What Happened To JUUL? Is It Banned?

Executive Summary:

JUUL is a manufacturer and distributor of electronic vaping devices (also called e-cigarettes) that can be filled with liquid pods.

JUULs are currently not banned from being sold in most countries in the world. Consumers in the United States, the United Kingdom, as well as Canada can legally purchase its vapes and pods.

Launched in 2015, JUUL has raised over $15 billion in funding. In its heyday, the company was valued at $38 billion.

What is JUUL?

JUUL, incorporated as Juul Labs Inc., is a manufacturer and distributor of electronic vaping devices (also called e-cigarettes) that can be filled with liquid pods.

Just like any other e-cigarette, the JUUL device converts liquid nicotine into a vapor that the user is then inhaling.

The device is powered by an internal battery and can be charged via a USB port. It offers additional features such as temperature regulation or sensors reading the charging level.

What sets the JUUL device apart is its hardly noticeable design. Unlike other vaping products, a JUUL vape can be enclosed in the palm of a hand. Furthermore, the vaporizer does not produce massive amounts of smoke.

The JUUL device is powered by cartridges dubbed JUULpod. These pods contain nicotine salt, which is derived from tobacco and creates a cigarette-like smoking experience.

Currently, JUUL offers menthol and tobacco flavors. Previously, the company also distributed flavors such as mango, creme, fruit, mint, and cucumber.

The pods, as well as the vaping device, can be purchased in JUUL’s online store as well as at selected retail partners.

What Happened To JUUL?

JUUL Labs, headquartered in San Francisco, California, was founded in 2015 by James Monsees and Adam Bowen.

However, its story begins over 10 years earlier at Stanford University. In 2004, Bowen and Monsees were pursuing a graduate degree in Product Design and eventually became friends on one of their many smoking breaks.

During their smoking break chats, they came up with the idea for their final thesis: designing an electronic cigarette that would provide smokers like them with the necessary amount of nicotine while leaving out the cancer-causing substances that emerge from burning tobacco.

The thesis eventually led to the formation of Ploom, which they started in 2007. They managed to raise funding from a variety of investors, such as billionaire Nicholas Pritzker (a family member of the wealthy Chicago family that previously owned tobacco company Conword), and began working on a first product.

In May 2010, they unveil the company’s first product dubbed the Ploom Model One. Unfortunately, the product was plagued with various problems such as occasionally electrocuting users and relying on butane fuel, which forced customers to consistently carry around a refilling can.

Despite those shortcomings, the Model One did end up doing reasonably well. The initial traction led Japan Tobacco Inc., the world’s fourth-largest tobacco player, to invest $10 million into Ploom in 2011.

The cash injection allowed Bowen and Monsees to severely ramp out their research and development efforts, which ultimately led to the release of a follow-up product called the Pax. In August 2013, Ploom hosted a launch party in the trendy Mission District of San Francisco to debut the device.

Pax offered a few distinct improvements over the Model One. For example, instead of relying on butane, it required users to insert loose-leaf tobacco into a small compartment, which was then heated and vaporized. Many of its users actually used it to smoke cannabis instead of tobacco.

Additionally, its design was also much slicker than many of the competing products offered in the market at the time. However, at a price point of $250, it certainly wasn’t a mass-market product. After less than two years, in February 2015, the duo exits Ploom by selling it to previous backer Japan Tobacco.

As part of the deal, Bowen and Monsees purchase back Japan Tobacco’s stake in their company and rebrand it into Pax Labs. Three months later, in June, and after having sold over 500,000 Pax devices, Pax Labs raises $46.7 million in Series C funding.

That same month, on June 1st and during a launch party in New York City, Pax Labs finally unveils the JUUL e-cigarette. JUUL entered the market at a much lower price point compared to the Pax device, which gave it a much broader appeal.

Furthermore, the JUUL device also differentiated itself from other e-cigarettes in the market by utilizing nicotine salt and not relying upon freebase nicotine, the common ingredient of vapes at the time.  

