Oh how the mighty have fallen. And fallen remarkably fast, too. Of course we’re talking about the breaking news that brought you to this story: NJOY has officially declared bankruptcy. This is going to be the talk of the town for the next few days here, or even the next few days. So, prepare yourself. You’re going to be peppered with news about the fall of this ecig giant and what it means for the electronic cigarette industry as a whole.
If you aren’t an avid follower of the e-cigarette industry and it’s history, like we are, then you need to know a few things about this. You should know that NJOY was one of the first “big” ecig brands, along with mainstays like Blu Cigs and our favorite cig-a-like, Green Smoke. They’ve been around from right near the beginning of the electronic cigarette revolution. In fact, you could say that they were among the first for a few things.
One is that they were quick to focus their efforts on the “offline” market by ways of convenience stores and the like. Two is that they were an early strong believer in the disposable ecig, which ironically is now being blamed as one of the reasons that led to their downfall. But where they were also pioneers is with their ability to raise huge sums of money. In fact, it was only in 2013 when NJOY was the recipient of a $75 million round of funding and a valuation of $1 billion.
They even had some big names among their investors, such as Sean Parker. Parker is of Napster fame and a long-time investor in new ideas. He had no problem throwing in $10 million of his own money, famously saying at the time that electronic cigarettes were the future and meant the end of traditional tobacco cigarettes.
What Went Wrong?
That’s the question on everybody’s mind right now. What in the world went so wrong, so fast, that we would wake up to such bombshell news. As with most things, there isn’t one clear answer, but we do have some clues. We know that NJOY made a big push into retail and, since they weren’t backed by Big Tobacco, they needed to invest a lot there. An example of that is the fact that Caesars Entertainment remains their biggest creditor, due to a sponsorship agreement. NJOY was doing it’s best to keep up the fight as Big Tobacco entered the game, but it just became riskier.
That furthered when the new deeming rule came to be, bringing with it oppressive regulations. The FDA is now in the process of forcing all products to go through lengthy and expensive testing. While companies with huge pockets like Altria and RJ Reynolds can power through it, others can’t. Not even big ecig companies like NJOY, apparently. Here what, Jude Gorman, general counsel at Reorg Research had to say: “All of the e-cigarette companies are affected by the regulations, but NJOY has a lot of debt it can’t pay.” That mounting debt would be its downfall.
Yet it wouldn’t have been if NJOY’s disposable ecig called the King had continued its success. After a rousing beginning, the King took a turn for the worst this past year. Sales plummeted, leaving NJOY in a big hole just as it was at its most cash-needy moment. This all led NJOY to seek new investors twice this past year, but to no avail. Apparently the only choice they really had was to declare chapter 11 bankruptcy, ending a long-held ambition to dominate the electronic cigarette market.
As for the market itself, this will certainly send some shocks waves. NJOY was an example of a small-time operation (based in Scottsdale, Arizona) that hit it big. Yet, it couldn’t sustain the changes to come. The rest of the industry needs to look at this as an example of how agile they’ll need to be going forward. While some ecig companies have already been bought out by bigger corporations, others are still hoping to make it. They’ll need to take advice from what happened to NJOY and plan their strategy accordingly.
In the meantime, we’ll mourn the loss of NJOY. They’ll still be around for a little while longer as they work to sell off their assets, but the future of NJOY ecigs is over. The good thing is that users will be able to find replacement products among the top ecig brands on the market that we’ve already reviewed. They may even be pleasantly surprised as to their capabilities. For now though, we’ll tip our hats to the outgoing NJOY team and hope this is a one-off situation and not the start of a trend. Thanks for giving us your best NJOY, we’ll continue to carry the torch of the electronic cigarette revolution even after you are long gone.