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Bloomberg Businessweek October 14, 2019In 2004, Stanford grad students Adam Bowen
and James Monsees set out to reinvent the
tobacco industry. In 2015 their company, Juul
Labs Inc., began selling e-cigarettes and fla-
vored nicotine pods that were twice as potent
as many competing vape rigs. By the following
winter, “Juuling” was a verb. The two men, for-
mer smokers, said their goal was to save millionsoflives
a year by helping smokers switch. “Fifty years from now,
nobody’s going to be smoking cigarettes,” Bowen said in a
promotional video. “They’re going to look back and think,
Oh, my God, I can’t believe people used to do that.”
He may be right, but the question today is what happens
to Juul. It’s facing investigations by the U.S. Food and Drug
Administration and the Federal Trade Commission, a congres-
sional inquiry, dozens of lawsuits, and, reportedly, a crimi-
nal probe by the Department of Justice. San Francisco has
banned the sale and distribution of e-cigs. On Oct. 7, Kroger
Co. announced it would stop selling them, joining Walmart
Inc. and other retailers. Regulators are investigating
whether Juul illegally marketed its products as
healthier than cigarettes, and to minors.
Juul’s USB-drive-looking vaporizers
and sweetened flavors, with names
like mango, cucumber, and creme,
may well help longtime smokers
give up a cancer-causing habit.
But they’ve also attracted
millions of nonsmokers,
including—as America’s par-
ents and assistant principals
know all too well—a lot of
kids. Researchers warn that
Juul’s high- nicotine pods and
Instagram marketing could be
undoing decades of antismoking
gains. For many teens, Juul has
become a fact of life, as have
memes such as a bathroom-wall
sign that reads, “Absolutely no
peeing in the Juul room.”
The company said in an emailed
statement that its objectives haven’t
changed. “We do not want, we do not need
and we do not try and get non-nicotine users to
use Juul,” it said. “More than 70% of smokers want to quit.
Offering adult smokers a real alternative to cigarettes is a com-
mercial opportunity of historic proportions.”
Achieving verb status is a hallmark of next-level suc-
cess for any Silicon Valley company, and Juul has reached
other such milestones as it became the world’s third-most-
valuable startup, worth $38 billion after raising $12.8 billion
last December. That deal made Bowen and Monsees paper
billionaires, and they made sure their 1,500 employees were
richly rewarded, too. But the biggest chunk of the moneydidn’t come from Silicon
Valley venture capitalists;
it came from Altria Group
Inc., the Marlboro maker
formerly known as Philip
Morris, which received a 35%
stake. Bowen and Monsees’ Big
Tobaccoreplacement project was
beginning to look like a standard tobacco company.
Juul said on Sept. 25 that it would end all U.S. digital, TV,
and print advertising, and that it was replacing Chief Executive
Officer Kevin Burns, a longtime private equity investor who’d
previously helped run yogurt maker Chobani LLC. Any relief
employees or public-health advocates might have felt at the
news of his ouster was short-lived. The company replaced him
with K.C. Crosthwaite, Altria’s “chief growth officer.”
The new CEO has another cloud to clear. Since April more
than 1,000 cases of lung injury associated with vaping have
been reported to the U.S. Centers for
Disease Control and Prevention from
48 states, and at least 20 people have
died, including a minor. None of
those cases, many of which share
pneumonia-like symptoms and
signs of chemical burns, have been
tied to Juul or its pods; many of the
victims reported using pods con-
taining oils from THC, the active
ingredient in marijuana, but some
said they vaped only nicotine. The
anxiety about mysterious killer
vapes has helped catalyze the
opposition against Juul, the most
prominent e-cigarette brand, with
more than $1 billion in annual rev-
enue and 70% of the U.S. vape mar-
ket, according to market researcher
IRI. (With a big asterisk: IRI doesn’t
track online sales.)
Interviews with former Juul exec-
utives, employees, and advisers sug-
gest that management’s drive to outpace
the company’s rivals led them to sidestep
several internal and external appeals for cau-
tion, including warnings from public-health officials
that Juuls were rapidly addicting children and from employees
concerned that they were being sold with-
out adequate quality controls. The com-
pany said in its statement that it meets
internationally accepted manufacturing
standards and that none of its products
currently on the market were in any way
rushed. Former employees remember
things differently. “They were in such a
hurry to get product in the marketplace,”the
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