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  • Swedish Billionaire Invests in Sting Free

    Swedish Billionaire Invests in Sting Free

    Erik Selin (Photo courtesy of Sting Free)

    Swedish billionaire Erik Selin has invested SEK4.4 million ($434,247) in the Swedish nicotine pouch innovation company Sting Free. He has thus become the second largest shareholder in the company, which is now valued at just under SEK31 million. Sting Free’s other shareholders include Curt Enzell, inventor of the original snus pouch and Meg Tivéus, a former board member of Swedish Match.

    Sting Free has developed and patented a pouch for modern oral nicotine products and snus, where one side has an integrated protective shield for the gums ((also see “Patching the Pouch,” Tobacco Reporter, July 2017). The shield effectively reduces the burning sensation and gum irritation that is normally caused by these products.

    This is the third time Selin has invested in companies in the snus industry. He is already the largest Swedish shareholder in the snus giant Swedish Match and is also a major shareholder in Haypp Group, which is the largest e-trader of snus and modern oral nicotine pouches in Europe.

    “We welcome Erik with open arms and could not have found a better partner,” said Sting Free founder and Chairman Bengt Wiberg.

    “We are a tobacco harm reduction company whose technology has already received much media attention and an international award for removing the stinging sensation. The stinging sensation is often considered as being a deterrent for smokers and other nicotine users who have never tried smokefree oral nicotine products,” said Wiberg.

    Sting Free AB recently conducted a survey with more than 1,000 snus and nicotine pouch using men and women in Sweden. The results show that the patented technology is in demand, especially among women and those who have, or are concerned about, oral health problems linked to their use of these types of products. The survey results shows that 59 percent of users dislike the familiar burning sensation and 56 percent have worried about their oral health in connection with their use of the products presently on the market.

    The market for snus and tobacco-free nicotine pouches is presently worth approximately SEK9 billion per year in Scandinavia alone.

    Before the end of 2022, Sting Free AB will launch its first tobacco-free nicotine pouch with the unique integrated Stingfree shield. “In the future our goal is to license the technology and thereby create a new standard in the industry that is as familiar to consumers as light products are for soft drinks or Gore-Tex is for clothes and shoes,” says Sting Free CEO Daniel Wiberg.

  • 22nd Century Begins Integration of GVB

    22nd Century Begins Integration of GVB

    three hands putting together three white puzzle pieces with other pieces scattered in the background
    Photo: chokniti | Adobe Stock

    22nd Century Group has begun integration of GVB Biopharma, which it acquired on May 13, 2022, according to a company press release. As a contract development and manufacturing organization (CDMO), GVB is a market share leader in hemp-derived active ingredients for the nutraceuticals, pharmaceutical and consumer goods industries. 22nd Century has posted a presentation, which includes an overview of GVB’s business operations, the strategic benefits of the acquisition, and strengths of the combined companies, on the “Investors” section of its website.

    “We are excited to welcome the GVB team into the 22nd Century family,” said James A. Mish, 22nd Century’s CEO. “Together, we believe 22nd Century now provides the most complete hemp/cannabis solution in the world, from receptor science and transformative plant genetics to finished ingredients and CDMO formulated products that meet the most exacting standards required by global consumer products and pharmaceutical companies. We can now offer complete, vertically integrated cannabinoid manufacturing technologies, creating industry-leading scale and cost efficiency alongside our proprietary hemp/cannabis plants designed to bring the commercially desirable traits and stable genetics critical to realizing the full potential of this exciting market.”

  • PMI Reaches Gender Balance Goal

    PMI Reaches Gender Balance Goal

    Photo: Tobacco Reporter Archive

    Philip Morris International has reached its global company-wide target to improve gender balance, ensuring at least 40 percent female representation in managerial roles by 2022, according to a company press release.

    Jacek Olczak, CEO at PMI, commented, “I am immensely proud of PMI’s vision, commitment and achievement in ensuring equal opportunities are given to all in the workplace, irrespective of gender. Meeting this target demonstrates that our inclusion and diversity strategy is working. Diverse profiles, backgrounds and perspectives allow us to make better and more considered decisions as well as contribute to better and more sustainable performance. I firmly believe that a culture of fairness, inclusion and diversity [is] crucial to PMI’s progress in achieving a smoke-free future and will continue to benefit the company as we become more reflective of our consumer base.”

