- E-cigarette startup Juul has exploded in popularity since its launch in 2015. The company briefly made its founders billionaires, created a new verb, and resurrected the United States' dying e-cigarette market.
- Juul attracted young users with its sleek design and flavored pods. Soon, Juul was going viral, and memes about "Juuling" were seemingly everywhere.
- Now, the $38 billion company has become the face of the youth vaping crisis and faces Congressional investigations, criticism from the FDA, and a potential nation-wide ban in the US.
- Visit Business Insider's homepage for more stories.
Following is a transcript of the video.
Irene Kim: You've heard of Juul.
It's the highest-selling and fastest-growing e-cigarette on the market. In 2017, it generated $224 million in revenue. In 2018? $1 billion.
And, as of February 2019, the company was expecting to triple its revenue. Juul briefly made its founders billionaires, created a new verb, and resurrected the United States' once dying e-cigarette market.
But what was once Silicon Valley's $38 billion darling now faces Congressional investigations, criticism by the Food and Drug Administration, and potential bans in entire countries, including the US. But how did a product designed to help adult smokers quit become the face of the youth vaping crisis? And what exactly is next for Juul?
Since launching in June 2015 with a party in New York City and a youth-oriented media campaign, Juul has dominated the e-cigarette market. How did it get so popular in the first place?
It starts with the design. Because Juul marketed itself as a way for adult smokers to quit, its product couldn't remind people of a cigarette. So Juuls ended up looking more like something you'd stick in a computer than something you'd smoke. With its sleek design, it was much more discreet than a traditional e-cigarette. But its discreet look also made it easy for young users to hide their Juuls from parents and teachers.
And its nicotine pods came in tasty flavors like mango, cool mint, fruit medley, and crème brûlée. Juul quickly became popular with young consumers. At some point, "Juuling" even became a verb. For many, "Juuling" became synonymous with vaping. And soon, memes about "Juuling" were seemingly everywhere.
Chidum Okeke: I began seeing a lot of Juul-related tweets about two years ago, which was, like, in 2017, when I was a senior in high school.
Kim: Chidum Okeke doesn't use a Juul, but his tweets about using Juuls have gone a bit viral.
Okeke: It was basically saying how, like, it's August, like, we're about to go back to school. Hell is about to arrive. Milly that rock, hit that Juul. And then, next thing you know, I had 100,000 likes and retweets just because it was, like, so relatable. Like, it was the cool thing, right? It was in.
Kim: Juuls became a growing part of young people's social identities. Researchers at Tobacco Control found that most Juul-related Instagram posts reinforce "a characteristic of cultural or social identity." And while Juul says its products are marketed to adult smokers, a study published by JAMA Pediatrics found that most of Juul's Twitter followers are underage. Juul's early social-media presence and marketing strategy would later come back to haunt it, but we'll get to that in a bit.
In the meantime, Juul's sales numbers only continued to explode. By 2017, it had claimed over a third of the e-cigarette market, generating $224 million in revenue. By November of that year, Juul was the best-selling e-cigarette on the market. However, as Juul's business continued to grow, so did the scrutiny on it. In the fall of 2017, teen vaping became a national story. News outlets across the country reported that high-school students were using Juuls in class or on school property.
Amid the outrage, the FDA launched an undercover crackdown of Juul sales to minors. The FDA called it the "largest coordinated enforcement effort" in agency history and issued more than 1,300 warning letters and fines to retailers for illegally selling Juuls and other e-cigarette products to minors. Later that August, the agency surprised Juul at its headquarters to seize thousands of pages of documents, which revealed the FDA was officially investigating whether Juul marketed its products to teens.
And in response to reports of a 78% increase in vaping among American high-school students, the FDA announced plans to curb flavored-e-cigarette sales. Around this time, the Federal Trading Commission also began investigating whether Juul marketed its products to minors.
But despite the controversies, Juul's sales continued to rise. In fact, Juul was bigger than ever. Altria, the parent company of multiple big tobacco brands, purchased a 35% stake in Juul for $12.8 billion, which valued Juul at $38 billion and made Juul's cofounders billionaires. The company hit $1 billion in revenue that same year, continuing its seemingly unstoppable growth.
However, things were about to get a lot worse. In April 2019, Democrats in the US Senate launched an investigation into Juul's social media and advertising practices along with its billion-dollar deal with Altria. Just two months later, the US House of Representatives announced its own investigation into Juul.
Meanwhile, Juul Labs CEO Kevin Burns publicly apologized in a CNBC documentary to parents of teens who are addicted to Juul products.
Kevin Burns: First of all, I'd tell them that I'm sorry that their child's using the product. It's not intended for them.
Kim: Things snowballed in late July, when the first reports of vaping-related lung illness emerged.
Erin Brodwin: So, there have been thousands of vaping-related illnesses related to e-cigarettes in recent months. The reason Juul is implicated or involved in these illnesses is because several of the case reports involve people saying that they used Juuls when they got sick.
The problem with that is that Juuls, as, you know, the most dominant and most popular e-cigarette on the market, there are a lot of counterfeit products that are labeled Juul when in fact they actually are not. So, in addition to that, people, rather than saying that they're vaping, they actually use the word Juul as a verb and say that they're "Juuling." They could have been using a different device and then just, you know, said they were "Juuling," and what, you know, CDC investigators write down is they were using a Juul.
