Vaping company Juul Labs cuts 400 jobs, citing lawsuits, government bans, increasing competition as cause

WASHINGTON– Embattled vaping company Juul Labs announced hundreds of layoffs on Thursday as the company weathers lawsuits, government bans and increasing competition for its electronic cigarettes.

Juul said it has received new funding to stay in business and continue operations, which includes ambitious plans from the Food and Drug Administration to ban its products.

The video in the player above is from a previous report.

The layoffs include 400 employees and are part of a cost-cutting plan to immediately cut Juul’s operating budget by 30% to 40%, according to a person familiar with the plan, who asked not to be identified to discuss the details. The new cash injection came from two early Juul investors: Nicholas Pritzker, head of Hyatt Hotels, and Riaz Valani, a San Francisco-based private equity specialist, according to the same person.

MORE: Juul agrees to pay $438.5 million in class action lawsuit

Industry analysts have been speculating for weeks that Juul could soon file for bankruptcy or sell itself to another company. Thursday’s announcement appears to have at least delayed any move in that direction.

“This investment will allow Juul Labs to continue operating, to further advance its administrative appeal against the FDA’s marketing denial order, and to support product innovation and science generation,” a company spokesman wrote in an email.

The Wall Street Journal first reported the news Thursday morning.

Juul shot to the top of the US vaping market five years ago due to the popularity of flavors like mango, mint and crème brûlée. But the rise of the San Francisco-based company was fueled by use among teenagers, some of whom became addicted to Juul’s nicotine-rich capsules.

The backlash against teen vaping sparked a series of government actions that have forced the company to pull out. As of 2019, Juul has dropped all US advertising and discontinued most of its flavors.

MORE: E-cigarette maker Juul pays $40 million to NC, changes business practices, attorney general says

The biggest blow came in June, when the Food and Drug Administration rejected the company’s request to keep its product on the market as an alternative to smoking for adults, putting its future in jeopardy. The FDA said Juul failed to adequately answer key questions about the potential for chemicals to leak from its device. The FDA has temporarily stayed its original decision while Juul is filing an appeal.

Another setback came in September when the company’s largest investor, tobacco giant Altria, announced plans to resume competition in the e-cigarette space on its own.

Altria pulled its own vape from the market in 2018 after acquiring a nearly $13 billion stake in Juul. But that investment has lost more than 95% of its value as Juul’s prospects have deteriorated, giving Altria an opportunity to opt out of its non-competition clause.

MORE: San Francisco-based Juul accused of recruiting public health researchers to support vaping, report says

The decision means Juul could soon be forced to compete with Marlboro-maker Altria for space on retail shelves, along with longtime competitors like Reynolds American’s Vuse, which recently surpassed Juul to become the top US vaping brand to become.

Juul’s share of the $5.5 billion retail market has fallen to about 33% from a peak of 75% a few years ago.

While Juul is no longer popular with US teenagers, the company remains a target for politicians in Washington and across the country trying to crack down on teen vaping.

In September, Juul announced it would pay $440 million to settle an investigation by nearly three dozen states into its marketing practices and their contribution to the rise in underage vaping. Juul still faces nine separate lawsuits from other states. And thousands of private lawsuits filed by individuals and families have been consolidated in a California federal district court.

Copyright © 2022 by The Associated Press. All rights reserved. Vaping company Juul Labs cuts 400 jobs, citing lawsuits, government bans, increasing competition as cause

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