Industry News

Juul Contemplates Sale of Its Recently Acquired Office Tower

According to reporting by the San Francisco Chronicle – E-cigarette maker Juul Labs could next be unloading the San Francisco office tower it purchased just six months ago for $397 million, a move that could be part of a larger cost savings strategy that includes laying off workers following nationwide reports of illnesses and deaths resulting from vaping products.

Juul bought the 29-story office building in June to house its then-growing workforce, but management told the Chronicle it may sell anyway considering its ongoing effort “to align the company’s organization and financial resources behind key priorities.”

Among those priorities: launching Juul products in international markets while decreasing their widespread use among U.S. children, according to company statements.

In the past few months alone, the vaping company parted with key leadership and cut more than fifteen percent of its workforce in a two-pronged effort to win back the trust of federal regulators and save money heading into 2020.

The potential sale of its 123 Mission St. building is just the latest sign of the financial squeeze Juul is facing since it announced earlier this month that it would discontinue online and retail sales of its mint vaping products. Juul’s mint products account for roughly 70% of its sales, analysts said.

“We are exploring our ownership of 123 Mission Street,” said Ted Kwong, a Juul spokesman. “While we are evaluating our outright ownership of this building, we will retain substantial leased office space at other locations across the city such as Pier 70. We remain committed to our presence in San Francisco, which is where Juul Labs was founded and where many of our talented employees live.”

Should Juul ultimately sell its Mission Street building, it remains to be seen whether it would recoup its purchase price after short ownership.

Juul announced plans to immediately suspend sales of its fruit-flavored e-cigarettes ahead of a policy by the Trump administration that is expected to ban all flavored e-cigarettes.

On many counts, it’s been a rough year for Juul, formerly the third-fastest growing startup in the world. 

Sept 11, 2018: The FDA issued more than 1,300 warning letters and civil fines to retailers who illegally sold Juul and other e-cigarette products to minors, according to a press release. The agency gave Juul and similar companies two months to make a plan for getting children’s use of their products under control. Soon thereafter, Juul included nicotine warning labels on its products after previously refusing to sign a pledge not to market to teenagers.
Nov 15, 2018: More than 3.6 million middle and high school students used e-cigarettes in 2018, a dramatic increase from the year prior, according to an annual survey by the Centers for Disease Control and Prevention (CDC) and FDA. That number continued to climb into 2019, reaching more than 5 million youth despite prevention efforts. Around the same time, Juul stopped distribution of some flavored pods to its brick-and-mortar partners but continued selling them online.
Dec 20, 2018: Altria Group, the maker of Marlboro cigarettes, announced it would buy a 35 percent stake in Juul for $12.8 billion. The $38 billion valuations made Juul the third-most valuable startup in the world. Altria reported that Juul made more than $1 billion in revenue during 2018 in its fourth-quarter earnings report the next month on January 31, 2019.
In February, Bloomberg reported the e-cigarette maker expected to make even more in 2019, around $3.4 billion due to markets overseas.

Aug 1, 2019: The CDC launched a multistate investigation as the first vaping-related illnesses resulted in at least two deaths. Soon thereafter, it warned people not to vape in general or to use e-cigarette products purchased from street vendors.
Sept 19, 2019: The FDA launched a criminal probe into the growing number of vaping-related illnesses. A couple of weeks later, the Federal Trade Commission ordered Juul and other vaping companies to hand over its marketing materials to see whether it targeted kids.
Sept 25, 2019: Juul ended all-digital, TV and print advertising in the U.S. and replaced its Chief Executive Officer Kevin Burns with K.C. Crosthwaite, a former Altria executive, largely in response to public backlash from vaping-related illnesses and deaths.
Oct 7, 2019: Kroger and Walgreens announced they would stop selling all vaping products, joining Walmart.
Oct 17, 2019: Juul suspended its sale of most e-cigarette flavors, including mango, creme, fruit, and cucumber, adding it would refrain from lobbying President Donald Trump’s administration against its expected ban on flavors.
Just three weeks later, the company also halted mint-flavored pods after data suggested they were popular among students.

Oct 31, 2019: Altria reported a $2.6 billion loss in its third quarter, mostly because of a $4.5 billion charge from lowering its initial valuation of Juul. Among other things, management at Altria expected more regulation from the FDA when it came to Juul’s e-vapor products.
Nov 12, 2019: Juul eliminated 650 jobs, part of an effort to cut $1 billion in costs next year, according to a company statement.
Nov 19, 2019: New York Attorney General Letitia James announced a lawsuit against Juul for advertising that downplayed risks to consumers. Her case joined a growing pile of suits from California, parents and multiple school districts announced in earlier weeks.
Nov 21, 2019: More than 2,000 vaping-related injuries have been reported to the CDC, along with forty-seven deaths, mostly from products containing THC, the main psychoactive ingredient in cannabis.
The FDA is expected to issue e-cigarette compliance guidelines in the coming weeks, which could require all e-cigarette makers to halt sales of their flavored, mint and menthol products or, even withdraw entirely from the market, until their PMTA applications have been approved and they can show e-vaping users face no health issues as a result of their use.

The FDA and the Centers for Disease Control and Prevention have expressed concerns that flavored vaping products, as well as mint products, are attracting youth to vaping in record numbers. Juul said it is also focusing its resources on earning the public’s trust by reducing and preventing underage use, as well as expanding its commitment to developing new technologies to combat underage use.