Jones Soda Co. last month laid off nine employees and furloughed four others, including almost the entirety of its sales team, the company reported in its Q1 2020 earnings call on Thursday.
Speaking to investors, interim CEO Jamie Colbourne said the layoffs were a result of financial constraints caused by the COVID-19 pandemic, but offered no further details. In addition to the layoffs, the Seattle-based company has also received a $335,000 loan from the federal Paycheck Protection Program to prevent further loss.
“We’re currently in a deep evaluation of the entire business across all product lines within Jones and feel we’ve made great progress in identifying our core strengths, then we can build from along with areas that need improvement,” Colbourne said on the call. “From an operational perspective, we continue to optimize cost structure and reduce manufacturing expenses wherever possible. As a result, and unfortunately, we laid off nine people and furloughed four more.”
The announcement comes a month after CEO Jennifer Cue stepped down after eight years in the role, though she remains a shareholder and consultant to the brand. Last year, CBD portfolio company HeavenlyRx Ltd., a subsidiary of SOL Global Investments, acquired a 25% stake in Jones, with the option to eventually purchase up to 51% of the company.
Four former Jones employees told BevNET that the layoffs primarily affected the brand’s sales team, including employees hired within the past six months. Employees were informed of the layoffs on April 17 and terminations took place immediately, with individual employees’ company emails being shut down within two hours after the announcement. According to the sources, members of Jones’ West Coast sales team were furloughed due to the belief that the region is stronger for the brand. Only one employee was left to oversee the company’s sales, but sources say he submitted his resignation shortly after the layoffs.
According to job board listings, Jones is currently seeking to hire a new VP of sales.
Jones Soda did not respond to requests for comment. Calls and texts to Jennifer Cue did not receive an immediate response.
In separate calls, three former employees all described Jones as “dysfunctional,” citing a company culture that was slow to respond to changing consumer trends and that could often provide little support for its sales team. Among the core issues affecting the brand was reportedly a lack of substantial innovation that has stalled growth efforts.
They also noted that Jones’ declining business with 7-Eleven has had a significant impact on the brand’s overall business and has forced it to rely more on Kroger and Walmart as its primary retail partners.
Although HeavenlyRx had injected Jones with fresh cash flow — which facilitated a hiring wave last year that included former Boxed Water sales director Joe Jankowski as VP of U.S. sales (who was one of the layoffs) and former Starbucks brand manager Maisie Antoniello as VP of marketing — the employees said there had been no significant shift in strategy despite hopes that the new partner would help right the ship.
The news comes as the company reported flat revenue in Q1 at $2.8 million. Gross profit as a percentage of sales grew 20.8%, compared to 20.1% last year. Net loss was $891,000, about $0.01 per share, compared to $796,000 last year. The company reported having $4.9 million cash on hand, down from $6 million in December.
On the call, Colbourne said the company has continued to see declines in its 7-Eleven business, as well as on-premise channels hurt by COVID-19. However, the brand has seen growth in retail partners such as Walmart. Colbourne noted Jones has shifted its marketing strategy to focus on social media and that event marketing plans have been cancelled due to the pandemic.
“Overall, we are proud of quickly being able to adapt to this new environment, and it speaks volumes to members of the organization.” Colbourne said. “Despite the uncertainties ahead, we will not let the circumstances hinder us from trying to do everything in our power to expand our presence across North America and introduce such a unique brand to a larger portion of the population.”
Jones Soda stock was down 2.69% to $0.19 per share at the closing of the market today.