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Altria Reports 2023 Results

Altria Group reported net revenues of $5.98 billion for the fourth quarter of 2023 and net revenues of $24.48 billion for the full fiscal year, down 2.2 percent and 2.4 percent, respectively, from the comparable 2022 periods.

The decrease in the fourth quarter and the full year were both driven primarily by lower net revenues in the smokable segment, which were partially offset by higher net revenues in the oral products segment.

“It was a pivotal year for Altria as we made significant progress in pursuit of our Vision by enhancing our smoke-free product portfolio while our businesses performed well in a challenging environment,” said Altria CEO Billy Gifford in a statement. “We grew adjusted diluted EPS by 2.3 percent and continued our long history of rewarding shareholders by delivering nearly $7.8 billion in dividends and share repurchases.”

“Our plans for 2024 include a continuation of our strategy to balance earnings growth and shareholder returns with strategic investments toward our Vision. We expect to deliver 2024 full-year adjusted diluted EPS in a range of $5.00 to $5.15, representing a growth rate of 1 percent to 4 percent from a $4.95 base in 2023.”

February 1, 2024

Korean Sales Fall for First Time in Years

South Korean cigarette sales fell in 2023 for the first time in four years, reports Yonhap News Agency, citing data from the finance ministry. Electronic cigarette demand, however, grew.

Last year, South Koreans purchased 3.61 billion cigarette packs, down 0.6 percent from 2022, the first on-year decrease since 2019’s 0.7 percent fall.

Sales of duty-free cigarettes increased 60.7 percent in 2023 in line with an increase in post-pandemic tourists.

Traditional cigarette sales fell 2.8 percent, but heat-not-burn electronic cigarettes increased 12.6 percent.

Last year, electronic cigarettes accounted for 16.9 percent of total sales, an increase from 12.4 percent in 2021.

January 31, 2024

E-cigarette Smugglers Found in Finland

Finnish Customs uncovered a substantial e-cigarette smuggling operation in Helsinki, according to The Helsinki Times. The operation involved illicit imports from China.

Customs officers discovered a shipment of about 1,000 nicotine e-cigarettes during routine inspections at a courier terminal in Helsinki. The suspect had ordered about 1,600 e-cigarettes from China in 2023.

Finland prohibits importation of vapes through “distant communication methods” like online orders. Penalties can range from fines to imprisonment plus paying back evaded taxes and illicit gains.

Some people are unaware of the rules, however. “Not all those persons always know that it is illegal to order and distribute e-cigarettes,” said Marko Laitinen, investigation leader, referring to young people ordering e-cigarettes. “Once you get caught doing that, it always entails criminal liability.”

January 31, 2024

Farmers Told to Destroy Seedbeds or Risk Arrest

Tobacco farmers in Zimbabwe must destroy seedbeds or risk fines or imprisonment of up to two years, reports The Sunday Mail.

The revised tobacco planting deadline passed on Jan. 15, following a pushback from Dec. 31.

Zimbabwe’s Plant Pests and Disease Act requires farmers to destroy all living tobacco plants on seedbeds by Dec. 31.

“The last date of destroying all tobacco plants in seedbeds was Jan. 15, 2024, and in this case, it passed, and farmers need to abide by that,” said Leonard Munamati, acting chief director of Agricultural Advisory and Rural Development Services.

“Pathogens, such as potato virus Y and bushy top virus, are a result of poor management and failure to comply with the regulation dates,” said Cleopas Chinheya, head of Kutsaga’s plant health services. “Clearing seedbeds breaks the life cycle of pests and pathogens and viral transmission from seedbeds or fields.”

“Complying to the regulated dates does not benefit the enforcers but the farmers,” said George Seremwe, president of the Tobacco Association of Zimbabwe. “If we let pests and disease carry over on our land, it is us who suffer.”

“We always urge our fellow farmers to be responsible in their operations,” said Seremwe.

January 31, 2024

Council Urges Steep Tobacco Tax Increase

Hong Kong’s anti-smoking watchdog has called for a 75 percent increase in tobacco tax to meet international standards, reports the South China Morning Post.

If the tax rate is increased by 75 percent, the smoking rate could decrease by 0.7 percentage points to 8.8 percent, according to the Hong Kong Council on Smoking and Health. The council added that other control measures would be necessary to bring the city’s smoking rate down to the 7.8 percent goal by next year.

The call for a tax increase comes before next month’s budget. Last year, the tax was increased 31.5 percent.

“Raising tobacco tax should be prioritized for achieving the smoking reduction target,” council chairman Henry Tong Sau-chai said at a press conference.

“[The increase last year] was insufficient to compensate for the price gap caused by the freezing of the tax rate in the previous eight years.”

