NJoy bankruptcy and the US Vaping Industry
Does the NJoy bankruptcy tell of dark days ahead for the rest of the US vaping industry?
As you might have heard recently, the Scottsdale-based E-cig and E-liquid manufacturer ‘NJoy’ has filed for a Chapter 11 reorganization.
NJoy, a major E-cig retailer in the US, is filing for bankruptcy – stating in an announcement that they are $32 million in debt, and that they are willing to start selling off assets to pay their creditors.
According to an article published on phoenixnewtimes.com, the company blames many of its problems on the new FDA guidelines that are getting ready to hit the US vaping industry in a tough way. The guidelines make it almost impossible for any but major money hard-hitters to continue forward into the vaping foray of the future, and (unless they are stopped or quelled) will cause many of the public’s favorite devices to cease to exist on store shelves in the US.
But does this news bode ill for the vaping industry as a whole in the US? Is NJoy just the first major piece on a much larger chess board to topple over, to be followed by a check-mate against vaping?
What really caused the bankruptcy in the first place?
As far as we can tell from the information that we’ve been able to gather, it sounds like NJoy’s problems began when the company started losing investor money since its birth back in 2006. By the time the downhill slide was complete, the company had racked up a total deficit of $234 million.
According to reports, the release of the company’s second-generation King E-cig (the NJoy King 2.0) was just not accepted by the marketplace or buyers. Apparently, they had to buy back a lot of inventory that didn’t move, and overall customer orders also decreased. At one point, NJoy brought in sales as high as $92.9 million in a year. But last year, these numbers plummeted to just $7.4 million.
But it gets worse. Apparently, the company was also trying to eat the necessary expenses to get them through the pending FDA regulations. Crippled by the expensive failure of the NJoy King 2.0, and financially taxed by the preparations for the FDA regulations, they weren’t able to bounce back as they otherwise may have been.
Information! They’ve also had to pay fees associated with state and local laws, and even had to ward off a patent-infringement lawsuit last year – a process alone that cost them $2.5 million.
What does this mean for vaping in the US?
There are two things that really stick out to us about this story. First of all, NJoy was a pretty major E-cig player in the US. Granted, they had a tough run of it for a while – but it seems fair to say that the new FDA regulations played a big role in this decision.
But if NJoy can’t manage to pull off a conversion to the new guidelines, who will be? Big tobacco? Big pharma? What about the smaller companies that have been doing really well with E-cigs thus-far? Is the FDA just going to bulldoze over them as well?
And second, it’s understandable that the FDA wants to regulate E-cigs – but it would seem that they’re using their power to literally cripple and crush an industry under fees that are so expensive that only a few players in the marketplace will be able to make ends meet.
They’re not supporting small businesses, free market, or any of the other things that have helped the E-cig movement (or any other beneficial movement, for that matter) to flourish. It is even suspected that they are playing political games – though this is more speculation and a much more complicated discussion than we can have right now.
And worst of all, their legislative strong-arming might even cause more people to go back to smoking. This, in itself, is a difficult evil to forgive.
We’re not sure what’s going to happen in the US as a result of these guidelines – but we hope that something will change before the toughest of the regulat situation here in the UK.