Startups Venture

FDA’s Flavored Tobacco Ban Looms Over Juul

Morning Report: Juul may need to double down on its rebranding strategy as it faces FDA backlash.

New regulation isn’t limited to ICOs and crypto companies. Today Bloomberg reported that the FDA is, once again, calling out e-cigarette companies, which means e-cigarette company Juul is under attack.

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If you’re not familiar. Juul is an e-cigarette company that has experienced rapid growth. The company now captures nearly three quarters of the e-cigarette market, according to a recent report by CNBC. And, according to our past reporting, at the time of its raise the company planned to grow by 284 percent from 2017 to 2018.

That quick growth has been met by significant investment from venture capital. In July, the company raised $650 million from Tiger Global Management, bringing its total known funds raised to $761.5 million. The company is currently valued at $15 billion, post money.

Juul and its founders have made a concerted effort to brand the company as an alternative to cigarettes, helping adults who are hooked on traditional cigarettes pick what they believe is likely to be a less deathly option.

However, a key challenge for Juul is preventing children from getting hooked on its product, which currently contains about as much nicotine in each disposable pod as a pack of regular cigarettes (though the company is reportedly working on products that contain less). According to CNBC’s interview with Juul’s founders, a significant amount of growth among Juul use by kids was a result of a faulty marketing campaign that relied on social media and young models. Juul has since switched strategies, focusing on adults recovering from cigarette abuse, and says that it has invested $30 million in preventative activities to get the youth off of its product.

Even so, the company is headquartered in San Francisco, an area that is both familiar with vaping culture and that has placed one of the most restrictive bans on what many believe is what makes vaping so attractive to children: flavored tobacco. However, Juul believes that is a big part of what makes the products attractive to adult users as well.

Illustration Credit: Li Anne Dias