Juul cut about one-third of its 3,000 workers earlier this year and already has halted sales of its vaporizers in several countries. The once fast-growing company has been scaling back its operations to combat a sharp drop in sales.
The company is aiming to shrink its workforce of 2,200 to about 1,000, the people familiar with the matter said. Juul Chief Executive K.C. Crosthwaite told employees in an email Wednesday that the company was planning significant cuts.
“No final decisions have been made and we will continue to go through our evaluation process,” a Juul spokesman said Thursday.
Widely blamed by parents and government officials for a surge in teen vaping in the U.S., Juul has faced regulatory crackdowns and investigations into its marketing practices over past two years. Now its sales are falling as Reynolds American Inc.’s Vuse e-cigarette brand gains market share and some vapers switch back to traditional cigarettes.
Juul Chief Executive K.C. Crosthwaite told employees in an email Wednesday that the business units under review don’t generate enough revenue to support further spending there. He said the cuts would allow the company to invest in developing new products, in technology to curb youth use and in scientific research that could help the company demonstrate to regulators that its products are less harmful than cigarettes. Juul has submitted to the Food and Drug Administration a new version of its vaporizer designed to unlock only for users at least 21 years old, according to people familiar with the matter.
“While those investments will not provide short-term revenue, they will help us earn trust and build a company for the long term,” Mr. Crosthwaite wrote in the email to staff.
Since Mr. Crosthwaite took the helm of the e-cigarette maker a year ago, Juul has halted most of its U.S. advertising, cut more than 1,500 jobs, stopped selling sweet and fruity flavors in the U.S. and reversed its overseas expansion. In the past few months, the company has exited South Korea, Austria, Belgium, Portugal and Spain.
Now it is considering pulling out of nearly a dozen more countries including Italy, Germany, Russia, Indonesia and the Philippines. The U.S., Canada and the U.K. represented more than 90% of Juul’s sales in the first quarter of this year, according to a person familiar with the matter.
Juul’s U.S. market share has fallen to 58% from 75% in November 2018, when it voluntarily halted sales of its sweet and fruity flavors in U.S. retail stores, according to Goldman Sachs analyst Bonnie Herzog. Juul’s sales at U.S. retailers dropped 33% in the four weeks that ended Aug. 8, compared with the same period last year, according to Ms. Herzog.
The startup’s biggest investor is Marlboro maker Altria Group Inc.
Juul last year recorded $2 billion in sales and a loss of $1 billion, and in the first quarter of this year it reported a loss of $46 million on sales of $394 million, according to financial disclosures the company made to its employees.
Rival Reynolds American is gaining on Juul with deep discounts on its Vuse Alto vaporizers and a wide-ranging marketing campaign. Reynolds is using models as young as 25 and social-media posts with music and images aimed at younger adults. Reynolds says it takes measures to prevent people younger than 21 from seeing its social-media posts and that its content doesn’t include images or themes intended to appeal to youth.
Meanwhile, some adult vapers, particularly those older than 50, are switching back to traditional cigarettes from vaping devices in the wake of federal restrictions on e-cigarette flavors, according to Altria. Others switched back to cigarettes, Altria has said, because of the outbreak last year of a vaping-related lung illness that ended up being linked to vitamin E oil in marijuana vaping products.
In a June interview, Mr. Crosthwaite pointed to improving cigarette sales trends in the U.S. as evidence of eroding public trust in e-cigarettes.
In other countries, officials have adopted policies such as taxes that push people back to cigarettes, a Juul official said.
“It has seemingly become easier to sell combustible cigarettes than vapor products in some markets,” Mr. Crosthwaite, a former Altria executive, wrote in his email to staff Wednesday.
Juul upended the U.S. tobacco industry in 2017, when it vaulted to the top of the e-cigarette market. Altria took a 35% stake in 2018 at a price that valued Juul at $38 billion, making it one of the most valuable startups in the country. Juul kept only about $200 million of that cash, distributing most of the money to its investors and employees. Altria now values the e-cigarette maker at about $12 billion.
Juul pushed aggressively last year to expand into overseas markets, and entered countries without first seeking local regulators’ support. That led to embarrassing setbacks such as in China, where online retailers pulled Juul off their websites just days after the company launched there.
Juul is now exploring introducing its products in Japan, where it plans to present its scientific research in an effort to make the case that e-cigarette sales should be permitted.