Published on September 22nd, 2016 | by Jimmy Hafrey
Another company bites the dust in the midst of the deeming FDA regulations, but is everything as it seems?
The New York Post reported earlier this week that NJOY, one of America’s largest producers of e-cigarettes, has filed for Chapter 11 bankruptcy reorganization. The Scottsdale-based company filed papers in Delaware, citing the deeming regulations, an outstanding debt of $234.4 million, and a failed product launch as the reasons for bankruptcy.
The company, which is known for ENDS products, also known as rechargeable e-cigarettes, had a disastrous year in 2015 leading in 2016. Their headlining product, the NJOY King, suffered a nationwide voluntary product return by consumers and saw profits of the e-cigarette fall to $7.4 million from its peak in 2013 of $93 million.
CSP News further reported that the company had actively sought buyers earlier this year. There were 12 separate entities solicited and ended with the company unsuccessfully finding a buyer. This is part of due the diligence process on the part of a company who is failing and is an important step in successfully filing for bankruptcy.
This bankruptcy has left various investors in the cold, including Napster’s Sean Parker, the singer Bruno Mars, and Peter Thiel, the founder of PayPal. These investors were part of the collective that valued the NJOY company at one billion dollars just a few years ago.
This bankruptcy filing could easily be seen as a reaction to the FDA deeming regulations that went into effect last month. After all, the company would have been responsible for dozens of PTMAs and stricter product regulations as a result.
But that isn’t the whole story. Not by a long shot.
As the vaping industry grows, consumers are increasingly attracted to customizable devices and e-liquids that can meet their needs. In fact, the vaping community thrives on the ability to customize their experience, including the look and feel of their device, how much nicotine they intake, the amount of vapor their devices produce, and even the complex flavors they can find in many vape shops. This is also helpful for smokers who are using vaping as a cessation tool because it allows them to control their nicotine levels, stepping down from one level to another until they reach their goal of no nicotine at all in their juices.
NJOY is not a vape company; it’s an e-cigarette company.
This is an important distinction. Because e-cigarettes and ENDS products don’t allow for any customization, vapers are less and less likely to purchase it. NJOY isn’t known for making vaping devices, also known as mods for its modularity and customization. It makes look-a-like e-cigarettes that have a small customer base and has therefore fallen into the trap of going all in on one product without diversifying its portfolio.
The NJOY bankruptcy shouldn’t be a surprise to anyone. When a company focuses on one product in an evolving market, they run the risk of neglecting its consumer base. In the case of NJOY, it was a risk that did not pay off.