In a bid to curb teen use of electronic cigarettes, the Food and Drug Administration is moving to ban the sale of all e-cig flavors from the market, including menthol and mint, allowing only tobacco flavor to remain.
Juul Labs is the industry leader with a 75% share of the market, and it derives most of its sales from flavored nicotine pods. As a result, Juul and Altria (NYSE:MO), which owns a 35% stake in the e-cig maker, could lose billions of dollars in sales if it leads to reduced e-cig use.
Although the ban is ostensibly aimed at cutting teen use, adults favor flavored pods as well, and with tobacco being the only flavor allowed, many may end up resorting to traditional cigarette usage again.
Teen e-cig use still rising
Having deemed teen usage an "epidemic," it was perhaps inevitable the FDA would react in this fashion and move to ban flavors.
In a statement announcing the coming ban, the FDA said the most recent National Youth Tobacco Survey indicated over a quarter of high school students were current e-cig users (meaning they had used a device within the past 30 days), and the overwhelming majority of teens users said fruit, menthol, and mint flavors were their favorite.
Yet when the ban takes effect, which could actually be a year from now, it won't only affect teens, but adults, too.
E-cigs remain a useful tool
There is a fairly broad scientific consensus globally that migrating people away from smoking tobacco through electronic cigarettes is beneficial because vaping is less harmful than smoking. It's the combustion of tobacco that creates the multitude of harmful chemicals that are associated with cancer and other diseases.
Yet while vaping vastly reduces the harm, it doesn't eliminate it, which is why e-cig makers like Juul advise that if you don't smoke, don't vape, and if you're a teen, don't use its products at all.
Of course, teen smoking is a problem, too, and vaping has undoubtedly helped innumerable teens quit smoking as it has adults. One university study showed teen smoking rates dropped to record low levels as teen vaping rates rose. The "epidemic" is at least partly caused by teens quitting smoking.
Yet it can't be denied that vaping is seen as "cool" and that influencers on social media encourage teen use of the devices. The FDA's hope is that by making e-cigs taste no better than tobacco, teens won't use them. The law of unintended consequences, though, says it may also make more adults not want to use them, either, as flavors also make the transition away from cigarettes to vaping easier for them.
Taste is a key benefit
Undoubtedly the flavor ban will have some impact. Flavors have been the most popular sellers for Juul, with mango and mint representing almost 75% of total sales, or about $1.6 billion, according to Nielsen data. The New York Post reports that when Juul voluntarily stopped selling flavor pods at retail stops last October, sales of mint and menthol flavors skyrocketed, generating almost $2.4 billion in annualized sales compared to $791 million in annualized sales prior to flavor pods being removed, or a 200% increase.
Part of the impetus behind the new crackdown is a spate of reports that hundreds of people have fallen ill due to e-cig use, and a half dozen deaths have been linked as well. Although there is no evidence e-cigs are the proximate cause for illnesses -- marijuana use has also been linked in the reports -- it is leading some, like U.S. Sen. Mitt Romney, to call for the FDA to recall all e-cigs until their safety can be evaluated.
Some countries have already started taking more drastic measures. India just banned all e-cig sales, and Juul devices mysteriously disappeared from online stores in China without warning.
The beginning of the end?
Still, most of Europe welcomes vaping, and other countries haven't experienced the same side effects reported in the U.S., though many countries also mandate lower nicotine levels in e-cigs than are permitted here.
A flavor ban, when it comes (states are starting to ban flavors now), is sure to hurt the tobacco industry, which has invested heavily in e-cigs, but particularly smaller manufacturers. An upheaval was on the horizon anyway, as they'll need to submit pre-marketing applications to the FDA by early next year, but the elimination of flavors may be what finally sends many under.