Leading e-cig maker Juul to sell lower-nicotine pods as scrutiny ratchets higher

  • Juul will introduce 3 percent nicotine pods for its mint and Virginia tobacco flavors starting in August. Currently, all of its pods are available only in 5 percent.
  • The e-cigarette maker has become such a phenomenon that it's earned its own verb: Juuling.
  • Juul's latest fundraising round would value the start-up at $15 billion, sources told CNBC.
A Juul e-cigarette
Suzanne Kreiter | The Boston Globe | Getty Images
A Juul e-cigarette

Juul Labs is addressing one of the most common criticisms levied against the e-cigarette company: the amount of nicotine in its vaping liquids.

The leading e-cig maker will soon introduce lower nicotine options for some of its flavor pods. A tiered approach to nicotine levels is thought to help people who are trying to quit smoking because they can gradually wean themselves off nicotine, the substance that makes cigarettes addictive.

Under Commissioner Scott Gottlieb, the Food and Drug Administration has approached nicotine products as existing on a continuum of risk, where conventional cigarettes are the most harmful and alternatives like e-cigarettes are less harmful. Gottlieb has advocated to encourage smokers to switch to other products on the continuum, realizing that not everyone can or wants to quit. Juul has framed its e-cigarettes as an option for adults looking to switch. However, the product has been gaining in popularity among teens and people who never smoked.

Juul currently does not offer different nicotine levels like some other e-cigarettes. Instead, all of its pods contain 5 percent nicotine, the equivalent to a pack of cigarettes.

Starting in August, Juul will introduce 3 percent nicotine pods for its mint and Virginia tobacco flavors. They'll offer limited quantities at first with the intention to make them widely available in October. The lower-nicotine pods will cost the same as the traditional ones, $15.99.

The two flavors are some of Juul's most popular ones, though they're not the most commonly criticized. Anti-tobacco advocates and lawmakers say fruity flavors like mango and creme brulee appeal to teens and mask the fact that each pod contains addictive nicotine. They've stepped up their attacks as more teenagers have started using the e-cigarettes.

“JUUL Labs wants to meet the needs and preferences of adult smokers who are on their journey to switching from cigarettes, and we hope the availability of different nicotine strengths will continue to allow adult smokers the ability to explore what is best for them," CEO Kevin Burns said in a statement.

Juul has become such a phenomenon that it's earned its own verb: Juuling. Sales have skyrocketed almost 800 percent over the past year, catapulting Juul to the clear market leading spot with 68 percent of share, according to recent Nielsen numbers compiled by Wells Fargo.

The company has pledged $30 million over the next three years to research, youth and parent education, and community engagement efforts. In June, Juul said it would stop featuring models on its Instagram, Facebook and Twitter accounts and start featuring former smokers who have switched.

Schools around the country have also begun to educate parents and students about e-cigarettes.

Juul's fast growth has enticed some investors. It has raised $650 million of a $1.25 billion fundraising round, according to a regulatory form it filed this week. The round would value the start-up at $15 billion, people familiar with the matter told CNBC.

Its growth has also attracted perhaps unwanted attention from regulators. The FDA took a rare move earlier this year in issuing a 904(b) letter, which refers to the section of the Family Smoking Prevention and Tobacco Control Act. It was the first time in three years that the FDA has sent such a letter.

In its request, the FDA asked Juul for a slew of company materials, including marketing documents and research on whether certain products' design features, ingredients or specifications appeal to different age groups. Gottlieb has been vocal about his belief that e-cigarettes can help adult smokers switch to alternatives, but not at the expense of addicting a new generation to nicotine.