E-cigarette manufacturer Juul suffered a major financial blow on Tuesday after they tentatively agreed to pay $438.5 million as a way of settling an investigation into its controversial marketing practices — a significant sum for a company whose 2021 net earnings were $2.475 billion, according to their financial filings. In the process, Juul has potentially put an end to an investigation that involved almost three dozen states. It has been a long and winding journey for the embattled company, which has raised eyebrows in recent years for doing things like buying an entire issue of a scientific journal and allegedly targeting young people with its advertisements.
The latter practice is what forced Juul to agree to the nine-figure settlement paid out to a number of U.S. states, as studies have repeatedly shown that e-cigarettes have become a preferred method of smoking nicotine among young people. Indeed, a recent peer-reviewed research study estimated that between $130 million and $650 million of Juul's net 2018 revenue came from youth.
According to a 2021 report by the Food and Drug Administration (FDA), roughly 2.55 million American teenagers — or roughly 1 out of every 11 (9.3%) — currently use a nicotine product; "current" is defined here as meaning they had used the product within 30 days. This includes 2.06 million high school students, or 13.4% of all high schoolers, and 470,000 middle school students (4%).
E-cigarettes were, by overwhelming numbers, the preferred method for consuming nicotine, with 2.06 million middle schoolers and high schoolers (7.6%) saying that they smoke by vaping. By contrast, only 410,000 (1.5%) said they preferred cigarettes.
The Centers for Disease Control and Prevention (CDC) reports that, since 2014, e-cigarettes have remained the most frequently used tobacco product among young people. There is also circumstantial evidence that e-cigarettes' multitude of flavors has helped the product gain traction: as of 2021, 85.8% of high school students and 79.2% of middle school students who consumed e-cigarettes within 30 days did so with a flavored version.
A 2022 meta-analysis of existing scholarship concluded that "the use of e-cigarettes as a therapeutic intervention for smoking cessation may lead to permanent nicotine dependence."
"The first thing is that e-cigarettes almost always contain nicotine," Robert Schwartz, a professor at the University of Toronto and Executive Director of the Ontario Tobacco Research Unit, told Salon. He explained that nicotine products are "very highly addictive," adding that "the research has demonstrated very clearly that young people who vape nicotine become dependent on that nicotine."
He explicitly linked this to e-cigarette marketing campaigns, which he said were indeed analogous to those of Big Tobacco years ago.
"A lot of the same kind approaches have been taken," Schwartz pointed out. "It's about lifestyle. Juul in its early promotions to young people promoted it as cool. It's the 'thing to do,' and using all kinds of colors and appealing images of young people themselves using the vaping products, they clearly have adopted tobacco tactics."
As the recent tentative settlement makes clear, the popularity of e-cigarettes like Juul among young people is precisely what put the company in its current predicament. When the company was first proposed in 2004 (under the name Ploom), its founders described it as "the rational future of smoking." By 2007 the company was off the ground, and was valued by PitchBook at roughly $3 million in February 2008. In 2015, the original founders, Adam Bowen and James Monsees, sold the Ploom brand and vaporizer line to a Japanese tobacco company named JTI, and by June 1st of that same year, JTI officially launched the Juul.
2016 was perhaps the climactic year for the Juul, with sales rising by 600% as the product took off, becoming a cultural touchstone among millennials and Generation Z. By November 2017, Juul products had captured one-third of the e-cigarette market — and with that success came heightened scrutiny for the advertising campaigns that made them appear cool and attractive to young people. Scott Gottlieb, who at the time was FDA commissioner, launched an "undercover blitz" against Juul in April 2018, with the stated goal of ending the sale of tobacco products to young people. In the largest coordinated enforcement effort in the history of the agency, the FDA sent more than 1,300 warning letters and fines to retailers accused of targeting minors with their tobacco products.
"A lot of the same kind approaches have been taken," Schwartz pointed out. "It's about lifestyle. Juul in its early promotions to young people promoted it as cool. It's the 'thing to do,' and using all kinds of colors and appealing images of young people themselves using the vaping products, they clearly have adopted tobacco tactics."
Yet despite this negative publicity — as well as increased heat from the FDA and bans on Juul products in municipalities from San Francisco to Israel — Juul continued to prosper. In 2019, however, the House of Representatives joined the FDA in investigating Juul's marketing practices as well as a recent decision by tobacco company Altria to purchase 35% of the company. Before the end of the year, other nations like China and India had also stopped selling Juul products or banned them altogether. By 2021, Altria and Juul argued that the company was worth anywhere from $5 billion to $10 billion — and it had been valued at $38 billion only two years earlier. In June 2022, the FDA finally dropped the hammer and ruled that Juul could neither sell nor distribute its e-cigarettes in the United States.
Although proponents of e-cigarettes claims that they can be a tool for smoking cessation, the scientific evidence strongly suggests this is not the case. A 2022 meta-analysis of existing scholarship concluded that "the use of e-cigarettes as a therapeutic intervention for smoking cessation may lead to permanent nicotine dependence." Similarly, a 2022 study in the British Medical Journal about e-vaping in 2017 found that "on average, using e-cigarettes for cessation in 2017 did not improve successful quitting or prevent relapse."