    “What gets measured really does get done,” said Silke Muenster, chief diversity officer. “This was a whole company effort requiring everyone to take responsibility. I am delighted that we have met our target on time but recognize that we still have a long way to go on our diversity, equity and inclusion journey. With this in mind, we have our next gender representation target: 35 percent of women in senior roles by 2025.

    “Having a truly diverse workforce is an essential part of our goal to achieve a smoke-free future. I am very proud of the progress we have made to date, and I am confident about achieving more in the future.”

    PMI has also been recertified as a global EQUAL-SALARY organization for the second time since 2019 by the independent EQUAL-SALARY Foundation. The recertification verifies that PMI continues to pay female and male employees equally for equal work in the more than 90 markets where PMI operates.

    The EQUAL-SALARY Foundation is an independent, nonprofit organization based in Switzerland. The EQUAL-SALARY certification verifies that organizations have sustainable policies and practices to ensure that they pay their male and female employees equally for equal work.

  • Swedish Match Accepts PMI’s $16 Billion Offer

    Swedish Match Accepts PMI’s $16 Billion Offer

    Photo: Swedish Match

    Swedish Match’s board of directors has accepted Philip Morris International’s offer of SEK161.2 billion ($16.14 billion), according to The Wall Street Journal. The deal is subject to shareholder approval.

    PMI hosted a live audio webcast today to discuss the offer. An archived copy of the webcast will be available at www.pmi.com/investors until 5 p.m. ET on June 9, 2022.

    “We are pleased to announce this exciting next step in Philip Morris International’s and Swedish Match’s trajectory toward a smoke-free future,” said PMI CEO Jacek Olczak in a statement. “Underpinned by compelling strategic and financial rationale, this combination would create a global smoke-free champion—strengthened by complementary geographic footprints, commercial capabilities and product portfolios—and open up significant platforms for growth in the U.S. and internationally.

    “Swedish Match’s dedicated employees and management have steadfastly pursued the company’s vision of a world without cigarettes while delivering very strong results. We look forward to building upon this success and joining forces to accelerate our shared smoke-free mission.”

    In 2016, PMI announced its new mission to replace cigarettes with science-based, less harmful alternatives as soon as possible, and the company says it has made considerable progress toward that goal. While in 2015, essentially all of PMI’s net revenues came from cigarettes, last year nearly 30 percent came from smoke-free products. By 2025, PMI aims to be a predominantly smoke-free company, with more than half of its net revenues coming from such products. PMI says it has built world-class scientific assessment capabilities, notably in the areas of preclinical systems toxicology, clinical and behavioral research as well as postmarket studies.

    Underpinned by compelling strategic and financial rationale, this combination would create a global smoke-free champion.

    Jacek Olczak , CEO, PMI

    Swedish Match embarked on its smoke-free journey two decades ago, starting with its decision to divest its cigarette business. PMI says it values how Swedish Match has relentlessly pursued tobacco harm reduction through its range of smoke-free products; received authorizations for its products via strict regulatory pathways in the U.S.; and reshaped the public health environment in countries such as Sweden and Norway.

    “As PMI continues to evolve its business for the long term, it believes that the two companies would be a perfect pairing of strategic vision, culture and enterprise,” PMI wrote in a press note. “Together, the companies would be able to create a global, science-led smoke-free champion, combining expertise in heated tobacco and oral nicotine—including multiple MRTP [modified-risk tobacco product] authorizations—as well as PMI’s emerging presence in e-vapor products, to switch more adult smokers to better alternatives than the two could achieve as separate companies. Swedish Match would lead the combined company’s oral nicotine business.”

    Financial analysts confirmed the deal has strategic merit, citing Swedish Match’s access to the lucrative U.S. market. Cigarette sales have been declining almost unabated for years because of the health hazards and the stigma attached to smoking. Meanwhile, “modern oral” products, such as nicotine pouches and lozenges, are driving growth in the oral tobacco category, which includes traditional chewing tobacco and moist snuff. Swedish Match’s Zyn pouch leads the U.S. modern oral category with a volume market share of 64 percent in 2021.

