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How Juul, founded on a life-saving mission, became the most embattled startup of 2018

E-cigarette startup Juul Labs is valued at more than $16 billion. It’s also hooking teens on nicotine and drawing scrutiny from the FDA. Can the company innovate its way out of a crisis it helped create?

How Juul, founded on a life-saving mission, became the most embattled startup of 2018
[Photo: The Voorhes]

Taking their seats across from me in a conference room at their airy red-brick headquarters in San Francisco’s Dogpatch neighborhood on a brisk August morning, Adam Bowen and James Monsees, cofounders of the breakout e-cigarette company Juul, lay their smartphones and vapes on the table and begin recounting their Silicon Valley origin story.

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It begins more than a decade ago: before the lawsuits and the FDA investigations; before the accusations that their company had unleashed an epidemic of teenage vaping on the country; before regulators, legislators, teachers, parents, and even some devoted users began looking at Juul—with its pocket-friendly design and playfully flavored nicotine pods—as a high-tech, highly addictive second coming of Philip Morris. Bowen and Monsees were simply two graduate students—Bowen, clean-shaven and studious; Monsees, bearded and gregarious—who met in Stanford’s product design program in 2002 and bonded, during late-night working sessions, over an idea that could save millions of lives and disrupt one of the world’s most powerful industries.

“Look, smoking hasn’t evolved in 100 years,” Bowen says, recalling the pitch to their thesis advisers. “It’s killing millions of people. We’re smokers. We’re at risk of suffering the same fate, and we want to work on this: How do you create a new ritual to replace the old one?”

Early e-cigarette models, such as R.J. Reynolds’s “Premier,” which launched in 1988, had failed to win over large numbers of smokers because their nicotine levels were too low and they relied on clunky technology and weak batteries. Plus, they often mimicked the iconography of cigarettes—round tube, glowing tip—but didn’t taste or smell as good. “[Big tobacco] had been trying to build a safer cigarette, and that’s not what anyone wanted,” says Monsees. He and Bowen realized that “people wanted to move past cigarettes.” A video of the pair’s 2005 thesis presentation at Stanford shows Bowen unveiling their prototype, called the Ploom, to professors and classmates. Through elevated design, he explains, it should be possible to “take tobacco back to being a luxury good and not so much a drug delivery device that cigarettes have become.” The presentation includes filmed endorsements from beta users—all cigarette smokers.

“The orthodoxy in a lot of the smoking stuff is, you just quit, man up, cold turkey,” says their thesis adviser, Michael Barry, who today is a Stanford adjunct and founder of Quotient, a design consultancy. “And if you fail, you’re weak.” (Less than 5% of smokers who try to quit abruptly are successful.) The sense of shame that results is “literally the kiss of death for any kind of behavior change.” Early studies suggest that e-cigarettes, which are not nearly as deadly as combustible cigarettes, offer an effective alternative. In the U.K., officials at Public Health En-gland have gone so far as to laud e-cigarettes as “the nation’s favourite stop smoking aid,” having helped an estimated 1.5 million people successfully kick the habit.

After graduating, Bowen and Monsees began to turn their vision into a business, launching Ploom and later Pax, a vaporizer for loose-leaf tobacco and marijuana. Both products reflected their view that smoking needed to be reinvented for a wellness-focused generation, not eradicated. Then, in 2015, a decade after leaving Stanford, they turned their focus to a form of liquid nicotine called nicotine salts and unveiled a sleek, rectangular e-cigarette with a name befitting their original luxury aspirations: Juul.

By almost every measure, Juul has succeeded in creating the type of compelling new ritual that Bowen and Monsees envisioned. Last year, parent company Juul Labs sold 16.2 million vapes—that’s $245 million worth of its $35 devices and $16 pods, which come four to a pack in flavors including mint and mango. In 2018, sales will easily surpass $1 billion. Today, Juul controls more than 70% of the U.S. e-cigarette market. A July fundraising round, which generated $1.25 billion in growth equity, valued the company at more than $16 billion, and it has started expanding into Canada, Israel, and the U.K. Bowen and Monsees, who today serve as Juul’s chief technology officer and chief product officer, respectively, are now paper billionaires helping to oversee 1,000 employees, a robust R&D lab, and one of the fastest-growing consumer products in history.

