E-cigs: Interview with the co-founders of Juul, maker of popular but controversial e-cigarette maker.
WORKING TOWARD A WORLD
Before the surging popularity of e-cigarettes, two Stanford University graduate students worked together on a product design master’s thesis that aimed to disrupt the long-established cigarette industry.
Fourteen years later, they are the cofounders of Juul Labs — selling popular, but controversial e-cigarettes with flavored “pods.” The two, Chief Technology Officer Adam Bowen and Chief Product Officer James Monsees, say the pods — tiny capsules that store patented nicotine salts — are healthier and don’t contain the tar or carcinogens commonly found in regular cigarettes. Both say they had tried to quit smoking several times and see their products as helping others to kick the habit.
Juul Labs raised $650 million in funding this summer, valuing the company around $15 billion. Today, it is the bestselling e-cigarette company in the United States, cornering 70 percent of the U.S. industry, according to Monsees.
He and Bowen met last month with this news organization for an interview at their office in the Dogpatch neighborhood of San Francisco.
The men’s success also has come with criticism, litigation and investigations. Juul has proven to be wildly popular with underage minors thanks to its flavored nicotine pods, and medical re-
searchers claim Juul’s nicotine salts are more addictive than other electronic cigarettes, as the salts give an instant and powerful burst of nicotine.
On Wednesday, the Food and Drug Administration said it is investigating Juul and other ecigarette makers for their marketing practices and online sales and distribution. The FDA also threatened to take the popular vapers off the market if their makers can’t prove within 60 days that they can keep them away from minors.
FDA Commissioner Scott Gottlieb said his agency is launching the “largest coordinated tobacco compliance effort in FDA’s history,” which includes going after Juul and four other competitors, Vuse, MarkTen, blu e-cigs and Logic. The FDA is also cracking down on those who sell e-cigarettes to minors, such as convenience stores and other retailers.
“I’m disturbed by an epidemic of nicotine use among teenagers,” said FDA Commissioner Scott Gottlieb in a statement Wednesday. He said e-cigarettes “may still pose health risks, including possibly releasing some chemicals at higher levels than conventional cigarettes, and these potential risks require closer scrutiny.”
Gottlieb added: “Let me be clear: Everything is on the table. This includes the resources of our civil and criminal enforcement tools.”
Juul is no stranger to the FDA. In April, the agency asked the company to turn over information about its technology and marketing practices in an effort to find out if Juul was deliberately marketing its products to children. A day later, Juul announced a $30 million investment to try to keep its vaping
devices out of children’s hands.
When reached Wednesday, a Juul spokeswoman sent the following statement: “JUUL Labs will work proactively with FDA in response to its request. We are committed to preventing underage use of our product, and we want to be part of the solution in keeping e-cigarettes out of the hands of young people.”
Adult users have sued Juul over the product’s alleged addictiveness. And the U.S. Food and Drug Administration, along with the Massachusetts attorney general, have begun investigating why the teenagers are so drawn to the product.
Bowen and Monsees said during last month’s interview that Juul never wants teens to use its products. They said the company’s mission is to reduce the overall number of smokers in the world of all ages and to eradicate cigarettes for good — even if it one day may hurt their business.
This interview has been edited for length and clarity.
QSome media outlets have dubbed Juul “the Apple of vapes” for its sleek design and new, disruptive technologies. What are your thoughts on the moniker?
Monsees:
(Apple’s original) proposition to put a PC in every household was game-changing, but these days, when someone compliments on being Apple-like, it’s more about the polish and finish of the consumer product. I would hope the takeaway is the mission of this company, which is to erase combustible cigarettes from the face of the Earth. All the compliments are just noise compared to the magnitude of the problem we are trying to solve.
QCan you then expand on the mission of Juul Labs? How are you and your company working toward that mission?
Monsees: You can think about this in two phases. The first phase is proving the value and creating a product which makes cigarettes obsolete. We hope to create an incredible gulf of product differentiation between what we do and what cigarettes represent.
The second phase is to further separate the technical capabilities of these platforms to controllable platforms. Cigarettes are the dumbest of dumb devices because it’s literally a stick you light on fire. Using modern tools, techniques and the internet of things, we are able to hone in on issues that have been most harmful to smokers. So far, Juul is not a connected-device product. But we do have an e-commerce end, so we get some visibility into consumer purchasing patterns, and that has been partly helpful for us to see what age our smokers are — average is mid30s, by the way — and what flavors do best to keep users from going back to smoking cigarettes.
QWith your goal to make cigarettes obsolete, what is your relationship with big tobacco corporations? Since 2011, your former e-cigarette product line, Ploom, has been commercialized by Japan Tobacco International, so it’s not like you two have an antagonistic relationship with “Big Tobacco.”
Monsees:
We do have 70 percent of the U.S. e-cigarette industry, but that is only 4 to 5 percent of the total U.S. tobacco market and less than half-percent of the worldwide tobacco market. So our relationships with tobacco companies are different than some people might expect. Within our small subset, we are the pinnacle, but we are still a small player. There is some interest from tobacco companies who want to get in touch with us and work with us in the future. And we will talk with all those companies to change the
nature of this business because we are really glad to see leadership from major tobacco companies who, too, want to see combustible cigarettes go away.
QHow did Juul differentiate itself from its competitors to grab 70 percent of the U.S. e-cigarette industry?
Bowen:
With Juul, the key is that we started from the ground up. The electronics, the mechanical engineering, the industrial designs and the chemistry are all homegrown. We always knew we needed to deviate from the form and the experience of smoking a cigarette, but you also want it to be simple and easy to use. We needed to deliver on the satisfaction of smoking a cigarette.
Monsees: When we were working in Stanford, before the e-cigarettes became a thing, we saw cigarette companies invested billions to make safe cigarettes. One of our key insights then was that consumers didn’t want or need safe cigarettes. What became apparent was that we needed to challenge the concept of cigarette iconography, which has been highly stigmatized. Instead of creating safe cigarettes, we created a superior product offering, which keeps some aspects on why people love cigarettes but not any of the ones they don’t like.
QCan we speak about the claims from federal and state investigators and medical researchers that Juul has been marketing toward teenagers?
Monsees:
I think the first thing is that it should be obvious that this is not in our interest. We still have 99.5 percent of smokers worldwide who are still lighting sticks on fire, and half are at risk from dying from using this product long term. This is a trillion-dollar business opportunity even without the youth. We have plenty of smokers of legal age to address. If the size of the tobacco industry shrinks dramatically, by 50 percent, thanks to our success, and we replace the industry with products like Juul, we will still be tremendously successful.
QBut isn’t it counterintuitive to push for a shrunken market size — especially against younger consumers — while your company is actively growing inside that market?
Monsees:
Absolutely not. The beauty is there will always be some degree of demand among humans for nicotine products. Chemically, nicotine is very similar to caffeine, and coffee is one of the most widely traded products in the world. While people of all ages around the world enjoy coffee, nicotine has been heavily stigmatized.
QAs Juul seeks to expand worldwide, you can’t even sell your products in your hometown. San Francisco voters voted to ban flavored vaping products in June. Other Bay Area cities and counties have a ban against flavored tobacco products. What are your thoughts?
Monsees:
The unfortunate effect of those laws is that when a consumer enters a convenience store, they don’t see the full spectrum of goods, but only cigarettes. We limited the selection criteria. As a company, we see this as a counterproductive step — but not of ill intent. Things are changing very rapidly in this universe, and it’s hard to understand that our products are right strides in the right direction and it needs to be supported. We look forward to the day when San Francisco and San Mateo counties support these products and use legislation to pivot users away from cigarettes and into safer products.