A Goal to Hook Youths for Life? FDA Investigates Vaping Ads
Posted August 26, 2018 9:33 p.m. EDT
SAN FRANCISCO — The leaders of a small startup, PAX Labs, gathered at a board meeting in early 2015 to review the marketing strategy for its sleek new electronic cigarette, called Juul. They watched video clips of hip young people, posed flirtatiously holding Juuls. And they talked about the name of the gadget, meant to suggest an object of beauty and to catch on as a verb — as in “to Juul.”
While the campaign was not targeted specifically at teenagers, a former senior manager said that he and others in the company were well aware it could appeal to them. After Juuls went on sale in June 2015, he said, the company quickly realized that teenagers were, in fact, using them because they posted images of themselves vaping Juuls on social media.
The former manager said the company was careful to make sure the models in its original campaign were at least 21, but it was not until late 2016 or January 2017 that the company said it decided the models in all Juul ads should be over age 35 — to be “better aligned” with a mission of focusing on adult smokers. Only in June of this year did the company again change its policy, this time to using only real people who had switched from cigarettes to Juul.
The company recently modified the names of its flavors — using creme instead of crème brûlée and cucumber instead of cool cucumber. Juul said it “heard the criticism” that teenagers might be attracted to the flavors and “responded by simplifying the names and losing the descriptors.”
The sales campaigns for Juuls — now hugely popular with teenagers across the nation — are at the heart of a federal investigation into whether the company intentionally marketed its devices to youth. The attorney general of Massachusetts, also investigating the company, contends that Juul has been luring teenagers to try the product and has introduced many to nicotine. Her investigation will examine Juul’s efforts to audit its own website and other online retailers that sell its products to see how effective they are at preventing minors from accessing Juul or Juul-compatible products. (Federal law prohibits sales of e-cigarettes to anyone under 18.)
“From our perspective, this is not about getting adults to stop smoking,” the Massachusetts attorney general, Maura Healey, said in an interview. “This is about getting kids to start vaping, and make money and have them as customers for life.”
And Cult Collective, the marketing company that created the 2015 campaign, “Vaporized,” claims on its website that the work “created ridiculous enthusiasm” for the campaign hashtag, part of a larger advertising effort that included music event sponsorships and retail marketing. A spokesman for Cult Collective declined to comment.
The company, now called Juul Labs, denies that it ever sought to attract teenagers. James Monsees, one of the company’s co-founders, said selling Juuls to youth was “antithetical to the company’s mission.”
The original sales campaign was aimed at persuading adult smokers in their 20s and 30s to try an alternative to cigarettes, but it “failed to gain traction on social media and failed to gain sales” and was abandoned after five months, in the fall of 2015, said a company spokesman, Matt David.
David said sales did not take off until 2017, after Juul had improved its sales and distribution expertise, and, by then, had a more sober online marketing campaign.
The former Juul manager, who spoke to The New York Times on the condition that his name not be used, saying he worried about facing the ire of the company, said that within months of Juul’s 2015 introduction, it became evident that teenagers were either buying Juuls online or finding others who made the purchases for them. Some people bought more Juul kits on the company’s website than they could individually use — sometimes 10 or more devices.
“First, they just knew it was being bought for resale,” said the former senior manager, who was briefed on the company’s business strategy. “Then, when they saw the social media, in fall and winter of 2015, they suspected it was teens.”
The Food and Drug Administration announced it was investigating Juul’s marketing efforts in April. Juuls and other e-cigarettes are regulated by the FDA as tobacco products because nicotine derives from tobacco leaves. E-cigarette users inhale far fewer toxins than do smokers of traditional cigarettes. The nicotine inhaled while vaping is less a concern for adults than these toxins, but it remains a serious health issue for teenagers, whose brains are still developing.
The Juul story highlights a central dilemma in public health. Cigarettes remain the leading cause of preventable death in the United States, killing more than 480,000 people a year. But will it be possible to get people who are addicted to cigarettes to switch to e-cigarettes, which are less harmful, without enticing a new generation or nonsmokers to try them?
The FDA commissioned research, published in January, that found “limited evidence” that e-cigarettes lead smokers to quit. And some evidence now suggests that young people who use e-cigarettes are more likely to try cigarettes.
Juul, in a letter responding to the FDA’s demand for documents, said it had converted 1 million smokers to Juul, but the company data is drawn from self-reported surveys on its website and is unverifiable.
Dr. Scott Gottlieb, who heads the FDA, declined to comment on the agency’s investigation of Juul. But he has long been hopeful that e-cigarettes or other similar devices, properly regulated, will prove a safer alternative to smoking and help people quit the deadly habit. Before becoming FDA commissioner, he served on the board of directors of Kure, a retailer that sells e-cigarette products.
“Two-thirds of adult smokers have stated they want to quit,” he said. “They know it’s hard, and they’ve probably tried many times to quit. We must recognize the potential for innovation to lead to less harmful products.”
