Company News

September 21, 2020

Today, Juul Labs CEO and Chairman K.C. Crosthwaite delivered the keynote address at the 2020 Global Tobacco & Nicotine Forum (GTNF), where he spoke on the potential harm reduction opportunity the vapor category represents for adult smokers, along with Juul Labs’ steadfast commitment to combating underage use.

The annual GTNF provides an invaluable opportunity for all stakeholders to come together and speak about using innovation and regulation to create sustainable change in the tobacco and nicotine market. As K.C. discussed, to fully realize this historic harm reduction opportunity before us, the category must work collaboratively with all stakeholders to create the regulatory frameworks that prevents underage use and, at the same time, ensure vapor alternatives can compete with combustible cigarettes among adult smokers.

That collaboration begins with open engagement, particularly as Juul Labs and the category work to re-earn trust and establish a license to operate in society. 

View The Keynote Address Here

Read The Full Remarks Below As Prepared For Delivery:

Hello to everyone joining us from around the world. 

Thank you for giving me the opportunity to present at this important gathering. And thank you to Elise, the GTNF team, and the advisory board for pulling this together.

This event comes at a critical moment in our effort to reduce the harm caused by cigarettes – an inflection point, if you will.

On one hand, adult smokers today have more noncombustible product options than ever before. But on the other hand, we are seeing a worrisome resurgence of cigarettes in some countries.

At Juul Labs, we are committed to moving adult smokers away from cigarettes. When I joined this company a year ago, I took action to help us reset, reorganize, and refocus towards that goal. I can tell you without hesitation that today, we are working harder than ever to achieve our goal of ending the age of the combustible cigarette.

I’d like to use my time with you today to discuss three observations about this moment and where we go from here. 

First, I want to talk about the harm reduction opportunity at stake. I can say with confidence and great optimism that we have today what was never feasible before — the tools and technology to end the era of smoking. For good.

Second, I want to talk about the factors that are standing in the way of this market transformation. Not all smokers have access to noncombustible products. Across the world, regulatory frameworks tip the balance in favor of cigarettes.

On top of that, many smokers are confused about the risk compared to cigarettes. Misconceptions about these products are at an all-time high. This, coupled with the erosion of trust in our category, has hindered adult smokers’ ability to switch away from cigarettes. I want to talk about what we need to do as an industry to build that trust.

Third, I want to share with you how we’re thinking about key principles of risk-proportionate regulation for nicotine and tobacco products. To realize such a system, governments, civil society, public health bodies, and industry must work collaboratively. If we get this right, we can accelerate the end of the age of the cigarette.

Before getting into the heart of my remarks, I’ll first explain our foundational approach to nicotine and its use. 

Nicotine is addictive and can be harmful. If you don’t use nicotine, don’t start. If you smoke cigarettes, the best thing you can do is quit. However, we know that there are many smokers who won’t quit. For those smokers, switching completely to noncombustible products may be a way to reduce their risk of smoking-related disease.

I want to also make clear that progress in harm reduction for adult smokers cannot come at the cost of high levels of underage use. Those who are underage should not have access to or use any tobacco or nicotine-containing products.

The past few years have taught us many important lessons, and at Juul Labs, we have worked hard to show our commitment to reform through actions. Today, we are more disciplined and focused on the responsible stewardship of our products.

In recent years, there has been an unacceptable rise in underage use of vapor products in the US, including the use of JUUL products.  Recently, we have seen some encouraging trends in the States, but more needs to be done, both now and in the future, to ensure our products are used by the adult smokers for whom they are intended.

This summer we submitted a premarket tobacco product application to the US FDA for the JUUL System. We believe our robust submission will help inform the FDA’s decision on whether continued marketing of JUUL products is appropriate for the protection of public health. Our submission contains over 110 original scientific studies and 125,000 pages of data and analysis across a whole range of disciplines. From chemistry, to toxicology, to clinical studies, to behavioral research, to a population model that ties it all together.

I’m proud of the work our team has done. We are committed to sharing our research with regulators and participating in the scientific dialogue with the global public health community through peer-reviewed publications, conferences, and other scientific venues.

We know from decades of research that nicotine is delivered on a continuum of risk, with combustible products on one end of that continuum representing the most harmful form of nicotine delivery,  and noncombustible products, including vapor, lower down the continuum. The world’s one billion adult smokers can reduce their risk by moving down this continuum and leaving smoke behind. This is the heart of tobacco harm reduction.

For those who are not familiar with our product, the JUUL System delivers nicotine without burning tobacco. Instead, it heats a nicotine liquid in a closed, tamper-resistant pod to create an aerosol. Through the device technology and software, the temperature is precisely controlled to minimize the production of toxicants found in tobacco smoke. 