    According to PMI, the combination would immediately enhance PMI’s already strong growth profile and support additional opportunities in the U.S. and internationally over time. It is also expected to be accretive to adjusted diluted earnings per share before any synergies and excluding transaction-related costs as well as the amortization of acquired intangibles. Swedish Match’s operating cash flow comprises meaningful U.S. dollar net income, thereby improving PMI’s currency profile.

    From January through March 2022, Swedish Match’s sales and operating profit from product segments increased on the back of continued strong momentum for the U.S. smoke-free business, according to the company’s interim report.

    Group sales increased by 10 percent to SEK4.89 billion ($492.05 million). In local currencies, sales increased by 2 percent for the first quarter.

    Operating profit from product segments increased to SEK2.12 billion. In local currencies, operating profit from product segments decreased by 7 percent for the first quarter.

    Profit after tax amounted to SEK1.49 billion.

    PMI says it intends to preserve and develop Swedish Match’s operational presence in Sweden, where much of the company’s skills base is located, as well as in Richmond, Virginia, the site of the head office for Swedish Match’s U.S. Division. PMI has no plans to divest Swedish Match’s Lights business.

  • PMI Mulls Offer for Swedish Match

    PMI Mulls Offer for Swedish Match

    Photo: SecondSide

    Philip Morris International and Swedish Match confirmed that they are talking about a possible offer by PMI for Swedish Match.

    “The discussions are in progress, and it is uncertain whether an offer will be made,” PMI wrote in a statement. “PMI intends to make no further comment regarding the discussions unless and until it is appropriate to do so.”

    “There can be no certainty that an offer will be made,” Swedish Match wrote in a press note.

    The statements were made in response to market speculation, first reported in The Wall Street Journal, about a possible deal.

    Swedish Match has a market capitalization of SKR120.92 billion ($11.99 billion), and Philip Morris is valued at about $154 billion.

    Financial analysts said a deal has strategic merit for PMI given the attractive U.S. market. The U.S. is the world’s most lucrative nicotine market, with strong and highly predictable cash flows.

    Morgan Stanley said that purchasing Swedish Match could accelerate PMI’s smoke-free transition. “Swedish Match is one of the few larger scale tobacco assets with a meaningful smoke-free business and attractive growth profile,” the investment bank wrote in a note to investors. Morgan Stanley believes Swedish Match could increase PMI’s smoke-free revenue from 29 percent in 2021 to 44 percent by 2025.

    PMI aims to generate about 50 percent of its revenue from smoke-free product by 2025.

    Purchasing Swedish Match could accelerate PMI’s smoke-free transition. (Photo: Swedish Match)

    Goldman Sachs, too, was enthusiastic about the opportunities presented by a possible tie-up. A deal would provide PMI access to the fast-growing and high-margin U.S. oral nicotine pouch category, in which Swedish Match’s Zyn is the market leader, with a volume share of 64 percent in fiscal 2021. Goldman Sachs expects the U.S. nicotine pouch category to reach $4 billion retail sales value by 2025.

    What’s more, buying Swedish Match would provide PMI with a platform to bring its Veev vapor product to the U.S. once approved by the Food and Drug Administration. This would be beneficial because PMI’s current partner, Altria Group, is unable to distribute Veev in the U.S. due to its stake in Juul Labs.

    Purchasing Swedish Match would also provide PMI with potential distribution for IQOS in the U.S. and allow it to capture the product’s full revenue and margins in the event that Altria loses the right to distribute IQOS, according to Goldman Sachs. Altria’s IQOS distribution deal expires in April 2024, but PMI and Altria currently disagree about whether Altria has thus far met the milestones to earn the renewal option for an additional five-year deal.

    The U.S. currently bans IQOS imports following an intellectual property dispute with BAT.

    Acquiring Swedish Match would also provide PMI with a move diversified geographic exposure, reducing the impact of swings in currency exchange rates.

    While considering a potential deal positive for PMI, Goldman Sachs says it could be potentially negative for Altria as PMI could evolve from a partner to a formidable competitor on Altria’s home turf. Morgan Stanley said it would also make the long-mulled recombination of PMI and Altria less likely.

  • JT Considers Sale of Russian Operations

    JT Considers Sale of Russian Operations

    Japan Tobacco on Thursday announced it was considering selling its Russian operations after suspending investment and marketing activities in the country last month following Moscow’s invasion of Ukraine.

    The statement by JT, market leader in Russia, came after it said in March it would continue manufacturing in the country, where it has four factories and 4,000 employees.