But Eric Lindblom, a former FDA tobacco official who heads the tobacco control program at Georgetown Law, said Juul’s internal concerns about teenage use demonstrate they are in some ways “no different than the cigarette industry.”
“They are going to maximize their sales and profits any way they can,” he said. “They are going to do that within the law, but they are going to press the gray areas as much as they can.”
Juuling Becomes a Verb
Over the past three years, Juul has had a meteoric rise. It has become the dominant seller of e-cigarettes, now controlling a remarkable 72 percent of the market, according to Nielsen data. In July, the company completed a round of fundraising for $1.2 billion, putting it in rarefied air. From a virtual standing-start in 2015, it is now valued by investors at $16 billion.
Across the country, Juuls have become so popular that “Juuling” has indeed become a verb, and officials from several state governments have sent alerts to schools warning them about the problem.
A survey of adolescent drug use last year found that 11 percent of 12th-graders, 8.2 percent of 10th-graders and 3.5 percent of eighth-graders had vaped nicotine in the previous 30 days.
Juul’s other co-founder, Adam Bowen, said that he was aware early on of the risks e-cigarettes posed to teenagers, and that the company had tried to make the gadgets “as adult-oriented as possible,” purposely choosing not to use cartoon characters or candy names for its flavors.
The FDA has ordered Juul to turn over the company’s research and marketing documents, including focus group data and toxicology reports, to determine whether it intentionally courted the youth market.
The day after receiving the FDA letter, Juul announced it would spend $30 million to combat underage vaping and recruited Tom Miller, the attorney general of Iowa, who helped lead the multistate 1998 master settlement with tobacco companies, to run an advisory board to counsel Juul on its efforts. Miller said recommendations might include more controls on social media marketing and better surveillance of retail outlets, but the ultimate decision on how to spend the money remains with Juul. Miller says he sees huge potential in e-cigarettes. He believes Juul and other e-cigarette companies have already helped lower the adult smoking rate to 13.9 percent in 2017 from 16.8 percent in 2014. “The only plausible explanation is e-cigarettes,” he said.
A report from Citigroup, citing Nielsen data, said that sales of traditional cigarettes dropped 6 percent in the first quarter of this year and “it’s impossible to say what has caused the change for sure but the most obvious case is Juul.”
Juul recently deleted months of social media posts, including ones with images of cool-looking young people vaping Juuls. This spring it made major changes to its website, which had prominently displayed a Juul surrounded by luscious-looking images of fruit and the words “Mango, it’s back.” The site is now a more sober-looking affair, featuring video of adults vaping with a tagline “For smokers. By design.” Across the top of the page, visitors are invited to “learn about our youth prevention efforts.”
A Nicotine Fad’s Origin Story
Bowen, 42, and Monsees, 38, the company’s founders, met in 2003 in a graduate product-design program at Stanford University, bonding over brainstorming sessions and cigarettes. Both had been smokers since their teens, and both have since quit; Monsees regularly uses a Juul.
The culmination of the program was a masters thesis, and both had struggled to find a worthy subject. In 2004, about six months before the thesis was due, they got to talking about their smoking habits and, within days, were excitedly sending emails back and forth about developing an alternative to cigarettes.
Big tobacco companies were experimenting with e-cigarettes, but there was no real market for them until around 2010, when NJoy, an Arizona company, became the industry’s first darling. By 2013, e-cigarettes were a $1.7 billion-a-year business, still only a small fraction of the $90 billion cigarette business.
But then NJoy gambled on an e-cigarette that looked virtually identical to a cigarette. It was a mistake, said Craig Weiss, the chief executive who pushed the so-called cigalike strategy and now consults for Juul. As NJoy’s fortuned flagged, he said he realized that people did not want a product that looked so much like a cigarette that it still left them with the stigma of being a smoker. NJoy filed for Chapter 11 bankruptcy in 2016, later re-emerging.
Juul initially developed a product in 2010 that looked like a fountain pen and distributed it in specialty vape shops. Its sales grew to a modest $30 million by 2015.
Then the company found its current design, a sleek stick that looks like a flash drive, and largely stumbled onto a new way of delivering nicotine: it mixes nicotine with a chemical called benzoic acid. The result is that when Juul users inhale, they get a very quick and powerful burst of nicotine. This gives smokers a more cigarettelike experience, but medical researchers say it also makes the product more addictive for youth. The company launched its new product in June 2015, with starter kits costing $35, and packs of four nicotine refill cartridges selling for $16 — each roughly the equivalent of the cost of a pack of cigarettes. According to Nielsen, sales in the first month were roughly $1,500 and reached over $1 million that December. It began a steady climb, and then experienced explosive growth in the beginning of 2017, with sales rising 627 percent in the four weeks ending June 17, 2017, according to Nielsen and Wells Fargo Securities.
