American e-cigarette giant Juul said on Wednesday that it is planning a new round of substantial layoffs and is considering stopping sales in Europe and Asia. This may mean that Juul is considering withdrawing from the markets of 11 countries and regions, including Italy, Germany, and Russia, and narrowing its business scope to core markets such as the United States, Canada, and the United Kingdom.
Juul did not disclose how many positions the company plans to cut. Earlier this year, the company has cut about a third of its employees and currently has about 2,200 employees.
Parents and government officials generally blame Juul for the sharp increase in the number of e-cigarette smoking among American teenagers. The company has been facing crackdowns from regulatory agencies and investigations into its marketing practices for the past two years.
In addition, competition in the market itself is also increasing. As Reynolds American Inc. (Reynolds American Inc.)’s Vuse e-cigarette brand expands its market share, and some cigarette manufacturers re-select traditional cigarettes. Juul, which once developed rapidly, had to keep reducing its business scale to cope with the continuous decline in sales.
Juul chief executive K.C. Crosthwaite told employees in an email on Wednesday that the business unit under investigation by the government did not generate enough revenue to sustain further expenditures.
He said that this time the layoffs and contraction plan will enable the company to invest in the development of new products, research and development of technologies to inhibit young people from smoking e-cigarettes, and conduct more scientific research to prove to regulators that e-cigarettes are less harmful than smoking cigarettes. .
According to people familiar with the matter, Juul has submitted a new version of e-cigarette to the US Food and Drug Administration, mainly for consumers over 21.
“Although these investments will not bring short-term benefits, they may help us win trust and build a long-term organization,” Crosswaite wrote in an email.
Reversing overseas expansion
Since Crosswaite took the helm of the e-cigarette manufacturer for one year, Juul has stopped most of its promotion activities in the United States, cut more than 1,500 jobs, stopped promoting candy and fruit flavors (e-cigarettes) in the United States, and Start to reverse overseas expansion (the trend).
A few months ago, the company had already left South Korea, Austria, Belgium, Portugal and Spain. Now, the company is considering withdrawing nearly 12 overseas branches from countries such as Italy, Germany, Russia, Indonesia and the Philippines.
According to people familiar with the matter, Juul’s sales in the US, Canada and the UK accounted for more than 90% of the company’s total sales in the first quarter of this year.
According to Goldman Sachs analyst Bonnie Herzog, Juul’s market share in the United States has fallen from 75% in November 2018 to 58% today. At that time, Juul voluntarily stopped selling its sweet and fruit-flavored products in US retail stores. In the four weeks ending August 8, Juul’s total sales at US retailers fell 33% year-on-year.
The largest investor in the startup is Altria Group Inc., the maker of Marlboro cigarettes.
Juul disrupted the American tobacco industry in 2017 and became the leader of the e-cigarette market. Altria acquired a 35% stake in Juul in 2018, when Juul was valued at $38 billion, making it one of the most valuable start-ups in the United States.
The financial situation disclosed to employees by Juul shows that Juul’s sales last year were US$2 billion, but its losses reached US$1 billion. In the first quarter of this year, the company reported total sales of $394 million, but lost $46 million. Altria currently valued Juul at approximately US$12 billion.