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Juul E-Cigarette Ban Creates $1 Billion Opportunity For Vape Companies

Tobacco companies are already dancing on the grave of the vaping giant, once popular with teens.

The Juul Era ended on Wednesday when the U.S. Food and Drug Administration banned the e-cigarette brand—once America’s favorite nicotine vape, with a 70% market share—from selling its products in America.

Founded by entrepreneurs James Monsees and Adam Bowen, who met while studying at Stanford, Juul was blamed for igniting a rise in teen vaping through its youthful marketing campaigns and fruity flavors. (The company eventually pulled those flavors from the market.)

Despite wide concerns about the underage use of vapes, the FDA decision hinged on another aspect of the product. The agency noted that Juul provided insufficient and “conflicting” data on potentially harmful chemicals that leak from its nicotine liquid pods. The vapes will be banned from distribution in the U.S. and pulled from shelves. Juul said it will appeal the decision with Juul’s Chief Regulatory Officer Joe Murillo telling Forbes the company will explore all options to stay on the market and that it “respectfully disagrees” with the FDA’s findings.

With the rapid success of Juul, Monsees and Bowen were billionaires for a brief moment in 2018 when tobacco giant Altria acquired a 35% stake in the company for $13 billion. Altria has since valued its stake at $1.6 billion. But Juul’s downfall is welcomed news to the tobacco industry. The vape sector generates some $7 billion in annual sales, with 50% of the market being disposable “closed systems” like Juul and the other half being “open systems” that customers can refill and reuse. With Juul’s 33% market share, according to Nielsen’s most recent data, there is at least a $1 billion opportunity for other brands.

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Vuse, which is owned by British American Tobacco, unseated Juul as the market leader with 35% market share thanks to an aggressive pricing campaign, says Vivien Azer, a managing director and senior research analyst at Cowen who covers alcohol, tobacco and cannabis companies. Azer says BAT, vape brand Njoy, and other vaping companies are thrilled with the FDA’s decision.

“Everyone is happy to dance on Juul and Altria’s grave as the behemoths of the category,” says Azer. “There’s a lot of market share up for grabs.”

“Oral nicotine is going to be massive,” says Catharine Dockery of Vice Ventures. “I cannot be more bullish on this category.”

The Juul ban is one part of the U.S. government’s efforts to control nicotine and reduce cigarette use. This week, the FDA also announced plans to cap nicotine levels in cigarettes to make them less addicting and earlier this year, the agency set out to ban menthol cigarettes.

Big Tobacco has been focused on a potential cigarette-free future for some time. Philip Morris International has invested about $9 billion in alternatives since 2008 and the company has an ambitious goal to eventually stop selling cigarettes. (PMI, which sells Marlboro outside of the U.S., was created in 2008 when Altria spun off its international tobacco business from Philip Morris USA.)

Jacek Olczak, the CEO of PMI, is working to pivot the company to smoke-free products. In 2021, PMI generated $31.6 billion in revenue and smoke-free products accounted for 29.1%. By 2025, PMI has a goal to derive 50% of its total revenues from the category. In May, PMI agreed to acquire Swedish Match, a smokeless tobacco product manufacturer, for $16 billion. Swedish Match is best known for General, its brand of snus, an oral pouch made with moist powder tobacco, and ZYN is its oral nicotine pouch product, made with synthetic nicotine, not tobacco-derived.

It’s not just Big Tobacco that’s experiencing schadenfreude from the Juul decision. Catharine Dockery, the founding partner of Brooklyn-based early-stage investment fund Vice Ventures, says that while she isn’t celebrating the demise of Juul—she believes all nicotine reduction products should be on the market—she is excited for some of her portfolio companies. Dockery sees the government’s strategy toward cigarettes and vapes as good news for alternative nicotine delivery products.

“Oral nicotine is going to be massive,” says Dockery. “I think people are missing the point, the future. All of these other smokable companies see the writing on the wall and will dive into oral nicotine. I cannot be more bullish on this category.”

Lucy, a Las Vegas-based startup that makes nicotine gum, pouches and lozenges, and is backed by $15 million in venture funding, is expecting a boost in sales. A few years ago, during the so-called “vape crisis,” when people across the country were getting sick from illicit cannabis vaporizers made with vitamin E, Lucy, which only sells nicotine products, saw sales jump by 50%. The company, which recently surpassed $10 million in annual revenue, also saw a 50% rise in sales when the pandemic hit as cigarette and vape users looked for safer alternatives in the midst of contagious respiratory illness.

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With Juul coming off the market, Lucy cofounders David Renteln and Samy Hamdouche see a lot more room for a startup like theirs. “A significant number of consumers that use Juul will be looking for an alternative,” says Hamdouche. “They’re unlikely to stop using nicotine altogether.”

There is, of course, another real concern among these nicotine upstarts: the FDA might take a strict stance around novel nicotine products. “They’ve denied 99% of vaping products that have applied,” says Renteln. “It’s unclear if this [Juul ruling] is indicative of a probationary stance in general across all new kinds of products, or whether there’s a focus on vapes, nicotine salts or flavors.”

Not everyone is rejoicing about the FDA’s Juul ban. Jonathan Foulds, a professor of public health sciences and psychiatry at Penn State University’s college of medicine, tweeted his disdain for the decision. “Banning this lifesaving escape route from smoking because some ‘potentially harmful chemicals’ may leach from some pods,” he wrote, “is a bit like locking the door to the fire escape because the steps may be slippery.”

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