Freebase nicotine would often burn a user’s throat due to the low levels of nicotine in it. This would also make it an unsatisfactory experience for smokers because they wouldn’t get the required nicotine hit.

Not only did JUUL launch with a splashy event, but it also made quick inroads with very influential people. It sent its product to various famous people. Weeks after the launch, the likes of Leonardo DiCaprio and Bella Hadid were spotted using the vape.

After that, JUUL’s sales team went on a half-year sampling tour during which it set up branded containers at concerts, rooftop bars, festivals, clubs, and more. Slowly but surely sales began to accelerate.

By November 2017, JUUL had managed to capture 32 percent of the e-cigarette market according to data gathered by Nielsen. Throughout the year, it managed to sell over 16 million vaporizers. Meanwhile, JUUL was also spun out from Pax Labs to create a separate company dubbed JUUL Labs.

To cap 2017 off, the newly incorporated JUUL Labs also managed to raise $150 million in a first round of funding in December 2017. It, furthermore, hired Kevin Burns to be its newest CEO.  Burns had spent the previous three years as COO of food and beverage company Chobani. In the meantime, Bowen served as JUUL’s CTO while Monsees acted as its Chief Product Officer.

But after more than two years of unprecedented growth, darker days soon emerged. In early 2018, multiple reports had emerged, stating that the usage of vapes across high schools in the United States was rising significantly.

On April 24th, 2018, then-FDA Commissioner Scott Gottlieb announced a new initiative dubbed the Youth Tobacco Prevention Plan whose goal was to combat the spread of vapes across U.S. high schools.

As part of that initiative, the FDA requested information from JUUL (and 40 other manufacturers), which at that point had captured close to 50 percent of the market. In response, JUUL announced that it would invest $30 million into independent research and education programs.

Despite the small setback, Juul Labs continued to add more capital to its war chest. In July, the company raised close to $700 million in additional funding and investors valued JUUL at over $15 billion.

Unfortunately, the good days wouldn’t last for too long. On August 21st, Israel announced that it would ban the sale of JUUL vapes because its product contained too much nicotine. JUUL’s pods contained 40mg of nicotine, which is equal to about one pack of cigarettes. To combat the ban, JUUL vastly reduced nicotine levels for its Israeli products (down to about the same levels it had in the United States).

Apart from other countries, JUUL’s management team also had to battle a vastly increasing number of competitors. These companies would often simply copy JUUL’s vape and pods. As a result, JUUL filed trademark claims against 30 Chinese entities for selling counterfeit products in early September.

Three weeks later, the FDA came knocking again. The agency allegedly seized thousands of documents from JUUL’s headquarters to determine whether it purposefully was marketing its products to teenagers. Weeks prior, the FDA had already ordered JUUL (and four other companies) to outline how they intended to clamp down on the underage usage of its products.

Exactly 60 days after the FDA imposed those demands, JUUL unveiled its plan on November 13th, 2018. Effective immediately, it removed all of its flavored pods (e.g., fruit or cucumber) from all physical store shelves and only allowed them to be sold via its website. Furthermore, JUUL doubled down on its secret shopper program which would check if store owners sell the pods to underaged people.

In order to preserve its image, JUUL also filed more lawsuits against Chinese copycats days later. These counterfeit producers would often offer products that contained much more toxins. Meanwhile, customers would still confuse them with JUUL’s vape because of the products’ similarities.

Despite all of this happening, investor interest in the company remained high. But even then, it came as a shock when, in December 2018, Altria Group (the company behind Marlboro) had just invested a whopping $12.8 billion into Juul Labs. The round, which granted Altria a 35-percent stake in JUUL, valued it at $38 billion. JUUL’s valuation even surpassed companies such as Airbnb or SpaceX.

Altria, furthermore, committed to supporting JUUL on various fronts. For example, it would give it access to its sales teams, retail shelf space, and distribution networks, amongst others.

