The wildly popular e-cig startup Juul is valued at $15 billion, but it faces a growing backlash of lawsuits and investigations
- For a slim device that looks like a USB stick, the Juul e-cig packs a powerful punch.
- But despite the skyrocketing popularity of its devices, Juul Labs — which was recently valued at $15 billion — faces a growing backlash.
- State and federal regulators are probing Juul to see whether it unfairly marketed its products to teens, several lawsuits have been filed against the company, and San Francisco recently banned flavored tobacco products.
For a slim device that looks like a USB stick, the Juul e-cig packs a powerful punch. Each refillable insert contains twice the nicotine as a pack of cigarettes.
American vapers have embraced the device: The Juul now represents nearly 71% of the entire e-cig market. Last month, sales of the devices surged 738%.
But despite the ballooning popularity of its vapes, Juul Labs — a Silicon Valley startup recently valued at $15 billion — is facing a growing backlash.
Several state and federal investigations and a handful of consumer lawsuits highlight concerns about the Juul's health effects and its worrisome popularity among teens. The Massachusetts Attorney General is investigating whether Juul violated state consumer-protection laws by failing to keep minors from buying its products, and the Food and Drug Administration recently cracked down on sales of the Juul to minors.
On top of those concerns, the city of San Francisco recently banned flavored tobacco products like the Juul, a move public-health researchers and leading philanthropists like Michael Bloomberg have said they hope other cities follow.
A startup that's booming
Behind the unassuming, aging brick facade of a shipping warehouse in San Francisco's Dogpatch neighborhood, Juul Labs is growing exponentially. Its five floors are packed with employees. Staff crowd the halls, spill onto balconies for meetings, and squat on the building's sweaty top floor.
Juul's US staff has tripled in the last six months, and more growth is coming. Juul has plans to open offices in 19 more locations across the country, including big cities like Boston and Chicago and smaller ones like Des Moines, Iowa and Manchester, New Hampshire. The company is expanding internationally, too. After launching in London earlier this month, Juul has plans to expand to three more countries.
The company has the money to do it. After scoring a $15 billion valuation that puts Juul in the ranks of startups like Pinterest, Lyft, and Snap Inc., Juul Labs raised $650,000 within just two days.
But as Juul has grown, government groups, nonprofits, and public-health experts have started sounding alarms, calling out the Juul for being addictive and uniquely appealing to teens.
Teen 'Juuling' could be the 'genie you can't put back in the bottle'
The first signs of trouble came from high school bathrooms. In small groups, students began gathering to "Juul" (the verb the product has spawned) under clouds of creme-brulee-scented vapor. Some carried the devices into class, where they'd sneak pulls from Juuls hidden inside the bodies of emptied Sharpie pens.
Worried teachers brought their concerns to principals, who called on public-health researchers to visit campuses and discuss the risks of nicotine.
Then some of those teachers looked at YouTube, and found the platform was full of videos made by teens showing themselves sneaking Juuls into class and vaping on the sly — sometimes even in front of teachers.
Using hashtags like #JuulGang and #VapeNation, teens boasted on social media about the number of devices they could use at once. Some appeared to be linked to viral hashtags that Juul Labs had used in a 2015 advertising campaign when its device launched.
Juul maintains that it does not want teens to use its devices and claims its products are designed solely for adult smokers looking to transition to less harmful devices. The company has also said that sales of its devices did not take off until at least two years after the 2015 campaign was launched.
"Juul is a company that was started by smokers with an objective to switch smokers to non-combustible products," Ashley Gould, Juul's chief administrative officer, told Business Insider in March.
A Juul Labs spokesperson also told Business Insider that the company has been working with social media platforms to remove Juul-related content that involves young people, and has deleted more than 4,000 vape-related posts from Instagram and Facebook collectively.
But experts say these moves have come too late.
"This is really the genie you can't put back in the bottle," Matthew Myers, the president of the nonprofit Campaign for Tobacco-Free Kids, told Business Insider.