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They are also in the center of a vape-cloud maelstrom. Over the past nine months, Juul has been hit with several lawsuits—including a nationwide class action suit—claiming that the company deceptively marketed its e-cigarettes as safe and targeted minors with lifestyle-based ad campaigns. The FDA, meanwhile, launched a formal investigation into the company’s marketing practices this past spring, and last week announced plans to restrict sales of flavored e-cigarette pods in an effort to address widespread vaping among teens.

In setting out to give the world’s billion smokers an alternative to combustible cigarettes, Bowen and Monsees have now become the antiheroes in an increasingly familiar twist on the classic Silicon Valley fable, involving breakthrough product design, viral user growth, and pervasive (perhaps willful) naïveté. If the traditional startup narrative once followed the outlines of “identify a need, scale the solution,” the modern version looks something more like “identify a need, scale the solution, and deal with the unintended consequences and regulatory backlash.” It’s no coincidence that Juul, like Uber, has become a verb.

Monsees draws a contrast, however, between Juul and tech giants like Facebook or Google, which opened up what he calls “a Pandora’s box” as they pursued new opportunities in uncharted territory. Smoking is a real crisis, “the leading cause of preventable death in the world,” he says. “We have a very clear opportunity to make potentially the largest impact on public health [of] any consumer product. The mission could not be more clear.”


As its sales have soared, Juul has become the first digitally native smoking brand. It’s a dubious honor. On Reddit, there are Juul memes involving Drake; paparazzi snaps of celebrities, such as Game of Thrones actor Kit Harington, with their Juuls; and discussions about FDA regulation (“FU FDA”). On YouTube, a 20-minute sketch by online comedian Stevie Emerson, titled “Dude, Where’s My Juul?,” racked up more than 1 million views in less than a month over the summer. On Instagram, there is a subculture dedicated to vapor-based #juultricks, many of which involve breasts or beer.

The most alarming posts are the most invisible. Skylar, a middle school student in Texas, tells me that she has never seen the official Juul Instagram page and doesn’t know anything about the company. But she is familiar with the product, which is a frequent prop in the Snapchat Stories of her peers. “It became really popular last year,” she says of Juul. “A lot of the popular kids do it because their friends think it’s cool.”

Although Juul and other e-cigarettes don’t burn tobacco, they do contain nicotine. Juul, in particular, has pioneered the use of nicotine salts as a way to deliver a hit equivalent to that of a combustible cigarette. As a result, Juul can be as addictive as cigarettes, especially for adolescents, whose brains are still developing. Even today, with laws constraining tobacco ads, 90% of smokers are hooked by age 18, according to the CDC. What’s more: An increasing body of evidence suggests a correlation between teens’ use of e-cigarettes and combustible ones, lending credence to concerns about the “gateway effect.” (Teen Juul-ers may also be exposing their lungs to particulates that cause respiratory problems over the long-term, though the science is still inconclusive.) Hence the FDA’s panic upon discovering, earlier this fall, that roughly one in five high school students had used an e-cigarette in the previous 30 days, more than a 75% increase from the prior year, according to preliminary data from the 2018 National Youth Tobacco Survey, which is conducted by the FDA and the Centers for Disease Control and Prevention. The study found that the total number of middle and high school students using e-cigarettes rose by 1.5 million from 2017 to 2018 to reach to 3.6 million. “These data shock my conscience,” FDA commissioner Scott Gottlieb said in a statement announcing the findings last week.

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Teens are also drawn to exotic flavors, a fact that the tobacco industry has known for years. (Flavored cigarettes, except for menthol, have been illegal in the U.S. since 2009; the FDA is now seeking a ban on menthol-flavored tobacco, too.) The CDC recently found that among teens who report trying e-cigarettes, the second-most common reason is the availability of “flavors such as mint, candy, fruit, or chocolate.” In a study published last year, researchers at the Yale University School of Medicine found that 75% of e-cigarette users ages 12 to 29 would quit if flavors were unavailable. After years of more or less sitting on the sidelines, the FDA is now officially cracking down. The agency announced last week new restrictions on how e-cigarette flavors (with the exception of menthol, mint, and tobacco varieties) can be sold: Brick-and-mortar retailers must sequester flavored pods into what the agency calls “age-verified areas,” and online sellers are subject to additional age-verification practices.

