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JUUL E-Cigs Going Up in Smoke

Analysis by Dr. Joseph Mercola Fact Checked

juul valuation drops

Story at-a-glance -

  • Just over five years ago I began warning readers of the dangerous effects of vaping; in response to the overwhelming evidence of this practice damaging lungs and health, JUUL has pulled advertising and promises they won't fight legislation to ban the sale of flavored pods or restrict advertising to teens
  • CEO Kevin Burns, who was originally installed to streamline manufacturing, stepped down. K.C. Crosthwaite, from Altria, and who has a long history of successfully navigating the regulatory landscape and keeping a proven addictive killer on the market, replaced him
  • During Congressional hearings, Ned Sharpless, acting FDA commissioner, conceded that the FDA should have acted sooner. He added the planned ban of flavored e-cig products could change if companies meet Federal approval. However, Mitch Zeller, director for the FDA's Center for Tobacco Products, stated authorization of a product should not be construed to mean it is safe
  • Zeller's comments were made concerning the recent approval of the IQOS system where tobacco is heated, not burned. The device produces a nicotine vapor; research indicates it may contain more of some toxins than cigarettes. I believe the secret to quitting is to get healthy first, by making good choices regarding exercise, nutrition and stress reduction

Just over five years ago I began warning of the dangerous effects of vaping on human health. In response to the current overwhelming evidence this practice is damaging children and adults, CBS, WarnerMedia and Viacom dropped all advertising for vaping.1

They named the growing number of teenagers using products designed for adults and the rising number suffering lung damage linked to vaping as the reason for pulling the ads. JUUL has now suspended their advertising in the U.S. for digital, print and broadcast media, which had topped $104 million in the first half of 2019.2

The San Francisco-based company also announced it would not fight the federal administration's proposed ban on flavored nicotine products and would comply with further policy changes.

JUUL Labs was founded in 2007 based on the thesis project of two Stanford graduates3 and quickly became the most popular vape manufacturer. In December 2017, Kevin Burns was hired as the CEO based on his previous manufacturing background, as the company recognized the need to produce e-cigarettes on a broad scale.4

In late 2018, Big Tobacco company Altria invested $12.8 billion for a 35% cut of JUUL Labs. The deal based JUUL Lab’s value at $38 billion,5 which CNBC reports has “dropped sharply” in recent months, taking Altria with it.6 While Big Tobacco companies like Altria will probably recover, the time may have come for vaping to go up in smoke.

FDA Says Mistakes Were Made

NPR reports analysts believe JUUL’s decision to stop fighting regulations against the sale of flavored e-cigarette pods may be an effort to stop an even bigger potential problem for their company — banning JUUL from selling any vaping products at all.7

During hearings at a subcommittee of the House Energy and Commerce Committee, Ned Sharpless, acting FDA commissioner, was asked if the rising number of illnesses related to vaping represented a massive regulatory failure. Sharpless responded to Congress:8

"In retrospect, the FDA should have acted sooner. We should have acted to regulate these devices sooner. FDA is not pursuing any actions associated with personal use of any vaping products, our interest is in the suppliers. But to be clear, if we determine that someone is manufacturing or distributing illicit, adulterated vaping products that caused illness and death for personal profit, we would consider that to be a criminal act."

In comments written for the subcommittee9 on electronic nicotine delivery systems (ENDS), it appears the company's strategy to voluntarily take flavored e-cigarettes off the market may have had the intended impact.

Sharples remarked the policy of banning flavored e-cigarette products had the potential to change if companies could create a product meeting Federal approval. In what sounded like backpedaling, which could lead to further mistakes at the expense of health and wellness, Sharpless said:10

"This policy would not mean that flavored e-cigarettes could never be marketed. If a company can show through an application to FDA that a specific product meets the standard set forth by Congress, then the FDA would authorize that ENDS product for sale.”

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Policy Changes May Move Sales Toward Traditional Cigarettes

Multiple other policy changes have been made by JUUL in an effort to stem backlash against the company, starting with their public move away from the “Make the Switch” campaign. The FDA cautioned this campaign may be seen as an illegal act since it markets e-cigarettes as a safer alternative to traditional cigarettes.11

Burns recently stepped down as CEO, being replaced by K.C. Crosthwaite, who had been the chief growth officer at Altria.12 Crosthwaite grew up in the tobacco industry, having started his career at Altria when he was 22.13 University of Notre Dame assistant professor of management Tim Hubbard wrote to The New York Times about the changes JUUL is making to affect public perception:14

“When compared to traditional tobacco products — which have remained on the shelves for decades despite being proven dangerous — e-cigarette makers have failed spectacularly. Bringing in a traditional tobacco executive who knows how to market and manage government relationships with deadly products matches the firm’s needs.”

