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`Businessweek Technology
`Vape King Juul Wants Everyone to Chill
`Out
`The $15 billion company is hoping Bluetooth locks and fewer new flavors will ward off
`more bans.
`
`Photographer: Thomas Albdorf for Bloomberg Businessweek
`
`By Alice Hines
`August 1, 2018, 10:00 AM UTC
`
`Listen to this article
`6:36
`
`Few startups are as hot as Juul Labs Inc., the three-year-
`old e-cigarette maker with 71 percent of the U.S. market
`and a $15 billion valuation. But that’s not the story the
`
`JLI Ex. 2027, Page 1 of 5
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`company wants to tell. As its sneaker-clad workforce
`lined up this spring for a steak-and-quinoa lunch at its
`new San Francisco headquarters, Chief Administrative
`Officer Ashley Gould said her team had failed. “We
`acknowledge kids are using the products,” she said.
`“We’re committed to stopping it.”
`
`Juul says its signature brushed-aluminum, thumb-drive-
`shaped vape is intended to help adult smokers switch to a
`healthier alternative, and there’s reason to believe it’s
`making some progress on that front. But it’s also become
`ubiquitous in America’s schools, prompting a backlash
`among critics who say it’s hooked a new generation on
`nicotine. In conjunction with anti-tobacco groups, users
`have sued the company for allegedly leading them into
`addiction, a claim the company says is without merit. In
`June, San Francisco voters banned the sale of flavored
`tobacco products, which include 75 percent of Juul’s
`liquid pods. Critics paint the company’s flavors, which
`include mango, cucumber, and crème brûlée, as
`dangerous gateway drugs created from little-studied
`chemicals. The company says they’re the cornerstone of
`its benevolent mission.
`
`Juul’s signature vape and flavored pods. Photographer: Gabby
`Jones/Bloomberg
`
`Instead of openly fighting the San Francisco ballot
`measure or at least four copycat proposals across the
`country, Juul is trying to aggressively self-regulate. In
`addition to issuing frequent apologies, it’s pledged to
`spend $30 million to prevent underage use. It’s hiring
`secret shoppers, talking to students and parents about
`nicotine’s risks, and supporting a push to raise the age for
`tobacco buyers. More quietly, it’s decided to keep 55
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`flavors it’s prepared off the market for now, and to
`redesign its vapes to more regularly monitor who’s using
`them.
`
`Chief Executive Officer Kevin Burns says that in October
`he’ll start rolling out Bluetooth-connected Juuls with
`software that’s meant to help would-be ex-smokers track
`their nicotine intake as they wean themselves off the
`drug. The hardware will also make it possible to regularly
`verify that Juul users are of legal vaping age. The update
`will launch not in the U.S., but in new markets in Israel
`and Western Europe. “We’re not a lifestyle brand, we’re a
`functional product,” says Burns, who previously ran
`yogurt maker Chobani LLC and has two teenagers at
`home. “We don’t want the product to seem cool.”
`
`Size of Global Vapor Device Market
`
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`Data: Euromonitor International
`
`It’s tough, however, to conjure the image of a staid anti-
`addiction tool from flavors such as mimosa, strawberry
`limoncello, Thai tea, and spicy watermelon, which are
`among the 55 off-market Juul liquids the company has
`registered with the U.S. Food and Drug Administration.
`Co-founders Adam Bowen and James Monsees, Stanford
`design school grads and former smokers, are personally
`involved in flavor development, testing pods in their own
`Juuls, according to a person familiar with the matter.
`Since 2016, federal policy has blocked most new e-
`cigarette technoloy from U.S. release, but unlike the
`Bluetooth Juuls, the off-market flavors were registered
`before the deadline. The person familiar with the matter
`says Juul has hesitated to sell them in part because of the
`ongoing controversy about underage use, and has also
`debated renaming them more vaguely as colors like red
`and green.
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`Juul declined to comment on the off-market flavors but
`says the ones it sells are meant to help wean adult
`smokers off the taste of tobacco. The company and its
`rivals have until 2022 to file applications with the FDA to
`demonstrate that their products “are appropriate for the
`protection of public health,” according to the agency.
`Products released since 2016, which weren’t
`grandfathered in under the federal policy, have to win
`over the FDA before they hit shelves. The agency says it’s
`received about 400 applications and has so far approved
`eight.
`
`Even so, Juul is confident enough to patent its
`forthcoming technoloy. An application published in
`April suggests the company is interested in refining its
`devices to better market to people as they’re vaping. The
`patent includes ideas for Juul features such as multiplayer
`games controlled by moving the vape or taking a puff,
`and outlines plans to collect data on everything from
`users’ preferred temperature and particle-size settings to
`their socioeconomic status. A Juul app could then
`recommend flavors, offer deals, or connect users to
`friends or social networks. The company says it doesn’t
`plan to add games and that the patent was written
`broadly only to protect its intellectual property.
`
`Juul has also considered using Bluetooth technoloy to
`set up geofences around schools, meaning the vapes
`would be programmed to shut down on school grounds,
`according to a person familiar with the matter. Juul
`declined to comment.
`
`The company has a reputation as the Apple of vapes, with
`its gadgetlike design and patented form of nicotine
`remaking an industry full of bulkier or more cigarette-like
`models. (Bowen and Monsees created it while already at
`the more cannabis-focused Pax Labs Inc.) Juul’s
`popularity, however, has reopened the question of
`whether tar was the only problem with tobacco. E-cigs
`generally lack—or have much lower levels of—the cancer-
`and emphysema-causing chemicals that made old-school
`smokes the world’s leading preventable cause of death. In
`a recent independent survey, just under half of 11,689
`U.S. smokers who started Juuling reported quitting
`cigarettes. But nicotine in any form is bad for a
`developing brain, rewiring its reward system and priming
`it for future addictions.
`
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`“Juul is the definition of a double-edged sword,” says
`Michael Siegel, a professor of community health sciences
`at Boston University. “What makes it so effective for
`adults to quit is also what makes it addictive for youth.”
`
`Nontobacco flavors are key to helping smokers switch,
`says Rodney Jerabek, CEO of flavor house Five Pawns
`Inc., which developed some of Juul’s unreleased varieties.
`Separating the nicotine rush from the other sensory
`elements of smoking erodes the cigarette habit, he says.
`But Jerabek also criticizes the high level of nicotine in
`Juul’s pods. At 5 percent, it’s almost double the
`concentration in some rival e-liquids, and Jerabek says
`they’re no longer partners.
`
`Juul says its doses were modeled on those in cigarettes
`and that it’ll release lower-nicotine pods later this year. In
`the meantime, do-it-yourself types are finding other ways
`to tweak the hardware. A YouTube video with step-by-
`step instructions on manually refilling a Juul pod with
`cannabis oil has been watched more than 200,000 times.
`
`The company retains other whiffs of its Pax origins. The
`April patent includes Bluetooth features explicitly related
`to cannabis use, including software to recommend
`particular strains and times of day to use them. And the
`current models contain another feature originally
`designed for the Pax: Wave a Juul around, and it lights up
`in a rainbow of LED colors, an Easter egg known
`colloquially as party mode. It’s decidedly nonfunctional.
`
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`JLI Ex. 2027, Page 5 of 5
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