“We were a company full of people in their late twenties, early thirties, without tobacco experience. We lacked any sensitivity as to how it would be perceived.” [Photo: The Voorhes]
It’s not clear how effective these tactics will be. Most underage users buy the device from older siblings, or borrow one from friends; in a recent survey, four out of five teens said they obtained e-cigarettes from “social sources.” When Skylar’s school attempted to incorporate Juul into its annual drug prevention assembly last year, she says, a student who volunteered to participate in a demonstration made a mockery of the guest speaker, much to her classmates’ amusement. Meanwhile, hundreds of schools have spent more than $1,500 apiece on a device called FlySense, designed to detect vapor—and Juul vapor, specifically—in bathrooms and locker rooms.

The question for regulators is how exactly Juul came to be so ubiquitous among teens. For critics of the company, the answer is obvious: the youthful marketing campaign that accompanied Juul’s 2015 launch. Times Square billboards and print ads in Vice magazine featured attractive twentysomething models against Candy Land–colored backdrops and echoed, intentionally or not, the types of advertising that tobacco companies historically used to appeal to younger audiences. The company also hosted sampling events at festivals and nightclubs, including New York City celebrity-magnet 1 Oak. Photos of patrons holding Juuls began to appear on the company’s Facebook and Instagram pages, lending a cool factor to the brand. “The portrayal was of young adults in highly attractive settings,” says Matthew Myers, president of the Campaign for Tobacco-Free Kids, a nonprofit focused on anti-tobacco advocacy. “I mean, it’s the Virginia Slims woman, it’s the old Winston, Marlboro, and Newport advertising come back to reality. And then for Juul to say, ‘We were shocked, shocked that it appealed to young people,’ [that] defies credibility.”

After taking a notably hands-off approach to e-cigarettes, the FDA began looking into Juul’s launch campaign this past spring, and tasked the company with handing over documents pertaining to its marketing efforts. The agency stepped up the pressure at the end of September when it sent agents, unannounced, to Juul’s headquarters to gather additional materials. (Agents also visited other e-cigarette manufacturers around the same time—at least one of which, the Imperial Brands–owned Blu, continues to feature images of sun-dappled young models in its investor presentations.)

According to a source familiar with Juul’s launch, the campaign had been designed to target smokers ages 25 to 34. The company wanted to set a “premium” price for Juul, says this source, and when it ran a survey of different demographics, “that was that age range that [the higher prices] popped for.” Juul’s board of directors signed off on the company’s launch plans, and Monsees, who was CEO at the time, personally reviewed images from the billboard photo shoot while it was in session. No one seemed to foresee that the bright colors and positive messaging might appeal to audiences even younger than 25. “We were a company full of people in their late twenties, early thirties, without tobacco experience,” says this source. “We lacked any sensitivity as to how it would be perceived. We looked at it as launching a new technology.”

The wake-up call came via an October 2015 segment on The Late Show with Stephen Colbert that criticized the company’s youth appeal. Juul quickly developed new ads with muted colors and cropped heads, unsure of which models would read as too young. Within six months, there were no traces of the original offline campaign.

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Juul maintains that the launch initiatives had little to no effect on its business; sales did not take off until nearly two years later. Another fact in the company’s favor: According to the CDC, vaping became more popular than smoking among teens for the first time in 2014—a year before Juul entered the market. Juul may have exacerbated a teen trend, but it did not initiate it.

Today, the company is distancing itself from the campaign. “It was a mistake,” says Monsees. “I think the biggest mistake was not believing enough that the core product proposition would be the most powerful marketing tool that we would have.” This past April, the company committed $30 million over the next three years to youth prevention efforts. What users—including teenagers—continue to do with the product on social channels, however, is largely out of the company’s hands.


