More Problems at Juul
With the negative publicity directed at e-cigarettes, the largest maker of the product was bound to be affected in a big way. According to the Wall Street Journal, Juul Labs will be cutting 650 jobs, or 16 percent of its employees. The San Francisco e-cigarette maker is also going to be reducing its spending by nearly $1 billion, especially in the areas of marketing and government affairs.
The news comes on the heels of Juul Labs cutting out the sales of cartridges for its best-selling flavor, mint-flavored e-cigarettes, and preparing for much lower sales as a result. The company announced the decision early in November after data showed that the mint flavor, which makes up 70 percent of Juul’s sales, is very popular among teens, along with the mango flavor. According to Garrett Nelson, a tobacco analyst with CFRA Research, that was the company’s most recent effort to pull products from the market while regulators begin to issue new guidelines for the e-cigarette industry.
Juul Labs, which currently has a workforce of about 4,000 people, with more than 1,000 workers in the Bay Area, is the subject of a number of federal investigations about its alleged role in teenage vaping. In addition, critics from public health and anti-smoking groups have said that e-cigarette companies are paying so-called social media influencers — quasi-celebrities with large followings — to promote and market their products directly to young people on Facebook, Instagram, Twitter and Snapchat, according to a letter from more than 100 public health and tobacco-free organizations, reported CBS News.
Most of the employee cuts will be in the marketing department. Juul has said that it would lighten up on its marketing effort, because regulators have expressed concern that the company was attempting to go to great lengths to persuade teens to try its products. While the company’s hiring has slowed by more than 62 percent in the past two months, its retail distribution spread has not slowed.
According to the San Francisco Business Times, Juul will be laying off 150 more people than previously estimated. The company had engaged in a “massive hiring spree” during the past few years as vaping grew in popularity. The company said it was hiring about 300 people per month earlier this year.
Financial analysts believe that Juul’s recent moves will have an impact on its much-reduced revenue and will trigger concerns about its viability. The tobacco giant Altria Group recently reduced the value of its $12.8 billion investment in Juul Labs by a third. Still, there is a possibility of staying alive.
Nelson summarized, “We think the mint ban will be devastating to Juul’s U.S. sales in the short-term, but we think they’re probably sitting on ample cash and liquidity following the investment from Altria, so now it’s all about cutting costs, treading water and working with regulators to expedite the re-approval process.”