    That announcement drew criticism after many global brands pulled out over the invasion of Ukraine and governments, including Japan, levied heavy sanctions against Moscow. Russia calls its action in Ukraine a “special operation,” according to Reuters.

    Japan Tobacco’s move to explore a sale of its Russia operations makes it the last major international cigarette-maker to speak publicly about potentially leaving Russia, the world’s fourth-biggest cigarette market.

    Marlboro owner Philip Morris, the No.2 biggest player in the country, said last month that it plans to scale down manufacturing operations in Russia and that it is working on options to exit the market.

  • Fortuna Possible New Owner Imperial’s Russian Business

    Fortuna Possible New Owner Imperial’s Russian Business

    Photo: ASDF

    Fortuna Cigar House (FCH) could become the new owner of Imperial Brands’ Russian business, according to an Interfax report citing the Kommersant newspaper.

    Following Russia’s military invasion of Ukraine, several tobacco companies said they would scale back their operations in Russia. On April 20, Imperial Brands announced the transfer of its Russian business to local investors, subject to finalization of the registration of the transaction with local authorities. The company estimates a noncash write-off of around £225 million ($279.86) for this transaction.

    Founded in Odessa in 1999, FCH has been operating in Russia since 2011 as a joint venture with the distributor Megapolis, which was previously associated with Russian tobacco mogul Igor Kesaev. The company sells cigars, tobacco, smoking accessories and materials and equipment. It also has its own retail outlet.

    According to SPARK-Interfax, 50.01 percent of FCH belongs to Megapolis, and 49.99 percent belongs to BVG Cigar House Fortuna of Cyprus. In 2021, FCH posted revenue of RUR4.09 billion ($67.12 million) and a net profit of RUR404 million.

    In March, Imperial Brands said it was suspending operations in Russia, including production at its factory in Volgograd, as well as sales and marketing. The company then began talks with a Russian legal entity on transferring the business.

    Imperial Brands operates in Russia through Imperial Tobacco Volga, the production entity, and Imperial Tobacco Sales and Marketing. The company has held around 5.5 percent of the Russian tobacco market, according to business analysts cited by Kommersant.

    Tobacco analysts Maxim Korolyov told Kommersant that Imperial Brands’ products will likely continue to be produced in Russia under a temporary license.

  • Match Sets Dividend and Elects Directors

    Match Sets Dividend and Elects Directors

    Photo: Swedish Match

    Participants in Swedish Match’s annual general meeting on April 27 resolved to pay a dividend of SEK1.86 ($0.19) per share distributed to the shareholders in two equal payments of SEK0.93 per share, the company announced in a press note.

    The record date for the right to receive a cash dividend for the first payment is April 29, 2022, and payment through Euroclear Sweden is expected to be made on May 4, 2022. The record date for the second payment is Nov. 14, 2022, and payment through Euroclear Sweden is expected to be made on Nov. 17, 2022.

    The board of directors and the CEO were granted discharge for the financial year 2021.

    Charles A. Blixt, Jacqueline Hoogerbrugge, Conny Karlsson, Alexander Lacik, Pauline Lindwall and Joakim Westh were reelected as members of Swedish Match’s board of directors. Sanna Suvanto-Harsaae was elected as a new member of the board of directors. Conny Karlsson was reelected as chairman of the board.

    The annual general meeting elected Deloitte as auditor until the end of the annual general meeting 2024.

    The board of directors’ remuneration report for 2021 was adopted. Furthermore, the annual general meeting approved the board of directors’ proposal that it be authorized to resolve on acquisition of the company’s own shares, on one or several occasions prior to the next annual general meeting, provided the company’s holding does not at any time exceed 10 percent of all shares in the company. The shares shall be acquired on Nasdaq Stockholm at a price within the price interval registered at any given time, i.e., the interval between the highest bid price and the lowest selling price. Swedish Match owns 59,285,810 treasury shares as per April 27, 2022.

    In addition, the company’s share capital was reduced by SEK13,559,080.98 by means of withdrawal of 55,000,000 previously repurchased shares held in treasury, with a simultaneous bonus issue, without issuing any new shares, of a corresponding amount to restore the share capital. The shareholders further approved the proposal that the reduction will be allocated to a fund for use pursuant to a resolution adopted by the annual general meeting.

