Juul Labs announced it will cut 650 jobs, representing 16 percent of the company’s 4,051 employees, and $1 billion in costs in 2020. The San-Francisco based electronic cigarette company has come under increased scrutiny for its marketing and ties to vaping-related illnesses and deaths. Juul plans to cut all marketing spending in a shift to overhaul the company’s image.
Juul’s decision to downsize contrasts rates of growth both in the company and the e-cigarette industry as a whole. Prior to the announced decision, the fast-growing company had been bringing on roughly 300 employees a month. Since its inception in 2015, Juul has come to dominate the e-cigarette industry, holding close to 40 percent of the market.
The e-cigarette industry itself is growing extremely fast. According to a marketing report by BIS research, the market is expected to be worth $86.43 billion by 2025, up from $11.43 billion in 2016. The popularity of e-cigarettes took hold as consumers were swayed by claims of “healthier alternatives” to smoking. So why is Juul cutting jobs and spending?
Juul officially announced in September that the company will suspend all product advertising in the United States. The company seeks to position itself as a responsible company to change its image from one that is largely to blame for a nationwide teenage vaping epidemic. Juul said its remaining marketing team will focus advertising efforts directly to current smokers.
This summer, the U.S. Food and Drug Administration officially declared a teen vaping “epidemic.” Federal survey data showed that roughly 21 percent of high school students vaped within the last year, a sharp contrast to decades of declining youth nicotine use. Many critics and advocates say Juul’s advertisements are heavily responsible for the epidemic.
Scott Gottlieb, the former FDA commissioner, blamed Juul for the surge in teen vaping. Critics point to Juul’s original advertising campaigns that used younger-looking models and bright colors. The FDA issued warnings to the company in September expressing concern over its marketing practices allegedly targeting students.
Amidst the scrutiny, Juul has worked to combat underage use. The company previously shut down its social media accounts and suspended its campaigns that officials said, targeted underage users. Juul also announced it would stop selling mint-flavored pods, the most popular flavor among high school students while removing other sweet flavors from retailers’ shelves.
Juul’s marketing overhaul coincides with local and federal regulatory push back. This summer, San Francisco became the first city in the United States to ban all sales of nicotine e-cigarette products. As of October, seven states have issued similar bans citing concerns over dangers associated with vaping. In September, the Trump administration announced it was preparing a ban on flavored e-cigarettes, and companies now must submit applications for their products to stay on the market. The bans come as concerns about the safety of e-cigarettes mount nationwide.