But in order for large numbers of adult smokers to switch, noncombustible products must successfully compete with cigarettes – which means they must deliver nicotine at a level that is sufficiently satisfying.  These products must be able to pull smokers away from the cigarettes they have used for years, if not decades. 

Our research shows that for adult smokers, JUUL products are a satisfying alternative. We estimate that in the US, in the last five years, approximately two million smokers have switched completely away from cigarettes using JUUL products.

That is an important and exciting step in a long journey. Let me show you some of this research.

Here we are looking at switching rates of JUUL purchasers. As you can see from the chart, at 12 months after purchase, we see very high rates of complete switching — 58% —  among all adult smokers. Switching in our behavioral studies means absolutely no smoking whatsoever in the last 30 days, not even a puff.

The group on the far right here is adult daily smokers who have smoked for at least 5 years. This is a group who typically finds it harder to switch. Even among this group, we see high rates of switching — 43% reported complete switching at 12 months. 

Across the board for all groups of smokers, switching increased over time as dual use declined.  The potential to switch smokers at such high numbers is a historic opportunity. It represents the opportunity that all of us have —and I mean all stakeholders in this fight against cigarettes — to truly realize meaningful harm reduction in our lifetime.

That brings me to the second point I’d like to make today. Across the world, there are a broad array of innovative noncombustible products that represent potentially lower risk alternatives to cigarettes. This is an enormous public health opportunity. 

But now, more than ever, we are at risk of losing that opportunity given the lack of trust in our category and the precarious regulatory reality it has created.

As I mentioned at the start, since joining Juul Labs, I have committed the company to what we call a “reset” – by which we mean a comprehensive effort to better align our policies and our practices to the expectations of our stakeholders. This is critical to re-ignite that positive momentum and earn trust. 

But we, along with the whole vapor category, now find ourselves at a turning point, and the goal and potential of meaningful harm reduction hangs in the balance.

As we all know, cigarettes are available – and smoked – everywhere around the world. At the same time, a third of the world’s population lives in countries where nicotine vapor products are actively banned. Smokers who live in these countries are being left behind.

As a result of these and other restrictions – despite being available for over a decade – vapor products are a very small percentage of total tobacco sales,  less than 3% of combustible cigarette sales worldwide.

On top of that imbalance, cigarettes are rebounding in the US – a country where we have had success with switching. This isn’t a hypothetical.

We are seeing, for instance, state and local regulations that ban menthol in noncombustible products, while leaving menthol cigarettes untouched and available on every street corner.

Compounding these restrictions are misperceptions about risk. The result – smokers who have switched are being driven away from alternatives and back to cigarettes.

We’re seeing higher than expected cigarette sales, cutting into the drastic declines we saw in 2019.  And we risk replicating this trend around the world if we continue on the current path.

We must be a responsible steward of our product and our category. This includes combating underage use.  We want to positively contribute to a world focused on harm reduction. This will require an effort from industry, regulators, and all stakeholders in three critical areas.

First, there are still widely held misperceptions about nicotine that must be corrected.

Second, regulatory frameworks must be created to provide a clear pathway to market for innovative and less harmful noncombustible products. 

And third, regulation must be risk-proportionate to accelerate switching away from cigarettes. 

In the few minutes I have left with you, I would like to spend a little time on each of these areas.

There are serious misperceptions about the role of nicotine in smoking-related disease. As you can see from this survey by the US FDA, approximately 80% of adults believe tobacco-related cancer is primarily caused by nicotine. 

This perception is, of course, incorrect. Nicotine is addictive, but it is not responsible for the overwhelming harm caused by smoking. When a cigarette is lit, the tobacco and paper burns to produce smoke. It’s this process of combustion that creates and carries the toxicants that cause smoking-related diseases like cancer.

But the public is confused. These misperceptions actually keep people smoking — after all, why should you switch if you think all nicotine-containing products are equally harmful? Why not stick with the cigarette you know?  

Correcting these misperceptions is incredibly important.

The experience from around the world is clear  — smokers are more successful in switching when they believe they’re making a choice that reduces their risk. And, of course, smokers can’t switch to products they don’t have access to. In many countries, there isn’t a pathway to market for noncombustible products. For example, snus remains banned in the EU, even with decades of epidemiology showing it is less harmful than continued smoking.

Noncombustible products should be available everywhere that cigarettes are sold. 

Regulatory pathways must – of course – include minimum quality and safety standards, but they can’t be so restrictive and so burdensome that they become de facto barriers to market.

There is no single product that will work for every smoker. They need access to a broad range of options that can help them leave cigarettes behind. Right now, however, smokers around the world have different access to noncombustible products, or none at all, depending on where they live.

As some of you are probably aware, earlier this month I announced that our company is withdrawing our products from several markets around the world. While there were several factors that went into this decision, one very important factor was the difficulty of competing with cigarettes without a risk-proportionate regulatory framework.