    The annual general meeting approved all other proposals made by the board of directors and the nominating committee. The proposals are outlined in the published notice of the annual general meeting.

  • Bank Policies Threaten Egypt’s Leaf Imports

    Bank Policies Threaten Egypt’s Leaf Imports

    Photo: Taco Tuinstra

    The reluctance of banks to open the documentary credits required to import leaf tobacco is endangering the operations of Egypt’s tobacco factories, reports Egypt Independent, citing the Tobacco Division of the Federation of Egyptian Industries ((FEI).

    FEI Division Head Ibrahim al-Embabi warned that more than 23 factories will close following the Eid al-Fitr holiday, after which they will have used their entire stock of raw tobacco. Due to a ban on tobacco cultivation in Egypt, the country’s tobacco industry is entirely dependent on leaf imports.

    Earlier this year, Egypt’s Central Bank of Egypt stopped collecting documents upon import, requiring importers to cover the entire value of the shipment before importing. The decisions forced many factories, including tobacco manufacturing plants, to suspend their imports of raw materials.

    Al-Embabi said that stopping the import of raw materials and the consequent disruption of production will lead to the displacement of nearly 30,000 direct workers in the sector, and threaten the state’s intake of taxes and fees paid by cigarette and tobacco companies, which exceed EGP79 billion ($4.27 billion) annually.

    Tobacco factories import raw materials worth about $500 million each year while exports reach $120 million annually.

    The remaining percentage is used to satisfy the needs of the local market. Despite its high consumption of imported raw materials, the tobacco sector is the state treasury’s most important source of revenue, according to al-Embabi.

  • Russian Tobacco Mogul Faces Scrutiny

    Russian Tobacco Mogul Faces Scrutiny

    Photo: GAlexS

    Metro published a profile of Russian tobacco mogul Igor Kesaev, who has been sanctioned by the EU and the U.K. for aiding Russia’s invasion of Ukraine.

    Listed by Forbes as Russia’s 35th-richest person last year, Kesaev’s holdings have included a major stake in the V.A. Degtyarev factory, which makes machine guns, anti-tank and anti-aircraft weapons, some of which have been used in Ukraine, according to sources.

    Until recently, Kesaev was also the board chairman of Russia’s leading tobacco distributor, TC Megapolis. Kesaev resigned from the board on April 11, 2022, according to a Russian-language press release, which stressed that Megapolis was not subject to EU sanctions and Kesaev did not influence the company’s business.

    Kesaev’s involvement in tobacco dates to the early 1990s. As the Soviet Union broke up into its constituent republics, he started an importing business that worked with international tobacco companies eager to get their products into the Russian market, according to a 2014 profile of the magnate published on Forbes’ Russian website.

    Russia was—and continues to be—an attractive market for international tobacco companies, with its large population of around 145 million people and one of the highest smoking rates in the world. More than 40 percent of men there light up, according to the World Health Organization.

    According to the Forbes profile, Kesaev graduated from Russia’s prestigious Moscow State Institute of International Relations. In the 1990s, he lived in Switzerland, where he developed personal connections with executives at Philip Morris International’s regional headquarters in Lausanne.

    Over time, Kesaev built the largest tobacco distributor in Russia through acquisitions of regional competitors, according to Forbes’ Russian website. Today, Megapolis delivers to 160,000 retailers across the country, according to the firm’s website. In 2013, PMI and Japan Tobacco International both purchased 20 percent stakes in Megapolis’ holding company for $750 million each.

    Kesaev has also been involved with the tobacco business in Ukraine. Following the toppling of Ukraine’s pro-Russian president, Viktor Yanukovych, in 2014 and Russia’s subsequent annexation of Crimea, Ukrainian officials began scrutinizing the role of Russian companies in various sectors of its economy.

    At the time, Trading Company Megapolis-Ukraine controlled 99 percent of Ukraine’s tobacco distribution market, according to research from the Anti-Monopoly Committee of Ukraine.

    Kyiv sanctioned Kesaev in 2016 for unspecified actions that it said threatened Ukraine’s national security. A top Ukrainian prosecutor later accused Kesaev of supporting “terrorist organizations” by supplying arms to Russian-backed separatist groups that have been fighting for nearly a decade to carve out two independent states—Donetsk and Luhansk—in eastern Ukraine.