Facing ire at home, the e-cigarette giant counted on international expansion to offset losses in the U.S., but the regulatory response abroad has been even stricter.
In January 2019, the chairman of Altria, Howard A. Willard III, flew to Silicon Valley to speak to senior executives of Juul Labs, fresh off signing a deal for the tobacco giant to pay nearly $13 billion for a 35 percent stake in the popular e-cigarette company. With public fury growing over Juul’s contribution to the epidemic of teenage vaping, he laid out his vision for the company to continue to thrive.
“I believe that in five years, 50 percent of Juul’s revenue will be international,” Mr. Willard told the 200 executives gathered at the Four Seasons in East Palo Alto.
Kevin Burns, Juul’s chief executive at the time, interrupted: “I told the team to accomplish that in one year!”
Many people in audience chuckled, but a year later, nobody is laughing.
When the big American tobacco companies started feeling pressure decades ago, they found new markets and friendlier regulation abroad. Juul’s efforts to follow the same playbook have been stunningly unsuccessful.
The company has been met with ferocious anti-vaping sentiment and a barrage of newly enacted e-cigarette restrictions, or outright bans, in country after country. As a result, its ambitious overseas plans have collapsed.
Juul was kicked off the market in China last fall after just four days. The company has had to abandon plans for India after the government there banned all electronic cigarettes. Thailand, Singapore, Cambodia and Laos have also closed the door to e-cigarettes. In the Philippines, President Rodrigo Duterte ordered the arrest of anyone caught vaping outside designated smoking areas.
Juul has postponed its launch in the Netherlands and has pulled out of Israel. In South Korea, the number of Juul customers has plummeted after the government issued dire health warnings about e-cigarettes, and the company has scaled back its distribution there.
“It has been an extraordinarily quick backlash,” said Kathleen Hoke, director of the Network for Public Health Law at the University of Maryland. “Countries that you wouldn’t necessarily describe as progressive public health nations are attacking this new product so that it doesn’t become embedded in their culture as cigarettes have.”
Even Indonesia, which has no restrictions on vaping and one of the highest percentage of smokers in the world, has not worked out for Juul. Last month, the company announced it would stop shipping its devices and nicotine pods to that country, too.
Public health officials abroad fear the same youth vaping epidemic that has been declared in the United States. Although Juul stopped selling its fruit- and dessert-flavored nicotine pods in the United States ahead of the national ban, it has not done so overseas, where it is offering glacier mint, mango nectar, royal crème, alpine berry, and until recently, apple orchard. The company said it is phasing out royal crème.
Concern about the products worsened after an outbreak of serious vaping-related lung disease last summer, although the vast majority of cases have been tied to vaping THC, the high-inducing chemical in marijuana, not nicotine products like Juul’s.
Recently two top executives of Juul’s global business resigned, ahead of restructuring in that division. Still, the company insists that a global presence remains very much part of its strategy.
“We are committed to advancing the long-term potential for harm reduction for adult smokers while combating underage use,” said Joshua Raffel, a Juul spokesman. “We have, therefore, been reviewing how best to reset local operations on a case-by-case basis.”
The skepticism and ire among regulators and public health advocates abroad are unlikely to dissipate quickly, however.
“Their prospects are certainly very much diminished in comparison to where they were a year ago,” said Shane MacGuill, senior head of tobacco research at Euromonitor International. “The way they were expanding in some of those markets was causing problems, not only within those markets themselves, but also reflecting back into the U.S. as well. It was adding to the sense in the U.S. that this was a company behaving recklessly.”
Much of the overseas backlash against Juul has been fueled by the perception that it has targeted young people and nonsmokers, the complaint that crystallized opposition among American regulators, municipalities and anti-tobacco advocates. It is an allegation the company denies.
“We have enough problems with cigarettes and now we have 9-year-olds vaping because they think it’s fun,” said Dr. Ulysses Dorotheo, executive director of the Southeast Asia Tobacco Control Alliance, who lives in Manila. “More than half our population is under 30. The last thing we need is for young people to get hooked on vaping.”
South Korea seemed especially promising for Juul. A wealthy nation of 51 million, its citizens are avid consumers of new technology, especially products from the West, and more than a third of men smoke cigarettes.
Juul’s sleek and fashionably designed devices enjoyed a few months of rapid growth after arriving on the South Korean market last May, and Juul quickly became one of the top vaping brands.
But the company soon encountered strong headwinds. For starters, a pre-existing tax on all e-liquid products — an amount comparable to the tax on cigarettes — made Juul expensive for many consumers. And because South Korean law restricts the amount of nicotine allowed in e-liquids, Juul pods sold there had to contain less than one percent nicotine, compared to the 3 and 5 percent pods available in the U.S. Even before the government warning, sales had dropped sharply.
The penurious nicotine levels proved frustrating and costly for South Korean vapers. Choo Sang-Chul, 42, briefly tried Juul but then switched to IQOS, the heated tobacco device made by Philip Morris International.
“When I use an e-cigarette, I want an experience similar to smoking cigarettes, but Juul didn’t have it,” he said. “I didn’t get the same kick.” (IQOS is distributed in the U.S. by Altria through an agreement with Philip Morris International.)
Juul’s troubles multiplied in October after South Korean health officials, prompted by the outbreak of lung ailments in the U.S., issued a stark warning about e-liquids, saying they posed the risk of “serious lung damage and even death.”
A month later, the South Korean Army banned e-liquids on all military installations. In December, South Korean health authorities announced the results of testing on a number of vaping products, including the apple orchard flavor formerly made by Juul, and said that in some products they had detected trace amounts of vitamin E acetate, the adulterant U.S. health authorities have linked to most of the lung injury cases.
