Juul: Its Ascent and Decline

Juul: Its Ascent and Decline
The Rise and Fall of Juul

Juul is an electronic cigarette brand that atomizes nicotine salts that are derived from tobacco that is supplied by one-time-use cartridges. Becoming the most popular brand of e-cigarettes in the US by 2017, Juul was successful in cornering 72% of the US market share in 2018. By the end of that year, i.e., December 2018, Altria, which was formerly known as the Philip Morris Companies acquired a 35% stake in Juul Labs for a total of USD 12.8 billion.

How did Juul Begin?
The Rise of Juul
The Fall
Conclusion

How did Juul Begin?

Phase 1

Adam Bowen and James Monsees met while graduating in product design at Stanford University in the year 2005. Former cigarette smokers themselves developed Ploom, an e-cigarette, first introducing it as a part of a co-authored thesis presentation. Later, they even created the Pax vaporizer device for cannabis and loose-leaf tobacco.

In two years, by 2007, the two friends launched a company and called it Ploom, their first vaporizer startup. Within a year the company had garnered approximately USD 1 million in venture capital. In the next few years, Ploom continued to grow and secured a total of USD 5 million in venture funding which led to Ploom introducing Pax, a vaporizer device for cannabis and loose-leaf tobacco, in the year 2013. The brand Ploom and the vaporizer line were sold off in 2015 by Monsees and Bowen to their minority investor Japan Tobacco Inc. The co-founders changed their company name to Pax Labs. Pax Labs developed the e-cigarette Juul in the same year.

Phase 2

The e-cigarette Juul developed by Pax Labs was introduced at a New York party in June 2015 and users were encouraged to share it on their own social media pages.

Juul Labs Inc. has spun off Pax Labs in 2017 as an independent company. Both the co-founders of Pax Labs served with Juul Labs – Adam Bowen as the Chief Technology Officer and board member and James Monsees as Chief Product Officer and board member. Tyler Goldman, the former CEO of Pax Labs served as the CEO of Juul for six months before being replaced by Kevin Burns.

The Rise of Juul

The launch of the Juul e-cigarette and its associated marketing campaign was heavily targeted toward the youth. This technique was extremely successful for the brand as the FDA, at that time, did not recognize e-cigarettes as tobacco. The brand could operate and advertise its products without discrimination with little federal oversight, requiring no FDA approvals.

The brand aggressively utilized social media platforms like Instagram and Twitter as well as influencers to target the youth market. It also engaged in email marketing campaigns requiring no verifications or age restrictions, bought advertising space on teen websites, and encouraged underage users and teens to buy its products. Juul saw its sales catapult by 700% in the year 2016.

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After being established as an independent company, Juul Labs expanded quickly, and its employee strength grew from 200 in September 2017 to 1500 by the end of 2018. Encouraged by its growing popularity and success it also managed to raise USD 110 million in capital funds in the year 2017. Its investors were Tao Capital, Fidelity, and Evolution Capital. By July 2018, the company managed to raise approximately USD 1.2 billion in venture funding from Fidelity, Sand Hill, Darasana Capital, Tiger Global, E-Squared Capital, Bracket Capital, and Applied Biosciences. Juul Labs, by this time, was valued at a whopping USD 16 billion.

The Fall

In March 2018, media reports first emerged of the rising epidemic of teen vaping. Social media platforms were flooded with teens posting about their ability to use Juul e-cigarettes in class and at home without detection due to its lack of smell and sleek design. Within the month, former FDA commissioner Scott Gottieb led what is described as ‘the largest coordinated enforcement effort in the agency’s history’ on the sale of Juul and its pods to minors. It also sent out more than 1300 warning and fine letters to retailers illegally selling Juul products to minors. This move prompted the company to switch to adult models who were former smokers, to advertise their products.

The rising epidemic of teen vaping also prompted the state of San Francisco to ban the sale of flavored e-cigarettes. Soon other states like Washington, Oregon, and Michigan also banned the sale of flavored e-cigarettes. An unannounced FDA inspection of Juul’s headquarters in September 2018 revealed thousands of Juul’s documents detailing its marketing practices. By November of that year, Juul announced the shutting down of their Facebook and Instagram accounts that promote the use of flavored e-cigarettes and attract underage users. In the year 2018, Israel was the first country that banned all Juul products.

By October 2019 more than 2300 personal injury, government entity, tribal, and class action cases that were filed in federal court against Juul were consolidated into multidistrict litigation (MDL) in the Northern District of California. By February 2020 there was a multi-state investigation into the marketing and sales practices of Juul. A total of 39 states were part of that investigation. The Altria Group, which had bought a 35% stake in Juul in 2018 was also not spared as an investor class action was filed on behalf of the shareholders. It charged Altria with negligence as it failed to conduct sufficient due diligence and failed to inform the associated risks to its investors. By October 2021, Juul’s market share had taken a deep nosedive from 70% to 41%.

How Juul’s Valuation Fell by Over $33 Billion in Two Years

Juul’s troubles had not ended and more lawsuits followed in the year 2022. The MDL that was led by several US states led to Juul paying USD 438.5 million as a settlement amount in September 2022. A few months later, by December 2022, Juul had agreed to pay a further USD 1.2 billion in an effort to settle approximately 10,000 lawsuits that claimed the company was solely responsible for causing a youth-vaping epidemic in the US. Juul continues to face litigation in many other states that were not a part of the settlement. It also continues to face many private lawsuits.

Conclusion

By June 2022, the FDA had ordered Juul to remove all of its products from the United States market. An appeal from the company won them a reprieve the US District Court for the District of Columbia issued a stay order in favor of Juul. The company was also stopped from selling products in China in 2019 and banned in India due to the disastrous impact of e-cigarettes on the youth. As fast and strong as the growth of Juul, its fall from success was just as sudden and hard. It remains to be seen what the full impact of the ongoing investigations on Juul Labs Inc. will be.

FAQs

Is Juul just a vape?

Juuls are a type of e-cigarette. E-cigarettes work by using a battery to heat a liquid, which turns into an aerosol that is then inhaled.

Why were Juul cigarettes banned?

The FDA's initial decision to ban Juul was based on concerns about the safety of its products. Specifically, the FDA found that Juul had not provided sufficient evidence to demonstrate that its devices were not toxic or harmful to users.

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