Juul just laid off 650 workers after federal investigations rocked the company. Workers who were affected describe how it was handled and what they saw leading up to it.
Category : entrepreneur
- Juul Labs just fired 650 workers — 16% of its global workforce — and plans to cut costs by $1 billion next year as the embattled e-cigarette maker faces growing regulatory scrutiny and federal investigations.
- While many first learned about the layoffs from news reports, others were not surprised as morale at the company had been low for months, former employees said.
- Business Insider spoke with six former Juul employees who described how the layoffs went down and how they thought the cuts reflected problems of unchecked explosive growth, lack of proper business processes, and mismanagement.
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Until this summer, Juul Labs was on such an aggressive hiring spree that new hires were often spilling into the kitchen of its San Francisco headquarters.
The e-cigarette company said it was adding an average of 300 employees a month, including upward of 30 new employees a week in some offices around the US, several former employees told Business Insider.
It had claimed nearly 75% of the US e-cigarette market and was valued at $38 billion last year after an investment from the tobacco giant Altria, which was bracing itself for a future in which adult smokers were increasingly seeking alternatives to cigarettes.
But this past week, many of its offices across the US emptied out as the company announced internally that it was laying off 650 workers — 16% of the global workforce — and planning to cut costs by $1 billion next year.
The layoffs, first reported by The Wall Street Journal on November 12, are part of a broader reorganization at Juul, which has been forced to curtail expansion and shake up management in the face of regulatory scrutiny and federal investigations. Its valuation was recently slashed by more than a third. It’s been sued by New York and California over accusations it has targeted teens, failed to warn that its products contain nicotine, and represented its product as safer than cigarettes. The government has warned against the use of e-cigarettes as vaping-related illnesses have grown, though many of those cases have involved vaping THC products, which Juul doesn’t sell.
Business Insider spoke with six former Juul employees who said they were let go last week. They said the layoffs reflected deeper problems at the company of unchecked explosive growth, lack of proper business processes, and mismanagement.
Many first learned about layoffs from press reports
The death knell for laid-off employees came in the form of a company-wide email labeled “company reorganization update” from Juul’s new CEO, KC Crosthwaite, and chief people officer, Monika Fahlbusch, timed with the Journal article last week.
The email, which has been viewed by Business Insider, said the company would notify affected people one by one.
The email went on to say that it was compliant with the Worker Adjustment and Retraining Notification Act, which requires employers with 100 or more employees to provide 60 days’ notice ahead of mass layoffs, and that Juul was paying severance that exceeded the law’s requirements.
“We recognize that company restructures are particularly difficult for departing employees,” a representative said. “That’s why Juul Labs went above and beyond during our termination process to support our team members.”
Laid-off employees confirmed to Business Insider that they would be paid until January 17 and get the bonuses they were eligible for.
“They’re doing everything they can to make sure that they’re in the clear and aren’t hit by any more lawsuits,” a former employee said.
Crosthwaite and Fahlbusch’s email was one of the few official forms of communication from the company about the layoffs, though, several former employees told Business Insider.
Some saw the writing on the wall when Craig Brommers, Juul’s first chief marketing officer, left the company and, under Crosthwaite, the company suspended all broadcast, print, and digital product advertising in the US.
“The morale was rock-bottom,” another former employee said.
Others said that people were unaware layoffs were coming until The Journal reported in October that Juul planned to trim 10% to 15% of its workforce this year and that middle managers were also kept in the dark.
“Having The Wall Street Journal announce that there were going to be layoffs kind of sucked,” one source said. “When KC took over, he did not have a town-hall meeting or spoke to the company, except when they booted Kevin out.” Kevin Burns was Crosthwaite’s predecessor as CEO.
Employees raised the concern in an all-hands meetings at the company, but Fahlbusch dismissed it, another source said.
“If you got a calendar invite, that was the sign that you were on the way out,” a former San Francisco-based employee said.
A company spokesman said there had been company-wide communications on this subject since late September.
Some teams were cut as much as 40%
Juul’s marketing team was hit the hardest, according to a company spokesman, but sources said employees across the operations, sales, and talent teams were also affected.
Some teams were slashed by as much as 40%, sources said, and the cuts hit San Francisco as well as Los Angeles, New York City, and Austin, Texas, according to a shared Google spreadsheet that Juul employees are circulating to share job leads.
While the process has concluded in North America, layoffs are still rolling out in other parts of the world.