“Who just leaves this?” mutters Juul CEO Kevin Burns shortly after I meet him at the company’s headquarters this past August. He is addressing a jumble of cardboard boxes that have been abandoned in a conference room at the already bursting offices that Juul moved into in March. He bends down in the wide-legged posture of a former football player to break down each box before carrying the stack out of the room. Mess erased, we sit down over orange chicken and noodles to discuss his first months on the job.

“I’ve tried a few cigarettes in my life, but I’ve never been a smoker,” Burns says. “I was an athlete growing up, it just wasn’t the thing.” Before joining Juul last December, Burns was the president and COO of Chobani, where he spent two years scaling the mission-driven yogurt company. He declined Juul’s initial overtures, but says he was eventually drawn in by the size of the market and the technology Juul had developed.

During Juul’s first year, sales were modest at best, despite enthusiastic prelaunch feedback from focus groups. They began to creep upward in mid-2016, and by late 2017, Juul was on a tear, with demand regularly outpacing the company’s erratic supply. The board tapped Burns to manage Juul’s explosive growth, along with the mounting backlash. “I didn’t know what a rocket ship we’d be on,” he says.

Burns has moved quickly to demonstrate Juul’s good intentions in the U.S. while gearing up for overseas expansion. He began by positioning the company more overtly as a tool to help smokers quit. Under Burns, the company renamed two of its flavors, dropping the “cool” before cucumber and the “brûlée” from crème, to make them less appetizing to teens. The VP of marketing he recruited from Nike, Ann Hoey, has overseen a complete overhaul of Juul’s online presence. Earlier this year, the company scrubbed its social media accounts of models, product shots, and flirty hashtags—anything associated with its initial marketing efforts. Last week, Juul went even further and shut down both its Facebook and Instagram accounts entirely. It now uses Twitter simply for “non-promotional” communications and YouTube to post first-person testimonials from former smokers who have quit with the help of Juul.

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Burns also preempted the FDA’s ruling on flavors last week by announcing a few days earlier that he was pulling Mango, Fruit, Creme, and Cucumber flavor pods from all 90,000-plus U.S. retailers that currently sell Juul—including traditional stores and specialty vape shops. (The company says it will move these products back into FDA-permitted stores only if the retailer adopts a system to restrict sales to people under 21 years old.) The move is significant: After addressing the supply-chain issues that once delayed its shipments, Juul has nearly quintupled its retail presence from the end of last year to today. Roughly 90% of Juul sales now take place in brick-and-mortar locations, and flavor pods account for some 45% to 55% of them. The company is betting that flavor-pod users will begin shopping online—but there’s no guarantee they’ll make the switch.

Burns says these steps, however difficult in the short-term, are necessary. “[E-cigarettes] is young category that’s frankly gotten out of ahead of itself in terms of growth and some of the practices, and it’s showing up in a bad way in terms of youth usage,” he acknowledges a few days after the FDA announcement. “We need to be part of the solution.” But even with the retail pullback, he remains focused on expansion: “I’m hoping that we’ll really make a dent on this youth uptake issue, so that we’ll get a chance to allow the category to evolve, to have the impact that we want to have, which is around adult smokers switching.” Juul is now available in four countries and more than 8,000 stores internationally, and expects to expand into Russia and three European countries by the end of the year. It has also begun exploring products, such as lower-dose pods, that could open the door to weaning users off of nicotine entirely.

Other smoking cessation tools—gum, the patch, lozenges—release nicotine at a slow and steady rate. The potent nicotine hit that Juul offers makes switching from combustible cigarettes almost seamless, and its flavors appear to keep people engaged. On Reddit, I correspond with a Juul user named John, who has been outspoken on this issue: “I tried pretty much every [smoking cessation] product and trick over the course of the last 10 years (30-year habit),” he writes to me. “Nothing worked. Most never made it past a day. The Juul, and mango [flavor] has stuck for two months now. And while I have cravings, none has been strong enough to [go back to] tobacco.”

