The Rise (and Potential Fall) of JUUL Labs and Vaping Startups

When people typically think of the smoking industry, the first images that come to mind are of massive tobacco companies dominating the market. The latter half of this decade, however, has seen the rise of an unexpected challenger: e-cigarette startups. While e-cigarettes themselves have been around for much of the 2000s, the past few years have seen the explosion of vaping, thanks, in large part, to the emergence of JUUL Labs. Between 2015 and 2019, JUUL Labs has transformed from a little-known vaping startup into the third biggest unicorn startup of 2019  – experiencing experiencing year-over-year growth of around 700%. Valued at $50bn, it is currently the largest retail e-cigarette brand in the US and has a market share of over 75%.

What has JUUL done that Big Tobacco hasn’t been able to before?

  • Image. JUUL presents itself sleeker, sexier and more discreet than other vapes on the market
  • Variety of flavours. Wide-ranging fruity and “exotic” flavours appeal to the younger audience
  • Intense nicotine hit. Think-tank “Truth Initiative” ran a survey and found that 21% of JUULer’s enjoyed the “buzz” JUULing gave them – one JUUL pod contains the nicotine content of a pack of cigarettes

The success of this new approach to e-cigarettes has prompted the rise of a number of e-cigarette startups mimicking JUUL’s design, branding and usability. NJOY and Blu are now dominant players in the market, with NJOY currently seeking a valuation of $5bn and using sales to compete with JUUL. And there are many more in both the US and, excitingly, the UK.

Does 2019/2020 spell the downfall of JUUL?

Once viewed as the ‘safe alternative’ to cigarettes, e-cigarettes are now coming under fire for a multitude of things:

  • Safety. As of yet, little is known about vaping’s health impacts, especially long-term. However, increasing evidence suggests that vaping is actually very bad for you. A 2019 study by the Stanford School of Medicine found that the e-liquids in JUULs could radically increase a person’s risk of heart disease because they destroy the endothelial cells that line the interior of blood vessels. The Director of the Stanford Cardiovascular Institute Dr. Joseph Wu notes that “this study clearly shows that e-cigarettes are not a safe alternative to traditional cigarettes”.  This finding appears to be supported by the jump in vaping-related illnesses. To date, there have been at least 450 reported cases of vaping-related respiratory illnesses and 7 deaths
  • Encouraging young people to smoke. Increasing research is finding that there is a ‘vaping epidemic’ amongst teenagers, perhaps spurred because the exotic, differently flavoured vaping fluids appeal to high schooler’s unused to tobacco’s harsh taste. Many of these teenagers have never smoked before and, through JUULing, are becoming addicted to nicotine. The danger is that these teenagers then turn to smoking

The tide is turning, perhaps, against e-cigarettes.   The Trump Administration is cracking down on the fast-growing vaping industry, introducing legislation banning flavoured vaping fluids,, but this could be just the start of JUUL (and the rest of the ’s problems. Around the US, cities are banning e-cigarette sales in droves, with JUUL’s hometown of San Francisco announcing a ban earlier this month and other cities in California following in their footsteps. All in all, it will be interesting to see how JUUL Labs, and, more broadly, the e-cigarette startup industry, fares in the last quarter of 2019 and 2020. It could very well be heading in the same direction as Big Tobacco. But it’s early days!

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