In February 2019, researchers, who were sponsored by JUUL, presented the first clinical data that supported the merit of JUUL’s devices helping people to quit smoking. Critics, both in the general public and scientific community, drew comparisons to the studies released by Big Tobacco companies in the 1990s, which ultimately ended up being debunked.

Unfortunately, the data wasn’t enough to stop the war that was about to take place on JUUL’s home turf. Just a week after the FDA released new proposed guidelines for e-cigarette makers (giving them until 2021 to complete public health reviews), the city of San Francisco, where JUUL is headquartered, introduced a policy that would curb the use and sale of vaporizers. Voting on the proposal would take place months later.

To combat the adoption amongst teenagers, JUUL introduced even more initiatives in April. It launched an online tool that would track where a certain device was sold. If a store owner was found to have repeated offenses, their stores would be barred from selling JUUL products.

By that point, JUUL had captured close to 70 percent of the e-cigarette market. Furthermore, people were already beginning to verbalize the usage of the product by calling the smoking activity ‘juuling’, which served as a further indication of the firm’s vast reach.

In early May, JUUL completely revamped its advertising. It invested millions into a TV campaign that portrayed the device as a means to help adults quit smoking. Instead of young influencers, JUUL would show interviews with middle-aged smokers who used its device to stop smoking.

Days after the campaign launched, North Carolina’s attorney general filed a lawsuit against JUUL to limit the number of flavors the company can sell. Things got even worse when, on June 25th, 2019, San Francisco’s city supervisors voted unanimously 11 to 0 to ban JUUL’s products from being sold.

JUUL responded by expanding into a set of new markets, such as South Korea (entered in May), Indonesia, or the Philippines, amongst others.

However, the lawsuits slowly but surely began to pile up, with the latter half of 2019 being particularly brutal. For example, on July 18th, 2019, a Connecticut man filed a lawsuit against JUUL, alleging that its products caused him to suffer a massive stroke after he became addicted to them.

Things got even worse when on July 26th members of the U.S. House Committee on Oversight and Reform issued a statement saying that JUUL possibly intentionally targeted teenagers. One of the many supporting examples the committee named was the $134,000 JUUL spent to set up a five-week summer camp for 80 teenagers via the help of a charter school.

JUUL responded by upping its product specs. In early August, it launched a Bluetooth-connected vape that would require users to download an Android app through which they would have to verify their age.

And the problems just kept piling on. In August alone, JUUL had to deal with the following issues:

  • The County State’s Attorney’s Office in Illinois filed a lawsuit and alleged JUUL its advertising was geared towards teenagers
  • District Judge William Orrick of San Francisco ruled that people can move forward with a class-action lawsuit against the company
  • A warning letter was issued by the FDA, asking JUUL to stop promoting its e-cigarettes as much safer than other tobacco products without possessing the necessary scientific evidence

To prepare itself for the onslaught of additional lawsuits, JUUL raised 785.2 million in an equity and debt offering in late August. The additional cash cushion was necessary since CNN, in mid-September, announced that it would stop running JUUL ads.

A few days later, on September 17th, China halted the sale of its products. JUUL had expanded into the country just a week before. In anticipation of upcoming financial hardships, JUUL began laying off employees. Even CEO Kevin Burns announced that he would step down. K.C. Crosthwaite, a seasoned executive from JUUL owner Altria, became his replacement.

JUUL also shut down all of its print, TV, and radio advertising campaigns and ended all lobbying efforts in Washington. The company had spent $1.2 million on lobbyists in the third quarter of 2019 alone.

One of JUUL’s backers, hedge fund Darsana Capital Partners, wrote down its investment in the company. Its valuation declined from $38 billion down to $24 billion, which made co-founders Bowen and Monsees lose their status as billionaires. JUUL also settled a lawsuit with an environmental group to restrict portions of its marketing practices.

