James Xu started Avail Vapor in 2013 with the goal of building a business around what looked like a growing, disruptive force in the tobacco industry.
“Our mission was to help smokers to quit smoking,” said Xu, who co-founded Avail Vapor as a chain of retail stores that specialize in selling electronic cigarettes, or e-cigs, now often referred to as vapes or vaping products.
The company grew to become a major retailer and producer of e-vapor products, owning more than 100 retail stores in 12 states and a manufacturing facility in Chesterfield County.
But Avail Vapor hit a wall as a business. It enters 2022 with what Xu says is essentially “zero” business. It had about 400 employees at the peak of its business operations.
“Right now, we are unwinding everything,” Xu said in a recent interview, adding that the company hopes eventually to “start everything fresh.”
The reason for shutting down the business, Xu said, is because the company — and others like it — faced an impossible task meeting regulatory requirements set by the U.S. Food and Drug Administration for vaping products.
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Avail sold vaping products, which unlike traditional cigarettes, do not produce smoke. Instead, the battery-powered vaping devices, which were just exploding in the U.S. market when Avail Vapor first opened, heat a liquid solution of nicotine and flavorings to produce a vapor that the consumer inhales.
With the idea of introducing the products to a burgeoning market of people looking for an alternative to smoking, the company opened a small, “clean-lab” production site on Southlake Boulevard just off Midlothian Turnpike in Chesterfield to manufacture vaping products.
The goal was to switch smokers to a product that, while not without health risks, is generally considered to be less hazardous than inhaling smoke from conventional cigarettes.
“Everybody has tried to make a product that is less harmful,” said Xu, adding that he still hopes his company eventually can be a force for change in the sale of nicotine products.
It even got Henrico County-based Altria Group Inc., the nation’s largest tobacco company, to take a minority investment in Avail in 2017. But that business relationship ended in 2019, Xu said.
This past summer, Avail Vapor was looking to capitalize on customers who wanted to cultivate cannabis plants at their homes under a new Virginia law, and the company partially converted some of its vape retail shops into selling those products.
But Xu started dismantling the Avail Vapor business and sister companies in 2021. (Xu was a former executive and is still a shareholder with his sister in Evergreen Enterprises, the South Richmond-based global home decor manufacturer and distributor of home decor products that owns the Plow & Hearth retail store chain.)
In the summer of 2021, Avail Vapor sold 30 of its stores to MadVapes, another growing chain of vaping stores.
By late October, Avail had closed or sold all of its stores, including nine in the Richmond area, along with its production plant in Chesterfield. The local stores included the company’s first locations — in Carytown and Short Pump.
The company also sold Giant Vapes LLC, an online seller of e-cigarette devices and liquids. Avail bought that business in 2020 with the idea it would help get Avail more firmly into the e-commerce market.
Avail Vapor had divided its operations into three different businesses two years ago — on Jan. 1, 2020.
One was Avail’s retail business, which has shut down.
Another business was called Blackbriar Regulatory Services LLC, created to provide FDA compliance consulting, laboratory services and contract manufacturing for other vaping products companies. The company transferred its contract manufacturing facility just off Midlothian Turnpike to another undisclosed company, Xu said. A few key members led a management buyout of the regulatory side of business, he said.
The third business unit — called Blackship Technologies LLC — provided research and development services. Since it’s a holding company with no activities, Xu said he hasn’t decided yet what to do with that business.
Xu said meeting regulatory requirements set by the FDA for vaping products was an impossible task.
“Under this environment, we cannot operate a legitimate business,” he said. “Our biggest problem was we tried to believe in the FDA — that one day it would regulate this market with common sense.”
Under a 2016 rule, e-cigarettes were deemed by the FDA to be subject to regulation as tobacco products, which required makers of the products such as Avail Vapor to submit them for FDA approval. The applications were required to be submitted by Sept. 9, 2020.
Vaping products companies must submit to the FDA information on each product’s health risks, ingredients and manufacturing process along with samples of the product and its proposed labeling.
The FDA said it has received applications from more than 500 companies covering more than 6.5 million tobacco products.
In August, the FDA rejected applications for about 55,000 flavored electronic nicotine delivery products, also known as ENDS. Among those rejected were some of Avail’s applications, Xu said.
Avail spent more than $10 million over several years to prepare the FDA applications, Xu said.
“FDA rejected our application based on a certain test that they have repeatedly told the industry is not required,” he said.
The FDA said the products “lacked sufficient evidence that they have a benefit to adult smokers sufficient to overcome the public health threat posed by the well-documented, alarming levels of youth use of such products.”
Specifically, the FDA cited vaping products with flavorings it contends would appeal to underage users and sold under brand names such as “Apple Crumble,” “Dr. Cola” and “Cinnamon Toast Cereal.”
Xu contends that Avail Vapor took steps to prevent sales of its products to minors at its stores.
He contends that the real reason for rising youth use of vaping products is a political backlash over the widespread availability of disposable vaping products that are sold at convenience stores, along with marketing tactics by some companies that appeal to youth.
“The FDA had an immediate reaction and tried to blame the flavors, which is not really the root cause,” he said. “In Europe, they have flavors, but they do not have a youth problem. It is really a marketing problem.”
Avail has filed an appeal of the FDA’s decision in court. Its appeal with the 4th U.S. Circuit Court of Appeals argues that the FDA’s denial of Avail’s application was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,” according to the court documents.
A spokesperson for the FDA said the agency “does not comment on possible, pending or ongoing litigation.”
Avail isn’t the only company that has challenged the FDA’s decision to reject thousands of e-cig applications.
In October, the 5th U.S. Circuit Court of Appeals ruled that Triton Distribution, a Texas-based manufacturer of e-cigarettes, could continue selling its products even though the FDA had rejected its applications.
The appeals court ruled that the FDA did not give adequate consideration to the company’s marketing plan to reduce the products’ appeal to youth.
That court also said the FDA “pull[ed] a surprise switcheroo on regulated entities” by saying they likely would need to do long-term studies to show that the health benefits of adults using the products outweighed the risk of youth starting to sue them.
Xu said the Triton case bodes well for other companies that have challenged the FDA decision.
“Our case is the strongest among all,” he said. “That’s because Avail is one of the few companies who submitted the most comprehensive applications to FDA according to their guidelines. Also from the formal communication that we received from FDA a year ago, it indicated that we were in a great position to receive the final approval.”
What has happened to Avail and other upstart makers of vaping products could be seen as part of ongoing “nicotine wars” in the U.S., said David Sweanor, a professor of law at the University of Ottawa and a tobacco control advocate who favors policies that push smokers toward less toxic nicotine products.
Sweanor said the FDA’s policies regarding e-cigarettes are making it harder for startup, innovative companies to compete in a market that still remains dominated by conventional cigarettes.
“The result is you kill the independents and the upstarts who have the greatest interest in replacing cigarettes,” he said.
“It is very disappointing that a lot of public health groups have taken this abstinence-only approach,” Sweanor said. “They end up just supporting the cigarette business by taking away one of the alternative products. The United Kingdom is a good example of a country that acknowledged the [vaping] products are less hazardous and are encouraging people who smoke cigarettes to move to vaping products.”