SCOTTSDALE, Ariz. -- The joy over NJOY seems to have evaporated months before the electronic-cigarette and vapor company filed for Chapter 11 bankruptcy in a Delaware court recently, according to retailers contacted by CSP Daily News.
In court documents, NJOY officials said gross sales of its Kings product hit a peak in 2013 at $92.9 million, but dropped to $22.6 million in 2014 and fell to $7.4 million in 2015. One of its main downfalls was its Kings 2.0 product, which came out in late 2013 and, according to officials, “was not ultimately accepted by the marketplace.”
NJOY filed for bankruptcy in mid-September, citing an accumulated deficit of $234.4 million, the documents stated.
Retailers such as Ben Reinhart, vice president of merchandising for Kocolene Development Corp., Seymour, Ind., had already pulled the product a year ago due to slow movement. “I don’t think [NJOY’s bankruptcy] had much impact on the category as a whole,” Reinhart told CSP Daily News. “However, with the deeming regulations, I do think you will see more vape and e-cig companies closing down in the near future.”
Reinhart was referring to the U.S. Food and Drug Administration’s (FDA) recently released rules declaring its jurisdiction over e-cigarettes, vapors, cigars and other tobacco products (OTP), which require many newly introduced products to undergo rigorous scrutiny before going to market.
Similar to Reinhart, John Strickland Jr., president of Wayne Oil Co., Goldsboro, N.C., said they pulled NJOY products from the shelves about nine months ago also due to slow movement. He told CSP Daily News the bankruptcy had “no material impact” on his business.
In Strickland’s view, the beginning of the end started about three years ago when the Scottsdale, Ariz.-based company “shifted from disposable e-cigs to vapor liquid.” Up until then, NJOY commanded 85% of his e-cig sales volumes, Strickland said, and from his perspective, “NJOY was a highly-focused sales organization.”
According to Strickland, when NJOY switched their sales strategy to almost 100% vapor, “this was clearly the wrong strategy and is what I suspect caused the demise of their company. We did drink the Kool-Aid and implemented their program to sell vapor.”
NJOY had a handful of promotional options and Strickland ran with all of them. “In the end, they had the best product in the industry but my customer base does not appear to vape,” Strickland said.
Currently, Strickland is pulling liquid off his shelves altogether, with his only e-cigs being the Blu brand, as well as Vuse from Reynolds American, Winston-Salem, N.C., and MarkTen from Altria, Richmond, Va. He said e-cigs account for less than one-tenth of 1% of his dollar-sales volume.
“Then again, we are in tobacco country here in eastern North Carolina,” Strickland said. “The vape segment appears to be mostly full of teenagers and hardcore vapers.”
Still, NJOY’s specific circumstances aside, retailers do see a darker horizon for innovation within the category. “[NJOY’s bankruptcy] really shows how volatile the e-cig space is,” said Mary Szarmach, vice president of Smoker Friendly and Gasamat Oil, Boulder, Colo., “especially with pending regulations and the amount of capital it takes to compete with Reynolds, Altria and [Greensboro, N.C.-based] ITG.”