This switch raises a number of red flags since Crosthwaite will be bringing experience from one of the most regulatory-savvy industries. Despite a long history overflowing with scientific evidence that cigarettes are an addictive killer, Big Tobacco has been successful in keeping them on the shelves.

Crosthwaite is now setting his sights on the international market as the U.S. struggles to determine how closely they will guard the health of their children and voting adults. At a meeting at the company headquarters Crosthwaite announced to employees,15 “International expansion continues to be a huge opportunity given the number of smokers around the world.”

In addition to agreeing to the ban on flavored products representing the majority of JUUL’s sales, the company also stated they would not attempt to influence legislation designed to eliminate advertising aimed at teenage users.16 amid all the media attention, Altria and Philip Morris announced they were calling off merger discussions and instead would focus efforts toward new technology:17

“’While we believed the creation of a new merged company had the potential to create incremental revenue and cost synergies, we could not reach agreement,’ said Howard Willard, Altria’s Chairman and Chief Executive Officer. ‘We look forward to continuing our commercialization of IQOS in the U.S. under our existing arrangement.’”

Investment advisers see the challenges now faced by e-cigarette companies as a potential benefit for traditional cigarettes. The New York Times18 writes the market research firm Nielsen reported that as JUUL sales slowed in recent weeks, the decline in sales traditional cigarettes have experienced in the past years19 has also slowed.

Traditional Cigarettes Aren’t Traditional Anymore

Philip Morris designed a new device20 that looks amazingly similar to an e-cigarette. They received clearance from the FDA to market in the U.S. beginning in the fourth quarter of 2019. The device, called the IQOS, heats tobacco rather than burning it. It first made an appearance in Japan and Milan in 2014 and has a preliminary U.S. market release planned for Atlanta.21

Philip Morris submitted two applications — one to sell the device and one to advertise it as less dangerous than cigarettes. To date, the FDA has not decided how the device could be marketed, but the director for the FDA’s Center for Tobacco Products, Mitch Zeller, made a statement the authorization of a product should not be construed to mean the product is safe.22

Even without approval for marketing the device as safe, CNBC calls the decision a win for both Philip Morris and Altria as the device23 “... is a key component of both companies’ futures as they try to pivot past cigarettes.”

Although the FDA believes the data suggests the device will not be attractive to nonsmokers and teens, they are placing restrictions on the marketing plans, especially those used online and in social media. Philip Morris calls it “Tobacco Meets Technology,”24 and describes “sophisticated electronics” at the core of the device that heats tobacco enough to release nicotine without generating smoke.

What is released is a nicotine-containing vapor Philip Morris classifies as a “smoke-free product.” The Truth Initiative25 points out while Philip Morris makes the claim the device is less toxic, multiple researchers26 find data Philip Morris produced does not support their own claims. One researcher concluded while the device may expose users to reduce levels of some toxins, it also increases the levels of others.

Just as the FDA completely missed the mark of the overwhelming appeal JUUL had to teens, the Truth Initiative believes the same is happening with the IQOS, otherwise known as Heatsticks or Heets. They point to research published in Tobacco Control in which researchers wrote:27

“Marketing efforts to portray HTPs as sleek, exclusive items akin to iPhones could find success among American teens and young adults, and researchers are already warning of growing interest and potential demand within new markets.”

And28

“Just as e-cigarettes, particularly the JUUL-style, promoted with a modern, high-tech image and harm reduction and ‘smokeless’ messages, appeal to adolescents, it is likely that IQOS, marketed in a similar manner, will also appeal to adolescents.”

Take Steps to Quit Smoking

Once you stop smoking, your body begins to heal and undergo significant changes in the following days, weeks and years. Many have been successful at stopping unaided, but I believe the secret is to first get healthy, which makes quitting easier.

Exercise is an important part of this plan, as is healthy eating and the ability to deal with your stress levels. As you move forward in your plan to quit smoking, consider additional steps to help make the process easier. Below are four of my past articles that offer practical strategies: