Juul founders aimed for big tech glory and got Big Tobacco, instead

Fifteen years ago, two Stanford graduate students, Adam Bowen and James Monsees, presented their product design thesis on “the national future of smoking.” In a video of the presentation, Bowen and Monsees are heard describing their interest in design for social change and pondering aloud whether it was “possible to make a safe cigarette.”

“The industry is ripe for innovation,” Monsees said then.

Today, Bowen and Monsees are chief technology officer and chief product officer of Juul Labs, a company valued at $38 billion. But instead of being seen as an agent of social change, Juul has increasingly found itself labeled — by politicians, regulators and health experts — as one of the instigators of the teenage vaping epidemic. Further scrutiny has been placed on vaping generally as regulators investigate the role of contaminants or counterfeit substances in hundreds of possible vaping-related lung illnesses.

Juul has maintained that its product is intended for adult smokers only.

So how did Juul go from its Silicon Valley roots to being associated with Big Tobacco? Here's what you need to know.

Bowen and Monsees’ thesis presentation gave rise to a San Francisco-based company that introduced its Juul e-cigarette in 2015. Two years later, Juul was spun out into a separate company. Last year, Altria Group, the maker of Marlboro cigarettes, took a 35% stake, more than doubling Juul’s valuation to roughly $38 billion.

Juul’s slim device was envisioned during that thesis presentation to deliver nicotine and flavor to the smoker through water vapor, minimizing combustion. To limit the “offensiveness” of traditional smoking for both the smoker and those nearby, the device delivered the vapor in such flavors as peach-strawberry.

Juul now dominates the e-cigarette market with its devices, despite challenges from other big companies. In the three years after it launched in 2015, the company captured 70% of the e-cigarette market, according to a Wells Fargo analysis of Nielsen sales data.

But the company has drawn scrutiny for marketing practices that critics say were aimed at teenagers and potential health problems related to vaping generally.

An e-cigarette or similar device heats liquid containing nicotine, flavoring, and other chemicals, creating a vapor for inhalation. Juul’s products, and those of many of its competitors, look similar to a USB flash drive.

The process delivers fewer harmful chemicals to smokers' lungs than conventional cigarettes, according to the Centers for Disease Control and Prevention, though e-cigarettes often contain higher concentrations of nicotine, an addictive chemical. Some people also use vaping devices to inhale THC, the psychoactive chemical in marijuana.

But it's still unclear what health complications could be associated with vaping. The number of cases of suspected vaping-related lung illnesses have grown quickly, to 354 potential cases in 29 states. State and federal health authorities are focusing on the role of contaminants or counterfeit substances as a likely cause.

Officials have urged Americans to stop vaping until the officials figure out what's going on. Juul said it commends the investigation and is monitoring reports of the illnesses.

Juul’s devices — as well as its competitors’ — are extraordinarily popular with teens. The U.S. Food and Drug Administration found a 75% increase in e-cigarette usage among high school students between 2017 and 2018, leading the agency to declare an “epidemic” of teenage vaping. It also cracked down on retailers selling to underage teens.

In June, San Francisco became the first major U.S. city to ban e-cigarette sales, an effort to prevent “another generation of San Francisco children from becoming addicted to nicotine.” The ban will go into effect early next year and apply to both brick-and-mortar stores and products shipped to San Francisco addresses. On Wednesday, Michigan became the first state in the nation to ban flavored e-cigarettes, a step the governor said was needed after the state health department found that youth vaping constituted a public health emergency.

As the market leader, Juul has borne the brunt of accusations that it has drawn younger users with its sweet-flavored products. Earlier this year, researchers at Stanford’s medical school concluded that “Juul’s advertising imagery in its first six months on the market was patently youth-oriented,” and that its use of social media platforms and influencers may have targeted the market. At a House subcommittee meeting this summer, lawmakers accused the company of “deploying a sophisticated program” to target children and teenagers at places that included schools and summer camps.

Juul has vehemently denied the allegations. In a statement, Juul spokesman Ted Kwong said the company has “taken the most aggressive actions of anyone in the industry to combat youth usage.” The company has removed all sweet flavored Juul pods — excluding tobacco and menthol flavors — from the shelves of such traditional retailers as 7-Eleven and Chevron gas stations, though sweet flavors are still available online through Juul’s e-commerce site. Kwong also says it has strengthened its online age-verification process and shut down its Facebook and Instagram accounts.

Juul said the program referenced by the House subcommittee panel was short-lived and designed to educate young people about the dangers of nicotine addiction. The company says that its early marketing campaigns were focused on smokers ages 25 to 34, and that Juul has since switched its tactics to focus exclusively on stories of adult smokers who have switched to their products from combustible cigarettes.

Juul is working with retailers to implement strict age-verification standards, automatically locking a point-of-sale system when a Juul product is scanned and remains locked until a valid of-age ID is scanned. All Juul retailers must have the new system implemented by May 2021.

Juul is battling a number of lawsuits and faces bigger hurdles to selling its products in the U.S. In May, North Carolina Attorney General Joshua Stein sued the company, alleging that Juul caused consumer addiction by “deceptively downplaying the potency and danger of the nicotine,” among other claims.

The company said it’s cooperating with his office.

Juul is also expanding abroad. Recently, its products became available in Belgium. That means Juul’s devices are now available in 18 countries, including Canada, Russia, and South Korea. Juul’s Kwong said in a statement that the company’s mission “is to improve the lives of the world’s one billion smokers by offering a viable alternative to combustible cigarettes.”