: not important, Like this is so much the stakes are
Speaker 4: so much higher than you know, avoiding an association with
Speaker 4: you know, a right wing firebrand. And we've seen something
Speaker 4: similar with the menthol cigarette ban where Biden, the Biden
Speaker 4: administration rolled back plans to ban menthol cigarettes, and the
Speaker 4: NAACP condemned the White House for that action because it
Speaker 4: was seen as kind of a cynical play for votes.
Speaker 4: And realistically, every single demographic or political leaning needs reduced
Speaker 4: harm products. They need options that are down as far
Speaker 4: down the continue of risk as possible. So I don't know,
Speaker 4: maybe the answer here is that we need to we
Speaker 4: need to make the like an ultraliberal out.
Speaker 2: The left coating the left coated the left, Yeah, exactly.
Speaker 4: I don't know who the Tucker Carlson of the left
Speaker 4: would be. Maybe we could get John Stewart to promote
Speaker 4: it or something. But I mean, in general, our our
Speaker 4: planet Lucy has been you know, to sponsor podcasts on
Speaker 4: both sides of the aisle, and you know, we don't
Speaker 4: take a firm stance uh politically because the issues is
Speaker 4: so much bigger than that and and the political lines
Speaker 4: do not align around the harm that cigarettes are. Calling.
Speaker 2: John Cougan, co founder of Lucy Nicotine, thank you so much,
Speaker 2: so many questions. I had been curious about this space
Speaker 2: answered there. So really appreciate you coming on outline.
Speaker 3: Yeah, that was so interesting.
Speaker 4: Yeah, thanks for having me on.
Speaker 2: First of all, that was really fascinating about the elf bar,
Speaker 2: which the whole thing is so weird to me that
Speaker 2: like here's this regulated Philip associated company jewel that like
Speaker 2: that sort of went off the market for a while
Speaker 2: and then we just got flooded by cotton candy made
Speaker 2: in that.
Speaker 3: Consumes more resources and ends up like taking up more space.
Speaker 3: I sin fills.
Speaker 2: I see disposable vapes on the street all the time,
Speaker 2: and there's like semiconductors in there, and like all this
Speaker 2: stuff and batteries and everything, it just gets thrown away.
Speaker 2: That's crazy.
Speaker 1: It's also just.
Speaker 3: This weird like gray market where if you walk into
Speaker 3: stores in New York, like the elf bars are kind
Speaker 3: of hidden away like behind the cash registered, but everyone
Speaker 3: knows that they're there, and like clearly no one's really
Speaker 3: cracking down on them. Now, there's so much to pull
Speaker 3: out of that conversation. One thing that I thought was
Speaker 3: really interesting was like just the different pathways, the sort
Speaker 3: of like pre market tobacco pathways. I hadn't realized that
Speaker 3: there were all the I mean I guess it makes sense,
Speaker 3: but I hadn't realized that you had to make a
Speaker 3: decision about that so early on. And then the other
Speaker 3: thing that I thought was really interesting was John was
Speaker 3: talking about how they saw regulation basically a regulated space
Speaker 3: as an additional mote, so something that was desirable from
Speaker 3: a business perspective, and that's why they targeted it.
Speaker 2: No, that is super interesting. And when you think about like, Okay,
Speaker 2: you have to like get in the queue, and you
Speaker 2: have to do this testing or the fact stability testing.
Speaker 2: So even after you design the power to the gum,
Speaker 2: you have to make sure that it's the same try
Speaker 2: to keep it on a shelf. Yeah, yeah, shelf stability.
Speaker 2: That's interesting. And then this application. And then there's this
Speaker 2: que interesting that you mentioned COVID sort of obviously and
Speaker 2: probably for good reason, taking resources away from some of
Speaker 2: the health regulators who had higher priorities than approving nicotine pouches.
Speaker 2: They're in twenty twenty. Just lots of really interesting details
Speaker 2: about how we got to this state of the market.
Speaker 1: You know.
Speaker 3: The other thing I'm kind of wondering is what the
Speaker 3: distribution network, Yeah, helf bars looks like now, no, and
Speaker 3: how like maybe we need to find someone with a
Speaker 3: bodega and ask them like, how do you how do
Speaker 3: they get how bars in the first place?
Speaker 2: Yeah, that's a good question. We should just find any
Speaker 2: of them, just we could just walk into some of
Speaker 2: them and ask them if they'll come on. I also
Speaker 2: think it's funny the Helsingborg Sweden has like the Shenzen
Speaker 2: or the Taiwan, the Taiwan of nicotine pouches. It's interesting.
Speaker 2: I had done Swedish match started off as a match.
Speaker 3: Company, did you know, speaking very.
Speaker 2: Very Ricardo houseman coded that we learned.
Speaker 3: Did you know, speaking of international tidbits about this particular topic,
Speaker 3: what's the only I think this is still this is
Speaker 3: still true and up to date. But the only country
Speaker 3: to have banned cigarettes entirely, uh.
Speaker 2: No, Bhutan, Oh, the happy country.
Speaker 3: Yeah, and I think it failed terribly because it just
Speaker 3: started a black market in cigarettes and people were, you know,
Speaker 3: taking them over the border, and so I think they
Speaker 3: actually ended up reversing it. But kind of interesting, it
Speaker 3: really is.
Speaker 2: Like I do think about that conversation from years ago
Speaker 2: with Laurence hamp Till about like, you know, when I
Speaker 2: was a kid, like the things I knew is like
Speaker 2: cigarettes are really bad. Bad people smoke cigarettes. And also
Speaker 2: it seemed like they're going away, like it's totally a
Speaker 2: matter of time. But then you recognize that there's been
Speaker 2: a war against nicotine or tobacco for you know, close
Speaker 2: to centuries. It's not going away. It'll just continue to
Speaker 2: evolve in different forms. They're never going to get rid
Speaker 2: of it.
Speaker 3: Okay, well on that Lindy note, shall we leave it there?
Speaker 2: Let's leave it there.
Speaker 3: This has been another episode of the Odd Thoughts podcast.
Speaker 3: I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2: And I'm Joe Wisanthal. You can follow me at the Stalwart.
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