Juul revolutionized e-cigarettes — and now the industry's in jeopardy
- The e-cigarette industry was a nascent category in 2010, with sales mostly coming from online channels.
- Companies like NJOY and Blu brought e-cigarettes into the mainstream. Juul revolutionized the industry.
- Teen vaping and health concerns have thrown the industry's future in jeopardy.
In 2010, e-cigarettes looked like they could be a promising technology for tobacco companies and health advocates alike.
NJOY and Blu were the best known brands in the $144.7 million market, selling products that looked like cigarettes but produced a vapor. The e-cigarettes were received with cautious optimism by some in the public health field, who believed that they could give adult smokers a way to consume nicotine in a less harmful way.
"My view was that we were a technology company," said Craig Weiss, who joined NJOY as president in 2010 and left as executive chairman in 2014. "We were part of the great American tradition that would solve what previously seemed like intractable problems that governments have spent decades and trillions of dollars trying to address."
Now, the optimism has screeched to a halt: Federal data shows that more than one-quarter of high school students say they vape thanks to the sleek device popularized by the company Juul. Millions of American teenagers are using and could become addicted to nicotine.
The shift shows how the smoking epidemic's potential solution — pushed by companies, health groups and regulators — morphed into a crisis of its own. Cigarette smoking kills about half a million Americans every year, making it the leading cause of preventable death in the U.S., according to the Centers for Disease Control and Prevention.
The problem is that e-cigarettes now appear more popular with teens and nonsmokers than with the adult smokers they were supposed to help.
Some remain hopeful that e-cigarettes can prove to be a useful cessation tool, but even supporters recognize the industry faces an uphill battle.
"It's going to take some work to rebalance public opinion," said Dr. Nancy Rigotti, a professor of medicine at Harvard Medical School and director of the tobacco research and treatment unit at Massachusetts General Hospital.
Nascent market
E-cigarettes were introduced in the U.S. in 2007. They were mostly sold online and started entering convenience stores at the start of the decade.
NJOY and Blu wanted to sell their products where smokers bought cigarettes. Jason Healy, founder of Blu, knew there was an opportunity. He was a smoker himself.
"I always knew if you could create this product that allowed someone to smoke without all the bad, that you would have an avenue," said Healy, who sold Blu to tobacco company Lorillard for $135 million in 2012. Blu was sold to Imperial Brands in 2014 to quell anti-trust concerns when Lorillard merged with Reynolds.
While NJOY and Blu were the best known brands among convenience stores, several other brands were sold at vape shops cropping up across the country in the early part of the decade. Most of the devices sold in these stores let people choose flavors and nicotine strengths to fill their devices.
It wasn't clear whether e-cigarettes would catch on with smokers. Tobacco companies had tried — unsuccessfully — to bring alternatives to U.S. consumers before.
They tried again in 2013. Altria introduced its MarkTen e-cigarettes and acquired the GreenSmoke brand. Reynolds rolled out a brand called Vuse.
The U.S. e-cigarette market eclipsed $1 billion in sales in 2013, according to Euromonitor. Adults were experimenting with the products while minors appeared to be staying away.
"In the beginning, I had mixed views," said Dr. Neal Benowitz, who studies nicotine at the University of California, San Francisco. "I thought it could be helpful for smoking cessation. … Relatively few kids were using e-cigarettes so it looked like it was OK."
Then came a product that would revolutionize the industry and transform public perception of e-cigarettes.
Juul debuted in 2015. The sleek device looked like a flash drive. People simply snapped on a cartridge filled with nicotine liquid. Its formula used nicotine salts, packing a more potent punch than its competitors.
The company almost single-handedly grew the e-cigarette industry this decade, said Euromonitor tobacco analyst Alexander Esposito. Category sales reached $6.83 billion in 2018, up from $2.67 billion in 2014, according to Euromonitor.
