- [Narrator] Juul Labs was once
one of the most valuable startups in the world,
valued in 2018 at $38 billion.
But most of that has gone up in smoke.
In 2020, Altria, which holds a 35% stake in the company
said Juul is now worth less than $5 billion.
- Juul's been a fascinating story to cover
because it rose and fell so quickly.
It really turned the tobacco industry upside down overnight.
- [Narrator] Juul is fighting for its life,
laying off in the past year around 3/4 of its employees.
It faces hundreds of lawsuits
alleging the company marketed its products to teens.
- If you think you can come into this county
and you can harm our youth
and we're not gonna fight you back, you're wrong.
- [Narrator] It's product's popularity with young people
has become the liability
that's a threat to the company's viability.
In 2015, Juul introduced a new vaporizer.
The company was founded
by Stanford University graduate students
Adam Bowen, and James Monsees.
- Adam and I smoked.
We tried to quit and we failed.
For us, giving up smoking
required an alternative which did not exist at the time.
We founded Juul Labs to invent one.
- Adam Bowen and James Monsees developed a product
that was unlike any e-cigarette that came before it.
It had a cool, sleek, slim design
that looked like a USB flash drive,
and they were going for an aesthetic like an Apple product.
They wanted to have something that was high tech, cool,
that people would wanna be seen holding.
The secret sauce was also what was inside it.
It contained a nicotine salt solution
that delivered a really powerful punch of nicotine,
but without the throat harshness
that you might otherwise expect
from an e-cigarette at the time.
- [Narrator] In 2016, legacy tobacco firms,
with their similar looking products,
led the pack in e-cigarette sales.
That year, Juul sold 2.2 million devices.
It was still a small player.
But in 2017, that changed.
Juul's sales numbers soared that year,
increasing nearly eight fold.
- It was available in more and more stores,
many convenience stores and gas stations.
So that helped propel its growth and Juul also marketed it.
They gave Juul packages to celebrities
for as little as a dollar
to try to get them to use it and be seen using it
in the hopes that celebrities
and other social media influencers
would help spread the word.
- [Narrator] As Juul's own data would later disclose,
some of the customers its product was attracting
had never smoked cigarettes before.
By the end of 2018, Juul Labs had captured
68% of the $1.9 billion US e-cigarette market.
Prominent investors took notice.
A fundraising round that summer
brought the startup's value to about $16 billion.
But 2018 was also the year Juul found itself
in the crosshairs of regulators.
The Food and Drug Administration
opened an investigation into Juul
after parents and school administrators
sounded the alarm about youth vaping.
After two decades of declining teen cigarette smoking,
a 2018 survey revealed that the share of high schoolers
who were vaping had increased significantly.
- When the regulator in charge of the e-cigarette industry
targets your company, that's a big deal.
And Juul took a series of steps that year
to try to show that they were taking the problem seriously.
The first thing they did
was they said that they would work with retailers
to ensure that at the point of sale
kids weren't getting access to Juul and other e-cigarettes.
- [Narrator] But the FDA wasn't satisfied.
It conducted an inspection at the company's headquarters
and the agency threatened to take flavored e-cigarettes
off the market entirely
because they were attracting underage users.
- Juul responded by voluntarily pulling
most of their sweet and fruity flavors
out of brick and mortar retail stores.
So those flavors included Mango Cucumber
and Creme Brulee, for example.
Juul also suspended its social media marketing in the US.
- [Narrator] Despite all this,
Juul's valuation soared to $38 billion
when Altria, the maker of Marlboro,
bought a significant minority stake in the company.
- Altria wanted to get a piece
of the growing e-cigarette market
and Altria's own e-cigarette products
were not that successful.
- [Narrator] Altria got in at an inauspicious moment.
After making the nearly $13 billion investment in Juul,
things began to unwind.
Rite Aid, the third largest us pharmacy chain,
announced it would stop selling e-cigarettes in its stores.
In September 2019, Juul CEO Kevin Burns stepped down.
He was replaced by Altria executive K.C. Crosthwaite.
That same month,
in a blow to the company's overseas ambitions,
China, the world's biggest tobacco market,
halted Juul's sales just days after its launch there.
And in the US, governors called for immediate bans
on all flavored e-cigarettes.
- Common sense says if you don't know what you are smoking,
don't smoke it.
- [Narrator] At the same time,
the entire nicotine vaping industry
faced a full blown PR crisis.
- New vaping numbers.
Illnesses top 1,000 with deaths on the rise.
- Some patients actually suffered toxic chemical burns
to their lungs and airways,
as if being exposed to a chemical spill.
- [Narrator] After hospitals throughout the country
linked at least eight deaths to vaping,
US health officials urged Americans
to stop using any and all e-cigarette products
while authorities investigated the cause.
The illnesses were eventually linked
to marijuana vaping devices containing vitamin E oil,
not to e-cigarettes like Juul,
but the damage to vaping's image continued to be felt
and the tsunami of bad news for Juul continued.
Juul's new CEO halted most US advertising,
then stopped all US sales
of Juul's sweet and fruity flavors.
State attorneys general across the country
sued Juul for deceptive marketing of its products.
- Juul basically took a page from big tobacco's playbook
by marketing its products
in a manner that was appealing to underage youth.
- [Narrator] In court filings, experts alleged
that even though the models Juul used
in its 2015 promotional materials were in their 20s,
they appeared in poses and behaviors
more characteristic of underage teens than mature adults.
Crosthwaite was grilled by lawmakers
for the marketing methods Juul employed before he arrived.
- We are focused on combating underage access.
'Cause it know it puts it all at risk
if we don't make progress here.
- Sir, how do I trust what you say? (scoffs)
- My actions, so far since I've joined,
support our recognition that more needed to be done.
- [Narrator] More done with fewer people.
Amid a sharp drop in sales in the fall of 2020,
Juul continued to shrink its workforce
down to around 1,000 from its high of just over 4,000
and pulled out of most overseas markets.
And Altria wrote down the value of its stake in Juul
by around $11 billion.
- Everything hinges on an FDA review
that will determine whether or not Juul's products
can stay on the market or whether they have to come off.
It presented a real potential for a public health benefit.
You know, getting adult cigarette smokers
off of cigarettes, which kill 480,000 people a year,
you know, offered a lot of promise.
It was interesting to investors,
it was compelling to public health experts,
but at the same time, Juul presented an incredible risk.
- [Narrator] Federal data now show
that youth vaping is decreasing.
The CEO said Juul is now focused on its founding principle,
to help smokers move away from cigarettes.
But that Juul needs to prove it can be trusted.
If it can do that, Crosthwaite said,
Juul has a lot of potential in the longterm.
But that will be an uphill battle.
(intense music)