We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Juul Burns Out: Company Ends Sales & Social Media Promotions
Read MoreHide Full Article
It was a long time coming, but the $15 billion startup that had 70% market share of the e-cig industry has faced the consequences. Earlier this year, Juul Labs had been facing a lot of backlash from the public, the government and the Food and Drug Administration as they were targeting the wrong demographic through their social media and selling their products to underage consumers. After facing lawsuits and complaints from other companies and children’s parents, Juul has decided to stop selling their e-cig flavors in stores and halting social media promotions.
It’s What We Expected
The company decided to go through with this decision as the FDA recently announced their plan to ban all sales of flavored e-cigs. CEO Kevin Burns stated that it was never their intention to have youth use Juul. However, even if it wasn't their intention, as they claim, the company still used young people in their promotional and social media campaigns. So even if they weren't targeting that demographic directly, they did so indirectly. According to the New York Times, the FDA acknowledged that it was caught off guard when they came across the soaring popularity of vaping among minors. It has been reported that more than three million middle and high school students use e-cigarettes.
The main idea behind Juul was that it was meant to be for adult smokers looking to find an alternative to cigarettes with nicotine. Since the company’s objective has taken a wrong turn, other tobacco/e-cig companies have had to face consequences as well. The FDA had met with many different e-cig and tobacco companies to find alternatives to reduce youth vaping after threatening that it would take e-cigarettes off the market if these companies didn't find a way to end teenage sales.
Major companies like Altria (MO - Free Report) said that they would discontinue most of its flavored e-cigs as well as support a law raising the age to 21 to purchase tobacco and vaping products, something they had denied before. The company also agreed to use age-verification technology. Hopefully, this will ensure anyone buying these flavors online meet the age requirement and that the technology is strict enough to figure that out.
Impact on Sales?
In a study by Ernst & Young, consumers have been demanding more variety in flavors for e-cigs. The most popular flavors include fruits (23%) and botanicals (20%). However, since these kinds of flavors won’t be sold anymore, does this mean sales will decrease? The company has mentioned that it will end sales for flavors like cucumber, mango and cream, just to name a few, but will still sell menthol, mint and tobacco flavors as those are still available in regular tobacco cigarettes.
According to Fortune, over a 52 week period ending July 14, 2018, the company had over $1 billion in profit, so imagine what it would be like since the company’s launch in 2015. It can be expected that since the company will no longer be selling in stores (the place where people prefer to buy their products, according to the EY report) the company might face a decline in sales. Juul has been a very profitable company, even from the start. However, since their operations seemed somewhat unethical, it is important to understand that the company faced the right consequence at the right time.
We can look at this both ways. Sales might decrease, but since the company will still sell online, consumers could still buy the flavors online, regardless of the age-verification system.
Bottom Line
Before we consider the financial aspects of this situation, it is important to consider the guidelines the FDA has set out to ensure safety for the people using this product. Considering this a huge hit for the company itself, the e-cig industry might be facing some trouble too, seeing as many other major companies don’t want to face the same problems after the FDA has set out specific strict guidelines.
It will be interesting to look at how these companies, especially Juul, will perform in the upcoming months, and whether or not they will be valued at the same amount as they were when they first started.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early. See Zacks' 3 Best Stocks to Play This Trend >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Juul Burns Out: Company Ends Sales & Social Media Promotions
It was a long time coming, but the $15 billion startup that had 70% market share of the e-cig industry has faced the consequences. Earlier this year, Juul Labs had been facing a lot of backlash from the public, the government and the Food and Drug Administration as they were targeting the wrong demographic through their social media and selling their products to underage consumers. After facing lawsuits and complaints from other companies and children’s parents, Juul has decided to stop selling their e-cig flavors in stores and halting social media promotions.
It’s What We Expected
The company decided to go through with this decision as the FDA recently announced their plan to ban all sales of flavored e-cigs. CEO Kevin Burns stated that it was never their intention to have youth use Juul. However, even if it wasn't their intention, as they claim, the company still used young people in their promotional and social media campaigns. So even if they weren't targeting that demographic directly, they did so indirectly. According to the New York Times, the FDA acknowledged that it was caught off guard when they came across the soaring popularity of vaping among minors. It has been reported that more than three million middle and high school students use e-cigarettes.
The main idea behind Juul was that it was meant to be for adult smokers looking to find an alternative to cigarettes with nicotine. Since the company’s objective has taken a wrong turn, other tobacco/e-cig companies have had to face consequences as well. The FDA had met with many different e-cig and tobacco companies to find alternatives to reduce youth vaping after threatening that it would take e-cigarettes off the market if these companies didn't find a way to end teenage sales.
Major companies like Altria (MO - Free Report) said that they would discontinue most of its flavored e-cigs as well as support a law raising the age to 21 to purchase tobacco and vaping products, something they had denied before. The company also agreed to use age-verification technology. Hopefully, this will ensure anyone buying these flavors online meet the age requirement and that the technology is strict enough to figure that out.
Impact on Sales?
In a study by Ernst & Young, consumers have been demanding more variety in flavors for e-cigs. The most popular flavors include fruits (23%) and botanicals (20%). However, since these kinds of flavors won’t be sold anymore, does this mean sales will decrease? The company has mentioned that it will end sales for flavors like cucumber, mango and cream, just to name a few, but will still sell menthol, mint and tobacco flavors as those are still available in regular tobacco cigarettes.
According to Fortune, over a 52 week period ending July 14, 2018, the company had over $1 billion in profit, so imagine what it would be like since the company’s launch in 2015. It can be expected that since the company will no longer be selling in stores (the place where people prefer to buy their products, according to the EY report) the company might face a decline in sales. Juul has been a very profitable company, even from the start. However, since their operations seemed somewhat unethical, it is important to understand that the company faced the right consequence at the right time.
We can look at this both ways. Sales might decrease, but since the company will still sell online, consumers could still buy the flavors online, regardless of the age-verification system.
Bottom Line
Before we consider the financial aspects of this situation, it is important to consider the guidelines the FDA has set out to ensure safety for the people using this product. Considering this a huge hit for the company itself, the e-cig industry might be facing some trouble too, seeing as many other major companies don’t want to face the same problems after the FDA has set out specific strict guidelines.
It will be interesting to look at how these companies, especially Juul, will perform in the upcoming months, and whether or not they will be valued at the same amount as they were when they first started.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early. See Zacks' 3 Best Stocks to Play This Trend >>