The company’s growth, Burns says, is predicated on a global captive audience of hundreds of millions of smokers who are interested in quitting combustible cigarettes, and willing to buy Juul pods on a regular basis. According to the company’s internal research, 1 million smokers have already switched to Juul. “There’s no need to grow the nicotine usage market,” Burns says. “Our business is all about penetrating an existing market”—one worth more than $700 billion globally, according to Euromonitor.

Cigarettes Are A Public Heath Nightmare. E-cigarettes Are An Imperfect Solution

Juul’s newest investors see this market potential and have big expectations. In July, Burns effectively bypassed the VCs of Sand Hill Road, which are commonly constrained by clauses that prohibit them from investing in “vice,” to raise $1.25 billion from hedge funds and asset managers, including Tiger Global Management and Fidelity Investments. (In its early rounds, the company relied on wealthy individuals for cash, including billionaire Nicholas Pritzker, the former CEO of Hyatt.)

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Burns says he’d welcome a strategic investment partner like the Gates Foundation, which would highlight Juul’s public benefit potential. “What I love about [Gates] is they’re not talking about policy, they’re handing out vaccinations for deadly diseases that they’re trying to eradicate off the face of the earth in a very pragmatic way,” he says. “That’s exactly what we need to do. We need to get the product in adult smokers’ hands.” (If Juul is seriously committed to smoking cessation, though, it may have to reconsider its premium-pricing model, given the higher rates of smoking among people of lower-income levels both here and abroad.)

Meanwhile, Juul is racing to figure out how to get its products out of teens’ hands. One afternoon in August, I join Juul’s small “brand protection” group for its regular check-in with chief administrative officer Ashley Gould, who oversees compliance and legal affairs. The team spends its days in a game of whack-a-mole with social media platforms and marketplaces, trying to identify illegal sellers (Juul.com is the only authorized seller online), posts by underage users, and violations of Juul’s intellectual property. Earlier in the year, Juul succeeded in persuading Instagram to remove the accounts of DoItForJuul, JuulNation, and JuulCentral, each of which had boasted hundreds of thousands of followers (many more than the 70,000 following that Juul’s own Instagram handle had before shutting down). New accounts are rising up, though their follower counts are still low. “They need to build from grassroots again,” a brand protection manager explains.

“So we just keep chopping them down,” Gould says with a nod of approval.

But it’s an unending battle. After the meeting, I go on eBay, search for “juul,” and within a few minutes am able to buy a product advertised as “JUUL100% AUTHENTIC KITS & PODS ALL FLAVORS FREE SHIP!” for $42.99. I check out as a guest, and I am never asked my age. A Juul starter kit—not a counterfeit—shows up at my door less than a week later.


One morning in early September, Juul senior sales manager Jonathan Granoff drives around Manhattan to check in on a few vape shops. The back of his Jeep Cherokee is packed with Juul signage, including switch & save window and counter displays featuring the latest promotion: $20 off the Juul starter kit, which typically retails for around $50. Despite Juul’s strong digital footprint, more than 90% of sales take place in physical stores. We inch forward in Manhattan traffic on our way to Cloud99, in the East Village.

In the early days, Granoff says, it was challenging to persuade vape-shop owners to get behind the product, because the margins on Juul pods are not as attractive as those on e-liquids that work with open-system vaporizers. (Despite the rise of Juul-compatible pods and Juul copycats, many of which the company is suing for trademark infringement, Juul’s device was officially designed to work only with its own pods.) Granoff’s pitch: “Do you want these [open system] juices to collect dust, or do you want to sell the hottest product in the country?”

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Juul is a far easier sell today. At the Smoking Shop on Sheridan Square, A-list celebrities are known to stop by asking for Juul. At Cloud99, Juul comprises 30% to 40% of all sales. “Half our calls during the day are: Do you have mango in stock? Cucumber in stock?” the store’s co-owner says.

