- E-cigarette company Juul faces an uncertain future as it brings on a new CEO with a long track record in the tobacco industry.
- In the US, Juul is confronting challenges that include warnings from national regulators, probes by members of Congress, bans, and questions about the health of vaping.
- Juul has raised a lot of money to speed its success outside of the US in countries like China and India, the world’s largest smoking markets.
- But some of those countries appear to be closing their doors to Juul too.
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Juul, the dominant e-cigarette company, is increasingly in hot water in the US, as state and federal health officials crack down on vaping, citing skyrocketing rates of youth e-cig use and mysterious vaping-related lung illnesses. On Wednesday, Juul brought in a new CEO with a long track record in tobacco to turn things around.
The company said it would halt advertising and some lobbying in the US, and the new CEO, K.C. Crosthwaite, acknowledged the need to address problems including underage use of e-cigarettes.
“We must strive to work with regulators, policymakers and other stakeholders, and earn the trust of the societies in which we operate,” Crosthwaite, a longtime executive at tobacco giant Altria, said in a statement.
Amid the US crackdown on vaping, Juul had been looking to expand in nearly two dozen countries, including China and India, according to a Business Insider review of job postings and other public information. The company has raised $14.5 billion to help fuel its growth, including $12.8 billion from tobacco giant Altria, and hit a valuation of $38 billion.
China and India have the largest populations of smokers in the world, making them alluring potential markets.
But Juul is likely to face challenges expanding internationally, as other countries seek to avoid a repeat of the youth epidemic that the company helped fuel in the US. Already, in China, Juul products have mysteriously vanished from store shelves, according to the Wall Street Journal. In India, vaping has been banned entirely, the country’s Ministry of Health and Family Welfare said in a statement.
In banning vaping, India’s government cited the need to stop the “impact of e-cigarettes on the youth,” according to BuzzFeed News. Five other countries that Juul has targeted for expansion have also put limits on vaping.
Juul didn’t respond to a request for comment for this story.
A recent spate of mysterious vaping-related lung illnesses have also cast a shadow over the category, although it’s not clear whether Juul is linked to those issues. Separately, Bloomberg News reported that Juul devices were involved in three reports of seizures tied to vaping.
The fresh challenges put Juul in a tough spot. On Tuesday, the Wall Street Journal reported that Juul may be preparing to restructure and aims to hire less aggressively in the near future as well as potentially cutting some jobs.
Juul has expanded feverishly, and some investors remain confident
In two years, Juul’s employee base has ballooned from roughly 225 employees in 2017 to 3,900 today — a 1,633% increase. The company is currently hiring for more than 500 positions across 16 countries.
Several investors told Business Insider they’re confident that Juul will prevail amid the rising challenges.
They believe the pushback against vaping is fueled by confusion and fear, and they expect the crackdowns and bans will disappear or be scaled back as more information emerges.
“I think Juul is a net public health benefit,” said Gregg Smith, the founder and CEO of venture fund Evolution, which backed Juul in 2017. “I’m disappointed today that there are other issues clouding the mission of trying to get people off of cigarettes.”
Morgan Paxhia, a managing director and CEO of hedge fund Poseidon Asset Management, agreed. His firm first backed Juul when it was still part of vaporizer startup Pax Labs.
“We’ve been through hysterias with new categories before,” Paxhia said.
Juul may be slowing down as it faces closing doors
Juul’s growth spree may be starting to show signs of slowing. The Wall Street Journal reported this week that Juul is preparing to restructure and aims to hire less aggressively in the near future. Some jobs may be cut, according to the Journal.
It is unclear if the moves are a response to the investigations and bans in the US, or to the barriers cropping up internationally.
Earlier this month, the US Food and Drug Administration said Juul wrongly painted its devices as safer than cigarettes and marketed them intentionally to kids. The findings were the result of a nationwide investigation begun last spring. An investigation by the Federal Trade Commission into Juul’s marketing is also ongoing, and federal prosecutors in California are also reportedly conducting a criminal probe.
In China, where Juul’s refillable nicotine cartridges are manufactured, the company’s flavored products were removed from online marketplaces JD.com and Tmall about a week after they first went up for sale, the Wall Street Journal reported. Juul had long been planning to launch in the country, where more than 300 million people smoke.
In this climate, Paxhia said he believes that if confirmed, Juul’s decision to restructure is probably a good one.
“They can take the time to kind of do a bit of a reset,” he said. “If we start to see steps in that direction I’m confident in the long term that we can get through this.”