Other companies in the market couldn't keep up with Juul's rise. NJOY filed for bankruptcy in 2016 as the company grappled with its debt and lackluster sales on a new product. It emerged from bankruptcy protection a year later.
"Compared to pretty much every other industry I cover ... e-vapor really stands out," Esposito said. "We've seen such stratospheric growth and in the past few years it's been driven by a single product or single brand. There's not really a comparable industry out there. This really stands on its own."
But Juul's explosive growth came at a cost.
Teen use surges
The e-cigarette category was virtually unregulated until the U.S. Food and Drug Administration extended its authority to all tobacco products in August 2016.
Dr. Scott Gottlieb embraced e-cigarettes as newly minted FDA Commissioner in 2017. They were a key part of his plan to limit nicotine in cigarettes to minimally or nonaddictive levels. He hoped e-cigarettes could provide adults with an alternative.
Then he received startling data at the end of the summer of 2018. E-cigarette use among high school students skyrocketed 78%. Among middle school students, vaping surged 48%. Together, the survey showed more than 3.6 million American teens were vaping, which Gottlieb labeled an epidemic.
Regulators and public health groups blamed Juul. Parents and teachers furiously complained that children were picking up nicotine after decades of convincing kids that smoking cigarettes wasn't cool.
"Juul changed everything," Gottlieb said. "I think Juul really changed the market and ended up damaging the entire opportunity and the entire category."
Some manufacturers redesigned their devices to look more like Juul's and reformulated their liquids to use nicotine salts. Knockoff and counterfeit Juul products flooded the market, especially as Juul pulled its sweet flavors from brick-and-mortar stores.
"Our customer base is the world's one billion adult smokers and we do not intend to attract underage users," a Juul spokesman said in a statement. "We remain focused on resetting the vapor category in the U.S. and earning the trust of society by working cooperatively with attorneys general, regulators, public health officials, and other stakeholders to combat underage use and convert adult smokers from combustible cigarettes."
Amid the teen vaping epidemic, a deadly lung disease emerged in the summer of 2019 that appeared linked to vaping. Health officials eventually narrowed their focus to THC products.
Still, the panic weighed on public perception of e-cigarettes and caused sales of the hot category to slow. It brought fresh energy to state, local and federal officials' attempts to tighten restrictions.
"I think for every major public health group, the experience has played out in a way where we have gotten the worst of all worlds," said Matt Myers, president of the Campaign for Tobacco-Free Kids.
A reckoning for the industry
The next decade could bring a reckoning for the e-cigarette industry.
Euromonitor in April projected the U.S. market would reach $10.26 billion in 2020. Euromonitor's Esposito said that estimate will likely be lower when the firm revisits its forecast next year.
Public health groups that were once receptive to e-cigarettes are now urging doctors and consumers to be wary of them. The public is skeptical, too.
Some health advocates still think there's an opportunity for e-cigarettes. The cigarette smoking rate hit a new low in 2018, down to 13.7% from 19.3% in 2010, according to the CDC. A study published in the New England Journal of Medicine in January found vaping was more effective than therapies such as patches and gums in helping people quit.
But a looming regulatory deadline could remove many e-cigarettes from the market altogether.
Companies must submit applications to the FDA by May. The agency will review safety data and evaluate the products' net public health benefit, essentially weighing the potential downsides of youth use to the potential upsides of smokers giving up cigarettes.
Those who had high hopes for the industry lament the turn it's taken. Healy, Blu's founder, says the industry has focused more on appealing to nonsmokers than the smokers they are "supposed to be helping."
That has personal consequences: He has used e-cigarettes to stop smoking himself and says he would to go back to regular cigarettes or try other cessation products on the market like nicotine patches if e-cigarettes were made illegal.
"The state of the industry right now, it's a mess," Healy said. "But it's the industry's doing, as well. This is the bed they've made. Of course I think it's savable. As long as you've got people still dying from smoking, it damn well should be savable."