More importantly, JUUL announced it would stop selling any flavored pods, such as mango, altogether. Before, its flavored pods were still available via the company’s online store.

In late October, a former JUUL employee filed a federal lawsuit and alleged that the company sold contaminated products without issuing a public warning. Former CEO Kevin Burns allegedly said that “half our customers are drunk and vaping like mo-fo’s, who the (expletive) is going to notice the quality of our pods” and that they were “too stupid” to notice.

All of this news piled on amidst dozens of deaths and over 400 hospitalizations due to pneumonia-like lung ailments. People soon began to speculate that JUUL’s pods were the reason for these medical issues. As it later turned out, cannabis-based oils found in unregulated and knock-off products were the ultimate reason for the health crisis.

Unfortunately, the damage was already done. Many, due to the negative sentiment that had already persisted, had assumed that JUUL’s products were causing people to be hospitalized. Amidst added problems with the FDA, JUUL announced that it would also ban the sale of its mint-flavored pods.

A week later, on November 12th, 2019, JUUL announced it would lay off another 650 employees, which were equal to about 16 percent of its workforce. Two days later, California officials filed a lawsuit against JUUL. New York’s Attorney General Letitia James filed another lawsuit a mere 48 hours after the one from California.

To get through those hardships, JUUL’s team decided to seek another round of funding. This time, in February 2020, the company raised more than $700 million in convertible debt. Despite the additional capital, JUUL’s executive team was forced to lay off even more employees. In April, it laid off another 800 to 950 people.

However, interest in the company, as well as usage of its products, slowly began to die down. While JUUL had captured over 70 percent of all e-cigarette sales a year ago, its market share had now declined to about 40 percent.

In late July, Juul Labs submitted an application to the FDA that would allow it to keep selling its vaporizers in the United States. Two weeks later, its application entered the substantive review phase, which was slated to end in September 2021 (more on that later).

Over the coming months, JUUL exited a variety of markets such as South Korea, Austria, Belgium, Portugal, and Spain. Instead, it wanted to shift its focus to core markets such as Canada, the U.K., and the United States.

By the end of October, JUUL’s valuation was cut again, this time down to $10 billion. Two weeks later, it closed a cigarette plant in Lexington, North Carolina, which it had just opened a year prior.

In July 2021, the state of North Carolina has reached a settlement with JUUL, which required the latter to pay $40 million in fines due to the way it marketed its product to teenagers. This became the first financial settlement that JUUL had to agree to.

A month after the settlement, vaping competitors filed a lawsuit against Altria and Juul Labs, stating that the two companies had violated antitrust laws when Altria invested more than $12 billion into JUUL in December 2018.

Meanwhile, the FDA, in September 2021, postponed its decision about whether JUUL is allowed to sell its products in the United States.

Just four months after JUUL settled their case with North Carolina, its Attorney General Josh Stein filed another lawsuit – this time against JUUL’s co-founders. Days later, JUUL agreed to pay another $14.5 million in fines to settle a lawsuit with the state of Arizona.

These days, JUUL remains enshrined in various legal battles while coping with the decreasing interest amongst customers. The company still employs over 1,500 people and enjoys a market share of about 40 percent.

Are JUULs Banned?

JUULs are currently not banned from being sold in most countries in the world. Consumers in the United States, the United Kingdom, as well as Canada can legally purchase its vapes or pods.

San Francisco remains to be the only city in the United States which bars shop owners from selling JUUL-related products.

In September 2021, the FDA had delayed its decision on a potential sales ban of JUUL devices. A decision is slated to be announced somewhere in 2022.

In the meantime, JUUL itself had stopped the sale of many of its popular products. These include examples such as mint, cucumber, mango, fruit, and more. As a result, JUUL currently only sells menthol and tobacco flavors.

Hi folks, my name is Viktor! By day, I lead a tech team of 10 for an e-commerce startup. At night, I work on expressing my weird thoughts through this blog. And if there's time, I cuddle my cat..