The company said that toward the end of 2016 and around the beginning of 2017, it changed its social marketing campaign and guidelines to require all models to be over the age of 35.
In the past two months, Juul has removed the flavor focus and now uses only “real people” who have used Juul to switch from smoking cigarettes, the company said.
Matt Myers, president of the Campaign for Tobacco-Free Kids, said that he was prepared to be a fan of a product like Juul if it is responsibly marketed and shown to help adults quit smoking. But he cited a Centers for Disease Control and Prevention report that in 2017 2.1 million high schoolers and middle schoolers used e-cigarettes — “and the reports about high school students using Juul are rampant,” he said.
Myers observed that Juul “delivers nicotine so much better than any comparable product on the market,” and so its popularity means that “both the hopes of the e-cig fans, and fears of those concerned about e-cigs and kids, rise exponentially.”
A Tobacco Industry Tactic
On Jan. 23, The Boulder Daily Camera published a front-page story about the growing concerns of local educators in Colorado about student use of Juuls.
Five days later, Carrie Yantzer, principal at Nederland Middle-Senior High School, received an email that immediately struck her as suspicious. The writer introduced himself as Bruce Harter, a former educator working with Juul to develop an anti-vaping curriculum for schools.
“I read about the challenges you’re having with Juul,” Harter wrote. He offered a free, three-hour curriculum provided by Juul to discourage teens from using e-cigarettes by teaching them about their brains and giving them mindfulness exercises.
“What we’ve found from focus groups with teenage Juul users is that young people don’t understand the dangers of nicotine addiction,” the letter read. “They sometimes feel ‘pushed’ by friends to use e-cigarettes. We also found that they don’t have operative ways to deal with stress and the emotional ups and downs of their lives right now.”
Yantzer was angry. “It sounded preposterous,” she said, and the company “deceptive.”
She was not the only school administrator to get such a letter. The Boulder school district and, ultimately, the state of Colorado condemned the offer as a brand-building exercise that was tone-deaf at the very least.
“The way we see this is a fox guarding the henhouse,” said Alison Reidmohr, tobacco communications specialist for the Colorado Department of Public Health. “A company that stands to profit from, and currently profit off, youth using a product can’t be trusted to prevent use of this product.”
Ashley Gould, Juul’s chief administrative officer, said the company, because it has not built management around former tobacco-industry employees, was unaware the tactic had been used by cigarette companies. However, Juul’s board of directors includes experienced investors, including Nicholas Pritzker, a billionaire whose family controlled one of the country’s largest chewing tobacco companies, Conwood, which was acquired in 2006 by Reynolds American for $3.5 billion.
For its part, Juul said it was still deciding what to do with that school program. Gould said the company did not realize the curriculum would offend or that the idea harked to a tactic big tobacco companies used decades ago. “We didn’t know,” she said. “We should’ve known.”
Juul Goes to Washington
Juul has a new innovation in the works, a Bluetooth-enabled version of its e-cigarette that it hopes could push more smokers to switch without risking youth uptake. Monsees called it a “smart” e-cigarette.
The Bluetooth-equipped Juul might provide a way for adult vapers to measure their nicotine use. It also might discourage teen use by disabling the device unless it’s in the presence of its adult buyer, perhaps by linking it to the buyer’s cellphone. The solution would still require effective controls on sales to minors at brick-and-mortar stores and online retail outlets.
Juul officials contend their ability to offer such innovations is hamstrung by regulatory policies. The company is building a high-powered operation in Washington to help it navigate such issues. It is run by Tevi Troy, a political strategist who worked with Gottlieb, the FDA commissioner, at the Department of Health and Human Services under President George W. Bush and who wrote an opinion article with him for The Wall Street Journal. The company has also hired Jim Esquea, who was an assistant secretary at the health department during the Obama administration, and Gerald Masoudi, a former FDA chief counsel.
The company is also ratcheting up its lobbying efforts. It has reported spending $450,000 on lobbying so far in 2018 — substantially more than the $120,000 reported spent for all of 2017. It also recently started a political action committee, although no donations have yet been reported. In June, Kevin Burns, Juul’s chief executive, gave $50,000 to the Republican congressional leadership fund.
The centerpiece of Gottlieb’s tobacco control strategy is a plan that would potentially greatly benefit e-cigarette companies, including Juul. It would require tobacco companies to reduce nicotine levels in traditional cigarettes so much that they were no longer addictive. The proposal is still in the early discussion phase, with the tobacco industry strongly opposed. But it would potentially make Juul, a potent nicotine delivery device, far more appealing to smokers.
Monsees, a Juul co-founder, says he believes that e-cigarettes are a key to reducing smoking, and can be profitable without sales to teenagers.
“Yes, I want to make money,” he said. “I’m on the board with a fiduciary duty that obligates me to make money.”
But he added, “The best investor return in the long term comes from more adults turning away from combustible cigarettes.”