In this episode of “At Your Convenience,” CSP Editor Diane Adam talks with K.C. Crosthwaite, chairman and CEO of Juul Labs, Washington, at the Outlook Leadership conference in Rancho Palos Verdes, California.
On this podcast, Crosthwaite talks about the Food and Drug Administration’s authorization of five Juul e-cigarette products. He talks about Juul’s latest innovation, challenges of the illicit market, youth nicotine use, age-gated technology and more.
“At Your Convenience” brings industry experts and analysts together with CSP editors to discuss the latest in c-store news and trends. From mergers and acquisitions to foodservice and technology, the podcast delivers the story straight to listeners in short-format episodes, perfect for the morning commute or a quick break at the office.
Listen to their conversation above, or read the transcript here, which has been edited for length and clarity:
Diane Adam: On July 17, the Food and Drug Administration issued marketing granted orders (MGOs) for five Juul e-cigarette products. This includes Virginia Tobacco and menthol flavors. Why is this significant for your company and for convenience stores that sell these products?
K.C. Crosthwaite: First of all to the c-store partners and customers and distributing partners, I want to just thank them, because it has been a long journey to get to this point. To have our first MGO, without their support and commitment to this category, it would have been much more difficult. We owe them a great deal of gratitude. But you’re right to call it out as a significant event. And for our company, it absolutely is. And I also believe it is for the category.
This was an application with 110 scientific studies. This was an application that, in our view, really demonstrated that these products are appropriate for the protection of public health. It’s one that we believe in and we were quite proud to achieve it. So, it was a big day for the company.
Adam: When this announcement came out, you had mentioned that this authorization marks an important step toward making the cigarette “obsolete.” Why is your goal making the combustible cigarette obsolete and how is Juul getting there?
Crosthwaite: Well, it’s such an important question and not to digress, but I’ll tell you a story. When I joined Juul, which is now almost six years ago, I had known about the company even prior to that. The two founders were from the Stanford University environment. They were both former smokers who were trying to design and develop a way that adults could access nicotine but not do so through a format that kills half its users prematurely. That’s been the mission of the company from day one and it still is what drives this organization today. When you look at the United States today, we still have close to 30 million adults using cigarettes. Innovation has changed. Science has evolved and we’re excited to go pursue that important work.
Adam: The e-cigarette category continues to lose market share from illegally imported products from China. For those in the tobacco category and any c-store category managers listening, what steps are necessary to combat this issue?
Crosthwaite: I am very sympathetic for any category manager today who’s trying to figure out how to responsibly participate in the e-vapor category. It shouldn’t be this way. When you look at the e-vapor business today in the United States, it has grown significantly. There are 20 million adult users of e-vapor, probably 14 or a little more million daily users. And the lion’s share of it has been evading the U.S. regulatory system. It just doesn’t make any sense. There’s a very clear statute in place that was passed into law by Congress that sets the appropriate bar. These products should be reviewed and regulated so consumers can have confidence that as they’re using e-vapor products they’ve been through that process. That’s the opportunity that remains to turn what is predominantly an unregulated category into one that is regulated.
Adam: Juul’s authorization has faced opposition. To give some background to our listeners, a group of senators requested answers from the FDA regarding its decision to authorize Juul’s e-cigarettes. In a letter sent to the FDA commissioner the lawmakers mentioned Juul’s previous lawsuits that the company has settled with 48 states over misleading promotions. What is your response to this?
Crosthwaite: When I joined this company in 2019, it was an interesting time for the category and an interesting time for Juul. What I said then actually to members of Congress was to judge this company by its actions. And rightfully so, in 2019, there was a lot of concern about youth getting access to e-vapor. At that time, we took steps to remove products out of our portfolio from the marketplace and took significant actions to try to deal with this issue.
Sitting here today, we’ve had a 98% reduction in youth getting access to Juul. So, I'm very proud of the steps we’ve taken, the progress that we’ve made. It will never change as part of our mission to operate that way. When we receive feedback, we listen to it. And with the [premarket tobacco product application] PMTA, I wasn’t surprised to see certain stakeholders take a different point of view. Respectfully, I disagree with them. I think, in fact, the way that this company is operating is exactly what you’d want to see from a regulated company. I hope that others in the e-vapor space take that same responsibility. I think it’s important to preserve and improve this e-vapor business that we’re all trying to be successful in.
Adam: I want to give you the opportunity to talk about innovation. What innovation is Juul working on now to share with our listeners? And what do you think is coming next?
Crosthwaite: We’re always happy to talk about innovation. I’m certainly biased, but it’s what sets Juul apart. We don’t outsource our [research and development] R&D. We don’t outsource innovation to other parts of the world. We have over 40 different technical disciplines in-house. We have all our scientific work in-house. We believe in that path for our company. And despite this long journey to have our first Juul One platform finally get over the hump with the MGO, we never stopped innovating. We have a robust pipeline of technology that we think will both responsibly switch adult smokers and continue to advance the standards in this business.
I can share with you that we did file the Juul 2 platform that entered scientific review at the end of last year. It is sold in other parts of the world. So that will give you a sneak peek of what’s to come. But there’s quite a bit more behind it that we are very focused on bringing to the world.
Adam: C-store operators are going to be listening to this podcast. How can they best merchandise products equipped with age-gated technology?
Crosthwaite: Well, I will humbly give my advice to c-store operators that I have a great deal of respect for, but I have been around one way or another the nicotine landscape for call it 28 years now and what I’ve seen in the last several years is a pace of change in the United States like no other. If I was on the other side in a retailing environment, the rate of cigarette declines at double digit and the pace of consumers transitioning off combustion to non-combustion formats, I don't think that's going to slow down. And in fact, with a better structure to the regulated system, I believe the innovation is there for this pace of change to even increase.
My advice would be to really embrace that strategy. Thinking about how they’re going to differentiate their business and win with this pace of change, I think, is a critically important topic. You mentioned things like age-gating, responsible retailing of nicotine is essential to the future of the category. There really is no room for underage sales to be permitted and I think with the way technology has evolved at the product level and the way technologies evolved at the retail level with scanning information identification, I think you can remove a lot of the friction for consumers. I would be very focused on the pace of change right now if I was in the retailer’s shoes.
Adam: Is there anything else you would like to share with our listeners?
Crosthwaite: I would just like to go back to where I started. I'm quite proud of this organization. It was one that went through a difficult time. We had a denial for a period of time. Then we were in this limbo status for a period of time. Our employees never gave up. They’re deeply committed to what they’re doing, but we could not do what we do without the support and partnership of the retail community. It’s so important to us and it was many in that community that never gave up on Juul. It’s because of that partnership and that belief that we were able to get to where we sit today, which is a very optimistic view from my standpoint on what’s next for Juul. I just want to make sure that your listeners hear that and understand how much that meant to us.
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