Those inquiries will likely come to a halt thanks to the FDA’s new restrictions on flavored e-cigarette pods. What happens online may be more difficult to police: Despite the FDA’s 2016 moratorium on new e-cigarette models, Juul knock-offs and “stealth” vaporizers, in shapes like car key fobs and asthma inhalers, are readily available on the internet. Juul reports that in 2018, it worked with sites such as eBay, Alibaba, and Amazon to remove more than 23,000 third-party listings of both its products and counterfeits.

Fortunately for Juul, FDA hasn’t yet followed the lead of countries like Israel, which has banned e-liquids with high nicotine concentrations. There, as in the U.K., Juul sells only 1.7% nicotine pods, rather than the 5% pods featured in its U.S. starter kit. The company feels that restricting nicotine this way would be a mistake. Grant Winterton, who oversees Juul’s operations in Europe, the Middle East, and Africa, says Bowen and Monsees “engineered [the 5%] product to help smokers quit right from the beginning. We have yet to do the tests, but we believe that 20 milligrams [or 1.7% pods] will switch a lower number of smokers.”

Winterton’s comments are a nod to one of Juul’s greatest innovations and also its Achilles’ heel: a nicotine delivery system so effective that users can find themselves consuming more than they expected or want. Matthew Pedecine, 27, is one of the plaintiffs in a class action complaint filed against the company in August alleging that it misled users about the addictiveness of its products. Two years ago, Pedecine says, he was smoking approximately four or five cigarettes a day. He saw someone using Juul at a deep house concert in New York, and gave it a try. “Even though I did manage to use it to quit smoking cigarettes, my daily nicotine consumption has nearly quadrupled,” he says. “I knew [Juul] had nicotine, but I didn’t realize the level of nicotine it was going to have.”

This is a problem that Juul can innovate its way out of, the cofounders say. “[Juul] is a smart product that has a microprocessor in it, firmware, sensors, and all this advanced technology,” says Bowen. Why not take advantage of those features and give users greater control? Monsees envisions a device that allows people to visualize and track their usage, and adjust it down or up as they wish. Next year, the company plans to launch a Bluetooth-enabled version of Juul that will connect to a Juul app, laying the foundation for such capabilities. It will also include an optional youth-prevention feature, which will pair an adult user’s smartphone with his or her device, effectively locking it. (Until the FDA lifts its ban on new e-cigarette models, the Bluetooth version will only be available outside the U.S.)

“As we build in more of these technologies, what we see is a potential place where all underage consumption can be eliminated at a product level,” Monsees says. In other words, Juul has technology know-how and a game plan—just give the company the time to see it through. “Not only do we have good intentions, we have incentive alignment. These are issues we want to end.”

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Yet the fact remains: Juul is making money from getting teens hooked on nicotine and turning combustible-cigarette smokers into pod addicts. “They’re profiting from it fabulously. To say, ‘We didn’t mean it,’ and then still cash the checks, in this environment doesn’t work,” says Barie Carmichael, coauthor of Reset: Business and Society in the New Social Landscape. “Here you have a company that has this noble purpose to wean adults from smoking. But in their business model, they have elements that can lead to unintended consequences.”

I pose this conundrum to Bowen and Monsees’s thesis adviser, Michael Barry. Is there a way to better predict what innovation might unleash? Or do we simply have to learn to deal with innovation’s negative side effects, when they arise?

“You’re asking the $64,000 question for the future of the Valley,” he says. “We have gotten amazingly good at satisfying needs and scaling. We are really good. And I think we’re beginning to see that this absolute focus on scale at all costs can be really problematic.”

Recently, the product design program that Bowen and Monsees attended celebrated its 50th anniversary. Founding faculty member Bob McKim was there, and he had a question for Barry: Do you teach the students what needs not to satisfy? “My answer was ‘no,'” Barry recalls. “He said, ‘Well maybe you should think about that.’ And he was absolutely right. Before, if I created a product that affected 100,000 people, I thought I was king of the world. Now students do that on a Kickstarter in a week. They’re affecting millions of people at a push of the button.”

Or in the case of Juul, at the first deep inhale.

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About the author

Staff writer Ainsley (O'Connell) Harris covers the business of technology with a focus on financial services and education. Follow her on Twitter at @ainsleyoc.

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