Inside the Downfall of JUUL: Featured Report
Remember JUUL? Not too long ago, JUUL was the unstoppable juggernaut of the vaping industry. Claiming almost three quarters of all vaping product sales in traditional retail establishments, JUUL received an investment of $12.8 billion from Marlboro maker Altria in 2018 based on a company valuation of $38 billion.
That, however, was before the you-know-what storm started.
Today, JUUL remains an enormous player in the vaping market. However, the writing at this point seems to be on the wall. JUUL is no longer the most fashionable e-cigarette brand in the United States, and the company’s attempts to expand to other worldwide markets have not met with the same success that JUUL enjoyed when the brand launched in the United States.
With billions of dollars in its war chest, it is extremely unlikely that JUUL is going away any time soon. It also seems improbable, though, that the brand will ever enter another phase of explosive growth resembling what happened from 2015-18. Rather, JUUL will settle into its sunset years as a member of the old guard – still an industry titan but no longer an innovator.
Here’s how we got to where we are today.
JUUL’s Marketing Triggers a Teen Vaping Explosion
During JUUL’s first few years on the market, the brand worked hard to cultivate a fashionable image among young vapers. Some have alleged, however, that the company went too far with its youth-oriented marketing. Suddenly, the new verb “JUULing” entered the public consciousness, and it became evident that millions of underaged teens in the United States were vaping. Most of those teens had never used cigarettes and probably would have never started vaping if JUUL hadn’t become so fashionable. By 2019, the U.S. had more than 5 million teen vapers – and the vast majority of those kids preferred the JUUL brand.
Amidst the teen vaping explosion, Big Tobacco company Altria acquired a 35-percent stake in JUUL to the tune of $12.8 billion. The honeymoon, however, would turn out to be short lived.
U.S. Bans Flavored Vape Pods
As the teen vaping epidemic continued to worsen in the United States, parents and anti-tobacco groups began to vociferously demand that the federal government step in and do something to curb underage vaping.
Early in 2020, the government did two things.• It raised the minimum legal age for smoking and vaping in the U.S. from 18 to 21. This change, the government hoped, would prevent older high school students from buying vaping products for their younger friends.• It banned all flavored vape pods and cartridges, leaving JUUL users with tobacco and menthol as the only legal pod flavors. This change was enacted to remove the sweet flavors that most teen vapers preferred.
The flavor ban did cause some collateral damage in that there were millions of adult vapers who were left with no choice but to seek out the best JUUL alternative if they wanted to continue enjoying the full range of flavors in the e-liquid world.
In response to the teen vaping epidemic, JUUL had already voluntarily removed most of its flavors – including the ultra-popular mango – from the U.S. market. The ban forced the removal of the mint flavor, which was the most popular flavor that JUUL still sold.
By early 2020, JUUL’s share of the conventional e-cigarette market had shrunk to 60 percent.
Lawsuits Against JUUL Pile Up
At the time of writing, JUUL finds itself buried under a mountain of legal trouble. There are now anywhere from dozens to hundreds of pending lawsuits naming JUUL as the defendant. The lawsuits are being filed by a variety of plaintiffs including individuals, classes of individuals and even the attorneys general of multiple states. Some of the wrongs alleged in the lawsuits include:• That JUUL knowingly and deceptively marketed its products to minors.• That JUUL has caused injuries such as pneumonia, strokes and seizures.• That JUUL’s labeling failed to adequately disclose the nicotine content of the e-liquid.
Amidst the mounting lawsuits and declining market share, JUUL cut about 500 jobs late in 2019.
Altria’s Investment Goes Wrong
By the beginning of 2020, it became evident that Altria’s investment in JUUL wasn’t turning out well. Amidst mounting lawsuits and declining earnings, Altria wrote down the value of its investment from $12.8 billion to $4.2 billion. Thanks to the write down, Altria lost $1 per share in the fourth quarter of 2019. Altria’s stock value – which had been as high as $63 per share in late 2018 – tumbled down to $34 in March 2020.Altria’s stock value has worked its way back up to $43.50 as ofthe time of writing. Although nothing is likely to bring the Marlboro maker down for good, the JUUL investment ended up taking an enormous chunk out of Altria’s market cap.
In April 2020, Altria’s investment in JUUL went from bad to worse when the Federal Trade Commission filed a lawsuitdemanding that Altria divest itself from the company completely. In the lawsuit, the FTC alleged that Altria illegally agreed not to compete with JUUL – and to exit the vaping market – as a condition of the investment. The lawsuit will go to trial on January 5, 2021.
JUUL Faces an Uncertain Future in the U.S.
As mentioned at the beginning of this article, it seems unlikely given JUUL’s immense financial resources that the company will end up folding despite its current difficulties. JUUL is well entrenched in the vaping industry at this point. Even if the JUUL that emerges from all of the controversy is smaller and less successful than the JUUL of today, the brand will still be around in some form. If nothing else, JUUL continues to be the holder of an impressive trove of patents and other intellectual property.
As for whether JUUL will still be available to buy in the United States a year from now, that remains to be seen. JUUL has already submitted the required premarket applications for its products, which means that JUUL won’t be removed from the American market when the PMTA deadline arrives in September. The timely submission means that JUUL can remain on the market for another year pending approval or denial of its application.
The big question mark, however, is whether JUUL will ultimately be approved for sale in the United States. To receive approval from the FDA, the maker of a new tobacco product must demonstrate that the product is beneficial to public health. The application also must show that the product will not cause new initiation of nicotine use. JUUL currently faces a pile of lawsuits, however, alleging that their product has done exactly that. Even former FDA commissioner Scott Gottlieb has said, “I don’t know how JUUL gets through.”
About the Author
Robert Conway is the owner and founder of The Vape Bar. Oklahoma City’s top vape shop, The Vape Bar is veteran owned and operated and prides itself on selling the best vape gear in theOKC area. Follow The Vape Bar on Facebook.