Juul and other e-cigarette companies say they do not use vitamin E acetate in their products and the American health officials have only found it in cannabis vaping products. Nevertheless, South Korea’s biggest convenience store chains, the primary retail outlets for Juul, removed two or three of the company’s five flavors from shelves. Many smaller stores followed suit.
Overnight, the health warnings turned many South Koreans against vaping.
Kim Ji-Ah, 28, an office worker in Seoul who has been using e-cigarettes for more than a year, said she felt like a pariah.
“People whisper behind my back when I vape,” she said.
Juul would not release sales figures, but sales of e-cigarette liquids overall in South Korea dropped by 90 percent in the fourth quarter of last year, to 1 million pods from 9.8 million from the previous quarter.
The company’s prospects are likely to get worse. Parliament is considering a bill that would phase out the e-liquid flavors that are said to attract young people, and industry executives are bracing themselves for further restrictions.
Like many vape dealers, Kim Do-hwan, who runs an e-cigarette store outside Seoul, is angry at the government, saying it unfairly demonized devices that he believes help people quit smoking. But he also blames Juul for failing to do its homework before entering a complicated market.
“I don’t think Juul really knew what it would be up against in South Korea,” said Mr. Kim, who also represents the Korea Electronic Cigarette Association. “Juul entered an impossible market.”
Two years ago, Juul viewed India as its most lucrative potential market. In comments about its planned entry there, the e-cigarette company noted India has 106 million adult smokers and chewing tobacco users — at least 29 percent of the adult population — and a growing middle class. India has about one million tobacco-related deaths a year, along with 80 to 90 percent of the world’s oral cancer cases.
India also has the world’s largest population of young people between 15 and 24, with 249 million. Not even China has more people in that age group.
That made Vandana Shah, director of South Asia programs for the Campaign for Tobacco-Free Kids, suspicious.
“What problem was Juul trying to solve?” asked Ms. Shah. “Not the bidi smokers,” she said, referring to the small hand-rolled cigarettes popular in India. “The smokeless tobacco guy spending 20 or 15 cents a day is not switching to Juul.”
Juul’s devices and pods began to trickle into the Indian market in late 2017 and early 2018, but the company planned an official launch for fall 2019. During that time, however, Juul could be easily bought in shops in cities like New Delhi, Mumbai and Bangalore. They were also available on commercial websites, few of which had age verification to prevent minors from buying them, according to Ms. Shah. Juul spokesman Joshua Raffel said the company has worked to catch smuggled or counterfeit pods and devices in India.
“Juul has been very aggressive in India, and they hired well-known lobbyists,” said Ms. Shah.
The end came swiftly. In November, around the time Juul had planned to launch, Prime Minister Narendra Modi signed a law banning the manufacture and sale of any e-cigarettes.
Juul supported a lawsuit challenging the ban, but later dropped it.
Juul did not anticipate a nemesis like Mr. Duterte when it began importing its devices to the Philippines last spring. With 16 million smokers and just 225,000 e-cigarette users, the untapped market potential was vast. But in November, Mr. Duterte, whose violent antidrug crusade has left thousands of suspected users dead, unleashed his animus on e-cigarettes, vowing to ban them and ordering the police to arrest anyone caught vaping in public.
Two weeks ago Mr. Duterte issued an executive order codifying his ban: It relegates vaping to designated outdoor smoking areas, severely limits e-cigarette advertising and prohibits those under 21 from purchasing or using such products. In the meantime, more than 2,000 vape shops in and around the capital have closed in recent months, according to the police, and a newly passed “sin tax” will add nearly a dollar to the price of many vaping products.
Juul had already announced it would stop selling flavors ahead of the new minimum age regulation, but its efforts to placate Mr. Duterte have not been successful: Last month, Juul executives wrote a letter to the department of finance complaining about a nationwide shortage of Juul pods. The culprit? The company’s products have been tied up in Philippine customs, the letter said, thanks to “the President’s pronouncement.”
With 57 million smokers and almost no tobacco regulations, Indonesia offered immense opportunity for Juul when it began selling its products there last summer.
The company opened stores selling its devices and flavored nicotine pods at upscale shopping malls and showed slick ads at movie theaters. But perhaps its greatest asset was the hip, youthful image that was cultivated in the United States and reached Indonesians through social media.
Audrey Anastasya Fide, 25, a security and risk management consultant in Jakarta, was intrigued after seeing Twitter images of Sophie Turner and Maisie Williams of “Game of Thrones” fame holding sleek black Juuls.
“I just wanted to try it,” she said. A friend brought her one back from the U.S., and Ms. Fide is now a devoted customer. “I prefer the shape of the Juul,” she gushed.
Although Juul sought to position its products as smoking-cessation devices, anti-tobacco advocates in Indonesia say the reality on the ground was different. Many Juul customers both smoke and vape, they said, and a worrisome number of buyers are teenagers who had never smoked.
“If it’s about harm reduction, why is Juul selling their products to kids?” asked Dr. Mouhamad Bigwanto, an antismoking advocate.
Dr. Bigwanto reacted to the news in February of Juul’s pullout with skepticism, saying he feared that sales of Juul products would simply move online, where a market in bootleg Juul pods already flourishes.
“It’s good news because right now Juul pods are sold at stores right next to the candy,” he said. “But the bad news is that Juul will use this announcement to improve their image.”
Sheila Kaplan, Andrew Jacobs & Choe Sang-Hun/NYT