Snowballing evidence of vaping's health risks
Alarmed by the prevalence of e-cigs, researchers have increasingly started studying the health impacts of vaping. So far, evidence suggests that although inhaling vapor is healthier than breathing in burned tobacco, e-cigs come with their own health concerns.
Chief among those issues is e-cigs' high concentration of nicotine. This may be part of the reason why teens who vape are seven times more likely to smoke regular cigarettes than young people who never use e-cigs.
Ana Rule, a professor of environmental health and engineering at Johns Hopkins University, said the makers of these devices fail to address "the increased risk to this huge market they are creating among teenagers and young adults that never have smoked, and would have never even considered smoking" had they not vaped.
Researchers are also not convinced that e-cigs actually help adult smokers quit. So far, the evidence suggests they don't. In January, a study in the journal The Lancet found that e-cigs were linked with "significantly less quitting" among smokers. Several months later, a study in the Annals of Internal Medicine found that e-cig users were less likely than non-vapers to abstain from tobacco use over six months. And a study published in the journal PLOS One this month found no evidence that vaping helped adult smokers quit.
"E-cigarettes are widely promoted as a smoking cessation aid but for some, they actually make it harder to quit, so most people end up doing both," Stanton Glantz, a professor of medicine and the director of the Center for Tobacco Control Research and Education at UCSF, told Business Insider.
Nicholas Chadi, a clinical pediatrics fellow at Boston Children's Hospital, spoke about the Juul at the American Society of Addiction Medicine's annual conference in April.
"After only a few months of using nicotine, [these teens] describe cravings, sometimes intense ones. Sometimes they also lose their hopes of being able to quit," Chadi said.
For these reasons, several nonprofit anti-tobacco agencies have come out in recent months in strong opposition to the Juul, including the nonprofit Campaign for Tobacco-Free Kids and the California Department of Public Health.
Mounting legal and ethical challenges
These scientific findings are being used in a snowballing number of legal and regulatory challenges against Juul.
In April, the FDA launched an investigation into Juul's marketing practices to see if the company targeted teens.
In a letter to the company, the agency wrote: "Widespread reports of youth use of Juul products are of great public health concern and no child or teenager should ever use any tobacco product. Juul products may have features that make them more appealing to kids and easier to use, thus causing increased initiation and/or use among youth."
Since April, Juul consumers have also filed several lawsuits against the company — most of them on behalf of teens — for what they allege are deceptive marketing practices that didn't clearly outline how addictive nicotine is.
Then in June, voters in San Francisco approved a ban on flavored tobacco products that includes Juul cartridges, called Juul Pods.
"Most scientists believe flavorings are used to target teenagers into becoming users," Rule told Business Insider. "There are of course many other factors such as marketing and peer-pressure, but when you look at the flavoring names, one has to wonder."
San Francisco has led the nation with similar types of initiatives in the past, such as its 2007 ban on plastic bags, which went statewide in 2014 and has since been copied in 13 other US cities.
Finally, just this week, Massachusetts Attorney General Maura Healey launched a probe to find out whether Juul had marketed its products directly to young people in a way that could violate consumer protections in the state.
"Just when teen cigarette use has hit a record low, Juuling and vaping have become an epidemic in our schools with products that seem targeted to get young people hooked on nicotine," Healey said in a statement. "I am investigating Juul ... to keep these highly addictive products out of the hands of children."
Juul's rapid fundraising suggests that many investors aren't deterred by these challenges, but others have said they're leery for ethical reasons.
"Selling drug addiction with unknown causes isn’t something I want to be associated with," Villi Iltchev, a partner with San Francisco-based investment firm August Capital, told Business Insider.
Villi said he used to smoke, but quit five years ago.
"Would I have switched from smoking to the Juul? Hell yes," he said. "But in terms of kids, they’re starting from scratch. Being addicted as a teen, your probability of quitting is so low. It’s part of you."
If you're a Juul or Pax employee with a story to share, email this reporter at ebrodwin@businessinsider.com.
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