Some former employees say Juul grew too fast
For the former employees who talked to Business Insider, the layoffs were symptomatic of deeper problems at the company. One was that Juul expanded too fast to meet explosive demand, leading to growing pains, they said.
In 2018, for example, Juul went from about 225 employees to roughly 1,500 as sales more than tripled, according to analyst estimates. Silos developed, with multiple teams working on the same projects and not communicating with one another, two former employees recalled.
“People were just told to go hire with little regard for organizational responsibility — you had duplicate and triplicate groups doing the same” things, a former mid-level employee said. “There was just an overall lack of understanding of basic business processes, and the excuse was always, ‘Well, we are just running so fast that we did not have the time.'”
Ex-staffers described lavish perks
Ex-staffers also were critical of what they considered excessive perks. Employees got free lunches and occasional juice bars, several ex-staffers said, the type of benefits that are common at Silicon Valley startups.
But one former employee also said the company mandated that workers fly first class for all business trips. Juul disputed this, saying employees were allowed to book premium seats only for long-haul flights and otherwise had to fly economy. Business Insider was unable to confirm what qualified as a long-haul flight.
The company also threw a three-day retreat for its sales organization at the Bellagio in Las Vegas in September, complete with an open bar, a source said. The company didn’t respond to this matter.
Some thought the company didn’t live up to the mission
Some former employees said they believed in Juul’s mission of helping smokers wean off traditional cigarettes when they joined the company.
But they said they lost faith in its leadership as they saw middle and upper management ranks get filled by people with regulation and compliance experience from tobacco and alcohol companies, like the vice president of US marketing, Gary Ross, and the senior vice president of US commercial, Kevin Cooke, one source said. The company had no response to this matter.
“Everybody can agree that cigarettes are harmful, and if there’s a product that people can use to wean off them, then it’s a good thing,” the source said. “However, a lot of the people running Juul came from tobacco and alcohol brands like Beam Suntory and Constellation, and they were just putting it out there without thinking of the ramifications.”
One source recalled a “tone-deaf” instance in which Fahlbusch walked onto the stage at a youth-prevention training in September at the Hyatt in downtown San Francisco to the rap song “California Love” by Tupac, which makes references to partying and “bomb-ass hemp.”
Fahlbusch did not respond to requests for comment from Business Insider.
There were other stumbles. The company looked into opening its own retail stores and e-cigarette vending machines, but that plan was shelved, a former employee said. And in September, Juul sales in China were halted just two days after launching in the country — the world’s biggest tobacco market.
A Juul representative said the company had no firm plans to open stores in the US and did have stores in other countries, including Canada and South Korea.
Juul faced regulatory problems
Juul’s rapid growth ambitions ran up against regulation in other cases.
After states including Michigan and Massachusetts restricted sales in recent months, Juul was forced to pull products from some of the 100,000 stores where it sold products. It was hard to pull products from shelves, as product fixtures weren’t serialized properly, according to a source.
The company was able to respond quickly to these new rules without incident, a Juul representative said.
Juul’s marketing has come under scrutiny, with the Federal Trade Commission investigating the company’s marketing practices, such as the use of social-media influencers, and accusations it targeted minors.
Some ex-employees said they thought Juul showed little consideration for how its products affected people.
“It’s common sense that if you hand teenagers a device resembling a flash drive powered by an addictive substance and it smells and tastes like mango, they’ll get hooked,” one source said. “It lost its mission when it raised funding from the very people it was trying to combat” — a reference to big tobacco — “that’s the point at which you sell out.”
What’s next for Juul
A common complaint among laid-off Juul workers was that there was no clear rationale in deciding who would get cut and that the layoffs disproportionately hit junior employees, multiple sources said.
“The people that should be let go are the ones who made those mistakes,” a former employee said. “But the people that made the bad decisions are not being held accountable.”
The company said that in fact, about 15% of vice presidents were laid off as part of the reduction. Some higher-ups have left recently, albeit before the layoffs, including Brommers, the CMO; CFO Tim Danaher; the senior vice president of advanced technology David Foster, and the chief administrative officer Ashley Gould.
As the layoffs continue around the world this week, the company said it’s shifting its attention to growing its product team as it explores new technologies to combat underage use.
“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 US and around the world,” Crosthwaite said in a statement.
Hundreds of laid-off workers, meanwhile, are left to grapple with their new reality.
“We knew it was coming, but it’s never easy to accept,” a source said. “It sucks to be so easily expendable.”