Allow me to explain what I mean by “risk-proportionate”. The premise of such a framework is straightforward: The toughest regulations should be applied to the riskiest products – cigarettes and other combustibles — while lower-risk products should have a clear and achievable pathway to market and policies that increase their value proposition compared to cigarettes.

To be clear, risk-proportionate regulation does not mean a “lenient” approach to noncombustible products. It certainly does not mean an unregulated marketplace. Robust regulation of our category will always be appropriate.

While there are some notable exceptions, regulations and policies today don’t often recognize this risk continuum at all. Some treat the products as equally risky, or even worse, make the burden higher for noncombustible products. This is counterintuitive, and counterproductive.

Noncombustible products must be able to compete with cigarettes – especially on nicotine delivery. 

Today, many countries are imposing limits on nicotine concentrations in vapor products, following the lead of the EU’s Tobacco Products Directive. Instead of promoting switching, the TPD, which dictated a maximum nicotine concentration of 20 mg/ml in e-liquids, may actually inhibit switching by making vapor products a less appealing option relative to cigarettes.

The intent of the TPD was to allow for parity in nicotine delivery between vapor products and cigarettes, but it focused on nicotine concentration, which does not directly translate to delivery.

Let me show you what this means for the JUUL System. Here we see blood nicotine delivery mapped out. The top line — in red — is delivery from a cigarette. Below that — in blue — is the JUUL System at 59 mg, available in the US. And below that — in gray — is our TPD-compliant product at 18 mg.

As you can see, the 59 mg product’s nicotine delivery is already lower than a cigarette. Delivery from 18 mg is much lower still. These differences in nicotine delivery directly affect the ability to switch.

Our research shows switching rates are significantly higher in countries where adult smokers have access to JUUL products with higher nicotine concentrations.

Many vapor products with these nicotine caps just cannot reach and switch adult smokers.

The market has evolved since the TPD came into effect, and product innovation advances have allowed for appealing, temperature-controlled vapor products that are a more viable alternative for many adult smokers.

To compete with and eventually replace cigarettes, we need lower risk alternatives that people who smoke will actually want to use.

So, when it comes to this idea of risk-proportionate regulation, consider what is in the balance. We know that the ability to introduce and promote innovative lower-risk products is very important to moving smokers away from cigarettes. We also know that noncombustible products should have an advantage over cigarettes because they are lower on the risk continuum. So the balance should be weighted toward the potential of harm reduction.

As I’ve just discussed, noncombustibles must compete with cigarettes for nicotine delivery, so nicotine ceilings may actually hinder complete switching away from combustible cigarettes. Unintentionally – this shifts the balance towards combustible cigarettes and away from lower risk products.

Studies have also shown that flavors are important. Flavors can help smokers switch, and help them stay switched. But there is a crucial balance with addressing underage use. Where flavors are available, they must be marketed in a way that can effectively reach adult smokers while limiting appeal and access to those underage.

Consumer awareness is another area where risk-based regulation is appropriate.  At Juul Labs, we believe responsible communications should be highly tailored to adult smokers in order to promote switching. Dark markets could actually protect cigarettes by limiting awareness and promotion of other lower-risk alternatives, shifting the balance a little more towards cigarettes.

We also know that price can be a powerful tool for pushing smokers away from combustible cigarettes. Regulators should consider risk-based taxation to create a better value for noncombustible alternatives while increasing the price of cigarettes — improving the public’s health while limiting fiscal shortfalls.

And finally, misperceptions about nicotine tip the balance towards cigarettes. Without clear, risk-based communication from trusted sources, there is less of an incentive to switch away from cigarettes. 

When it comes to communicating information about risk between products that burn tobacco and products that don’t, regulators and public health bodies are the most effective messengers. The current regulatory framework around the world today is a patchwork of regulations, policies, and communications that may actually be helping to shift the balance towards the very cigarettes we would like to make obsolete.

Noncombustible products have the potential to completely replace cigarettes for those who won’t quit.  And the opportunity to address, once and for all, the leading cause of preventable death and disease in the world is right here in front of us. We cannot let this opportunity slip through our fingers.

In closing, I am fully aware that building a risk-proportionate regulatory framework will take time. Yet I am ultimately optimistic about the future.

There are strongly-held, significant differences of opinion among stakeholders about how to proceed, but there is near-consensus that the era of smoking must end – and the sooner the better. This is common ground upon which we can build.

As we continue this dialogue — informed by the evolving science — I believe we can accelerate change. We can put into place policies and practices that will benefit adult smokers and improve public health around the world.

I believe products like JUUL have something uniquely important to offer in that effort – they truly are the best technologies I have ever seen to help adult smokers switch away from combustible cigarettes.

But, as I said before, it starts with our company and category acting with humility and being responsible stewards of our products. That is my commitment.

Thank you for providing me this opportunity. I welcome your questions.