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How did a $38 Billion Startup fail? Story of Juul

Updated: Jul 7, 2022

Juul was designed to help adult smokers quit, but instead resulted in an entire generation getting addicted. Today, Juul has lost much of its market share and faces multiple lawsuits.

When first launched, Juul became so popular that it became a verb of its own, becoming representative of all e-cigarettes and vaping under the term 'Juuling'. At its peak, the company dominated over 70% of the e-cigarette market share. The company claims that it was never their intention to hook an entire generation on vaping and nicotine. However, intentions aside, the matter of fact remains that the younger age group did get addicted.

However, in just 3 years the value of the company fell from $38 billion to under $5 billion. The company is also awaiting FDA authorization while facing multiple multimillion-dollar lawsuits for its contribution to fueling the youth vaping epidemic.

The company launched in 2015, out of Pax Labs, an American electronic vaporizer company founded in 2007 that markets the Pax vaporizers. It revolutionized the tobacco industry with Juul’s cutting-edge design. It generated the perfect storm – a high-tech product released at the right time, convenient to use and carry around, and looked like a sleek flash drive. Its design further enabled the youth to hide and use it right under their parent’s nose.

Co-founders Adam Bowen and James Monsees had wanted to create a satisfying alternative to cigarettes for adult smokers who wanted to quit, but whether knowingly or unknowingly, their marketing catered to all the needs of the youth. While they have denied targeting this consumer base, their advertisements painted the picture of the coolness and convenience of the Juul for the youth. They provided fun flavors as well – having pods in different flavors such as mango, cucumber, mint, crème brulee, and fruit medley.

Under marketing, they also organized events and hired social media influencers to do paid promotions posting themselves juuling. These are all tactics that would greatly bring the youth into their fold. Soon users started posting their own content of themselves juuling on social media platforms such as Instagram and Snapchat. The company’s popularity skyrocketed. In 2016, the company made up less than 5% of the e-cigarette market. By the end of 2017, this had grown to nearly 30% and generated 224 million dollars in revenue. The number of devices sold jumped from 2.2 million to 16.2 million within a year.

This came at a time when the percentage of youths in the US smoking cigarettes was at an all-time low of 10.8%. A common sentiment among experts states that kids were not informed enough, and were tricked into getting addicted to Juuls, that they did not realize that the nicotine in vapes was also incredibly addictive. Their early packaging failed to highlight that juul pods contained high amounts of nicotine, an extremely addictive substance.

There was no warning label on the box. They market as 5% and 3% pods, but nobody knew what the base value was. 5% of what? One 5% juul pod has as much nicotine as a standard pack of cigarettes. The formulation and design of the product meant that it could be conveniently used nearly all the time, while also liking it better because of the flavors.

This in many ways made it more potent and worse than smoking, as you would finish a pod faster than you would a pack of cigarettes, and then proceed to buy another one. Nicotine consumption hence increases. By 2017, an estimated 1.73 million high schoolers were vaping as opposed to the 1.12 who were smoking. With its massive success, Juul parted ways with Pax Labs.

For years, Juuls and other e-cigarettes were marketed and sold without the intervention of the FDA. But following the visibly accelerating and observable nicotine and Juul addiction among the youth, it became impossible to ignore. In 2018, medical and public health groups like the American Academy of Paediatrics sued the FDA over its lack of action against e-cigarettes. A federal judge later ruled that the agency did act illegally by allowing those products to remain on the market unchecked until 2022. The number of high schoolers vaping rose to over 3 million. As concern around teen use grew, in 2018 San Francisco passed a ban on flavored tobacco products.

Juul’s market shares massive increased within a year. And while the company had always branded itself as an attempt away from cigarettes, at the end of 2018, Altria, one of the world’s largest tobacco brands invested 12.8 billion dollars in Juul, acquiring a 35% sake. The glass ceiling shattered. This is the move that brought the company’s valuation to 38 billion dollars. The vaping giant was at an all-time high and seemed untouchable until the FDA declared youth vaping an epidemic.

While a lot of parents and citizens blame the company Juul, they as a business were simply taking advantage of an unregulated industry and market structure that was put in place by agencies such as the FDA. In September 2021, the agency launched one of its largest coordinated enforcement efforts to crack down on over 1300 retailers and 5 major manufacturers for illegally selling e-cigarettes to minors.

Then, they seized over a thousand pages worth of documents related to Juul’s sales and manufacturing practices. Juul got rid of every flavour except tobacco, mint and menthol and promised to enhance its online age verification system. It also phased out all social media accounts that had been accused of targeting teens for years.

In 2019, an investigation was opened as to whether Juul had actively marketed its product to American children. This is when the company began its downfall. It was revealed that Juul representatives had called the product completely safe and had neglected to mention that along with the product they would be selling a lifestyle of nicotine addiction.

Research also shows the negative impacts on children, as they have developing neurological systems. In September 2019 CEO Kevin Burns resigned and all advertising in the US was suspended. School districts across the country started to sue Juul. The Trump Administration announced a federal ban on almost all flavored pods and raised the legal age of tobacco to 21. These strategies seemed to pay off as teen vaping rates dropped from 2019 to 2020. The following year Juul’s legal battles came back. They settled with the state of North Carolina for 40 million dollars and the state of Arizona for 14 million dollars.

Recently, FDA ordered Juul to stop its US operation permanently and The move by the F.D.A. is part of a wide-ranging effort to remake the rules for smoking and vaping products and to reduce illnesses and deaths caused by inhalable products containing highly addictive nicotine.


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