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6:33 AM / Wednesday February 26, 2020

25 Sep 2019

Juul to end product advertising and replace CEO

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September 25, 2019 Category: Stateside Posted by:

By MATTHEW PERRONE and MICHELLE CHAPMAN

Juul Labs will no longer promote its e-cigarettes in print, digital and TV advertisements and is replacing its CEO amid an escalating backlash against vaping nationwide.

The nation’s largest e-cigarette maker also pledged Wednesday not to lobby against a sweeping ban on vaping flavors proposed by the Trump administration earlier this month.

Juul announced its CEO, Kevin Burns, will step down and be replaced by a senior executive from Altria, the maker of Marlboro cigarettes. Altria took a 35% stake in Juul in December at a cost of $13 billion.

The shakeup comes amid growing public furor over vaping that has triggered calls for tighter restrictions at the federal and state levels. On Tuesday, Massachusetts proposed banning all vaping products for four months.

Juul and hundreds of smaller e-cigarette companies are fighting for their survival as they face two public health debacles linked to vaping: a mysterious lung illness and rising use of e-cigarettes by teenagers.

Public health officials are investigating hundreds of cases of the breathing ailment but have not yet identified any one product or ingredient. At the same time, underage vaping has reached epidemic levels, according to top government health officials, with more than 1 in 4 high school students using e-cigarettes in the last month.

Also on Wednesday, one month after announcing that they were in merger talks, the tobacco giants Altria and Philip Morris International said they were calling off those discussions.

Juul quickly propelled itself to the top of the e-cigarette market with a combination of high-nicotine pods, dessert and fruit flavors and viral marketing. Today the San Francisco company controls roughly 70% of the U.S. e-cigarette market.

Since 2018 Juul has tried to head off a crackdown with a series of voluntary steps, halting retail stores of several flavors and shutting down its social media presence. But parents, politicians and public health advocates have continued to push for a broader crackdown.

The company now faces multiple investigations from Congress, several federal agencies and state attorneys general.

Earlier this month President Donald Trump said that the federal government will act to ban thousands of flavors used in e-cigarettes in response to a recent surge in underage vaping that has alarmed parents, politicians and health authorities nationwide.

Altria Group Inc. said that K.C. Crosthwaite will become JUUL’s new CEO, replacing Kevin Burns. Crosthwaite served as Altria’s chief growth officer.

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Crosthwaite said in a prepared statement that Juul has long focused on providing adult smokers with alternatives, but recognized that there’s currently “unacceptable levels of youth usage and eroding public confidence in our industry.”

“We must strive to work with regulators, policymakers and other stakeholders, and earn the trust of the societies in which we operate. That includes inviting an open dialogue, listening to others and being responsive to their concerns,” he said.

Altria and Philip Morris said last month that they were in discussions to become a single company, more than a decade after splitting into two as lawsuits mounted.

Altria has exclusively sold Marlboro cigarettes and other tobacco brands in the U.S., while Philip Morris has handled international sales.

Philip Morris International Inc. CEO André Calantzopoulos said Wednesday that the companies will instead focus on launching IQOS in the U.S. IQOS is a heat-not-burn cigarette alternative made by Philip Morris.

It was Crosthwaite, who will take over Juul, who headed the development of IQOS.

Shares of both companies rose in early trading, with Philip Morris’ stock jumping almost 7%.

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