The downward shift in marketing efforts by Juul Labs Inc. has led to a higher workforce reduction than projected in October, the company confirmed Tuesday.
Juul, maker of the controversial top-selling Juul electronic cigarette, is eliminating 650 jobs, or about 16% of its global workforce of 4,051.
The downsizing began Tuesday.
Media reports on Oct. 29 had Juul cutting about 500 jobs by the end of the year.
The workforce reduction is part of a restructuring aimed at reducing expenses by $1 billion in 2020.
Before Juul Labs became swept up this summer in the national vaping illness crisis, it had been adding to its work force this year at a rate of 300 per month.
“All regions (are) impacted and all employees who are impacted will receive separation packages,” the company said.
“As the vapor category undergoes a necessary reset, this reorganization will help Juul Labs focus on reducing underage use, investing in scientific research, and creating new technologies while earning a license to operate in the U.S. and around the world,” said K.C. Crosthwaite, the former Altria Group Inc. executive who took over as Juul’s chief executive Sept. 25.
In August, Juul said it had launched a trial market for an electronic cigarette product that can be paired with Bluetooth to help monitor usage and lock the device when not in use.
In October, Juul paused marketing efforts as regulators claimed the company was trying to push its products on teens. That followed the suspension in September of all broadcast, print and digital product advertising in the U.S. The remaining marketing team will focus on direct efforts to adult smokers.
The latest restructuring development puts more stress on Altria’s stake in Juul. Altria spent $12.8 billion in December to acquire a 35% stake, which led it to discontinue its e-cigarette production.
On Nov. 1, Altria reported in a regulatory filing taking a non-cash, pre-tax impairment charge of $4.5 billion related to its Juul ownership stake.
That places the fair value of the investment at $8.3 billion, down 35%.
Analysts question how much success Juul will have going through the Food and Drug Administration’s premarket tobacco-application process. That process requires the FDA to consider products’ existing risks and benefits to the population as a whole, including users and non-users.
Tobacco manufacturers are required to not only provide information on the composition, design and manufacturing process but also chemistry, toxicological and behavioral studies that demonstrate the product — when used — is appropriate for the protection of the public health.
In October, Juul halted all sales of its four non-tobacco and non-menthol flavors. Juul pulled its creme, cucumber, fruit and mango flavorings from retail outlets in November 2018, but kept them available via age-verification requirements on its website.
Juul made another flavoring concession Nov. 7 to immediately cease online sales of its mint pod products and halt orders from retailers and wholesalers. Crosthwaite said Juul will sell only Virginia tobacco, classic tobacco and menthol flavorings — the same flavors allowed for traditional cigarettes.
Crosthwaite said the decision was made largely in response to the Nov. 5 release of the 2019 National Youth Tobacco Survey and Monitoring the Future survey that determined U.S. teens who use e-cigarettes prefer those made by Juul.
The survey also found that mint became the preferred flavor for youths after Juul ceased selling creme, cucumber, fruit and mango flavorings at retail outlets.
The FDA is expected to release any day its final rules on heightened e-cigarette regulations, which will likely include banning all flavorings outside tobacco and menthol. Anti-tobacco critics have pressured the FDA to ban menthol.
President Donald Trump has said he would support raising the federal age for tobacco products from age 18 to 21.
The original Vuse version by R.J. Reynolds Vapor is the No. 2 selling e-cigarette. Its current flavors are tobacco, menthol, mint, rich tobacco, chai, crema, fusion, tropical, mixed berry, melon and nectar.
Reynolds American Inc. spokeswoman Kaelan Hollon said in September that the manufacturer “shares President Trump’s concern that some flavors, such as those resembling ‘kid friendly’ food products, may play a role in increasing youth appeal and that marketing activities should not be directed to youth.”
Fontem Ventures, maker of blu eCigs brand, continues to sell sweeter flavors, including honeymoon, neon dream, blue ice and melon time.
Although the flavored e-cigarette removal process could start within months of the final rules being announced, it likely will take several years for the FDA to work though the expected legal challenges from tobacco manufacturers and advocates.
The other reaction on heightened FDA regulation is a concern about “throwing the baby out with the bathwater,” given that several studies have demonstrated that some flavored e-cigarettes are helping to wean adult smokers from traditional cigarettes.
The e-cigarette sector is facing an avalanche of public-health criticism over deaths and severe illnesses related to e-cigarette consumption.
The federal Centers for Disease Control and Prevention has said its investigation into an outbreak of severe vaping-related illnesses is focused primarily on open-pod e-cigarettes in which liquids containing the marijuana compound THC are being vaped.
Open-pod systems tend to be sold by smaller makers of e-cigarettes, including vape shops, that offer more flavor options, such as several varieties of fruit, candy and coffee.
The CDC’s latest update on vaping-related illnesses, released Nov. 7, determined there have been at least 2,051 cases nationwide and at least 40 related deaths.
On Friday, the CDC said they have a “very strong culprit” in the vaping illnesses in vitamin E acetate.
Meanwhile, there have been few incidents reported involving the closed-pod e-cigarettes sold by Juul, Reynolds Vapor, Fontem and NJoy.