Kim: Juul's popularity began to work against it. By being synonymous with vaping, it finds itself embroiled in a multitude of different vaping-related incidents. In response, the company has attempted to be proactive about addressing the controversies around vaping.
In August, Juul's CEO publicly asked nonsmokers not to use Juul, telling CBS:
Burns: Don't vape. Don't use Juul.
Kim: Burns even brought up that the long-term health effects of vaping remain unknown. A majority of the vaping-related lung illness cases have been linked back to black-market products containing THC, the psychoactive ingredient in cannabis. However, some of the cases do involve people who said they used nicotine-only products, and still others said they used both nicotine and marijuana products.
All this has made figuring out the cause behind the outbreaks very difficult. By September, the CDC and FDA reported that there were 530 cases of illness related to vaping. Although neither organization has been able to find a clear culprit, Juul continues to fall under scrutiny.
And the company's global expansion has come to a screeching halt. In the US, President Donald Trump recently announced his intention to ban flavored e-cigarettes.
Donald Trump: People are dying with vaping.
Kim: Amidst these crackdowns, the FDA issued the company an official warning for its marketing practices. There's a growing concern over what medical experts are calling the "youth nicotine epidemic."
Brodwin: I've talked to several experts about this, and most people in public health agree that the people in Juul's advertisements from 2016 and 2017, I believe, looked underage.
I think the very first error that Juul made in judgment was creating these advertisements that clearly include people who look very, very young, advertising its devices as cool, using taglines like, quote, unquote, "smoking evolved," picturing them on flashy, very colorful backgrounds. And then at events, giving them away either for free or for, you know, a dollar or $2.
Because, right there, you have the potential to create a desire among young people who maybe otherwise would never have thought about smoking, vaping, or using an addictive drug like nicotine. You suddenly have this opportunity for them to be interested in this new, novel, seemingly cool, very discreet product.
Kim: When asked if its early marketing targeted underage users or nonsmokers, Juul told Business Insider that, "We have never marketed to youth and we never will. ... Nonetheless, we recognize how that campaign was perceived. ... Our recent marketing efforts exclusively featured adult smokers who shared their personal experiences about switching to Juul products from combustible cigarettes."
Because of the controversy over Juul's marketing practices and the growing wave of vaping-related illnesses, Burns stepped down in late September and was replaced with longtime tobacco executive K.C. Crosthwaite.
Juul announced plans to suspend advertising in the US, as well as some lobbying efforts. But for some, that wasn't enough.
In October 2019, school districts across the US launched lawsuits against Juul.
Brodwin: They're saying that Juul created what they call a, quote, unquote, "public nuisance" by having its devices not only be distracting for young people on school campuses but also potentially endangering their health and safety.
Kim: The company says that the lawsuits have no merit. So, what's next?
Brodwin: Juul is going to have two big things that it needs to prove. First, it's going to have to prove that it did not intentionally or unintentionally hook an entire generation of young people on nicotine who otherwise would not have smoked or interacted with nicotine, an addictive drug, in any way. It's also going to have to prove that its devices could help hundreds of thousands of adults who smoke quit smoking and start vaping instead.
Kim: And don't forget, Juul is owned by Altria. It's one of the world's biggest tobacco companies, with brands that are more than 170 years old and a reputation for resilience. It's not likely to let its billion-dollar investment and 35% stake in Juul go up in smoke.
Juul spent $3 million in the first half of 2019 lobbying Congress and federal regulators. And there's a reason Juul replaced its CEO. While former CEO Burns worked as chief operating officer for yogurt-maker Chobani, his replacement comes from Altria. Crosthwaite's years of experience in Big Tobacco means he's used to working with regulators, which will come in handy now that Juul has to submit its products for FDA regulation, something it's hasn't done until now.
Brodwin: Thanks to some legislation that was put in place several years ago and then delayed, Juul was able to get its products on the market without any sort of FDA sign-off required.
Kim: Now, Juul will need to get FDA approval by 2022 to stay on the market. But will the company avoid even harsher regulations, like Trump's potential ban on flavored pods?
Brodwin: My opinion on this is, and this is my opinion, so take it with a grain of salt, but I don't think wide-scale bans on flavored e-cigarettes are going to succeed, at least on a national level. If they do, it could spell kind of the destruction of the e-cigarette industry.
Kim: Many analysts say it isn't likely that there will be enough support to pass a nationwide ban. At the very least, a nationwide ban isn't likely to happen for a few years, according to analysts at Stifel.
A ban could also hurt more people than it helps. Public health professionals say that a widespread ban could create an unregulated black market, which could be much more dangerous. The answer could be regulation, both from the government and from companies themselves. Which is something Juul is already doing.
Back in 2018, it kept 55 new flavors it had designed off the market. Flavors like mimosa, strawberry limoncello, Thai tea, and spicy watermelon. Although all 55 were registered with the FDA, the controversy surrounding Juul and underage use reportedly made the company hesitate.
In November 2018, Juul restricted sales of its flavored pods to its website. And in August 2019, the company announced that it had developed a new system meant to prevent sales to minors and pledged $100 million to help retailers install it.
Later, in October, Juul withdrew support of an initiative in San Francisco to overturn the city's ban on e-cigarette sales, the same ban it previously spent $11 million lobbying against. A few weeks later, Juul suspended all sales of its fruit-flavored pods.
But whether any of this will be enough to help Juul turn things around, only time will tell.
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