The World Health Organization has stated that the tax should account for at least three-quarters of the retail price of cigarettes, meaning Hong Kong would need an increase of 75 percent.

“[Hong Kong is] in a really good position to reduce prevalence to the point in getting close to what we call the ‘endgame,’” said Hana Ross, an honorary research associate from the University of Cape Town’s school of economics.

Forty-one countries, including France, the United Kingdom and Australia, have reached the WHO’s recommended level of tobacco tax.

January 31, 2024

FEELM Launches Charge-Free Disposable

FEELM, a vaping industry leader in closed-system products, has launched the world’s first charge-free vaping system. The new Power Alpha 2.0 solves the problem of needing repeated charging in the large puff vapes currently popular on the market.

FEELM started developing the charge-free battery technology that can empower large-puff vapes as early as 2022. The previous version of the company’s original Power Alpha technology could only support 6,000 puffs without charging.

The upgrade more than doubles the count to 15,000 puffs, according to an emailed press release.

FEELM states that the Power Alpha 2.0 also solves the issues of decaying tastes in cotton mesh coils, realizing consistently true flavors in every puff.

The Power Alpha 2.0 is equipped with FEELM’s TopPower technology. “Relying on this technology, the energy density of Power Alpha 2.0’s battery cells is 40 percent higher than … products of the same size, making Power Alpha 2.0’s battery cells 40 percent smaller than … products with the same amount of power.

“The extremely low self-discharge rate is another addition to benefits. A 700 percent lower self-discharge rate compared others on the market, which can lead to a longer shelf life and better support customers’ global market rollout.”

The Power Alpha 2.0 also uses a unique Mesh constant power solution, leading to a taste that is 300 percent more consistent than other products on the market, according to FEELM.

“With the substantial increase in the vapor volume and atomization efficiency, Power Alpha 2.0 supports the ability to fully vaporize the e-liquids for richer and fuller flavors, ” the release states. “Experiment data shows that the Power Alpha 2.0 solution’s atomization efficiency has increased by 200 percent along with an increased vapor volume of 49 percent compared to similar products from competitors. The numbers show a very evident advantage.”

January 31, 2024

KT&G Finalizes CEO Candidates Shortlist

The governance committee of KT&G Corp. finalized the first shortlist of KT&G CEO candidates on Jan. 31 and recommended the finalized list to the CEO candidate recommendation committee. The first shortlist includes four external candidates and four internal candidates.

The governance committee held eight meetings since the end of December to oversee the open recruitment for CEO candidates and conduct comprehensive assessments. Subsequently, the committee selected the first shortlist by taking into account impartial and objective opinions from the advisory panel composed of external experts.

The CEO candidate recommendation committee will now assess the candidates from the first shortlist in order to ensure sufficient candidate validation and select the most suitable candidate for the CEO position. The committee will finalize the second shortlist of three to four individuals by mid-February and disclose the list upon its finalization.

Then, the CEO candidate recommendation committee will conduct face-to-face interviews with the candidates on the second shortlist to thoroughly review each candidate. Following the assessment, the committee will name the final CEO candidate and report to the board of directors by the end of February. The board of directors will then table the agenda for the annual general meeting of shareholders after resolution, and the CEO will be appointed following the approval at the annual general meeting of shareholders in late March.

The CEO candidate recommendation committee is composed entirely of outside directors, without the participation of the incumbent CEO, Bok-in Baek.

January 31, 2024

Pax Labs Files Patent Suit Against Stiizy

Pax Labs Inc. has filed a lawsuit against the vape brand Stiiizy Inc. and its manufacturer ALD Group Ltd. for allegedly infringing four patents with vape pens they make and sell.

Stiiizy and Hong Kong-based ALD make vaporizing devices, including a cartridge and battery, that utilize methods similar to Pax Labs’ patents, according to separate complaints filed Monday in the US District Court for the Central District of California, according to media reports.

Pax Labs said the companies infringed U.S. Patent Nos. 11,369,756, 11,369,757, 11,766,527, and 11,759,580, which deal with methods for leak-resistant vaporizer cartridges and apparatuses.

The patents are all labeled as a “Leak-resistant vaporizer device.”

January 31, 2024

Luciano Cigars, Peter James Launch JV

Luciano Cigars and Peter James Co. have announced the launch of Peter James Cigar Co., a new joint venture that will include cigars and accessories released in the near future.

According to Luciano Meirelles, the new entity is a joint venture equally owned by Peter James Co. and Meirelles and his business partner, Tiago Splitter. The new company will hold the Peter James trademark in the U.S. as well as other trademarks for future products, according to Halfwheel.

The two are working on a new cigar that will be launched in March, though details about its specifics have not been announced. However, the cigars will be produced at the Luciano Tabacos S.A. factory in Estelí, Nicaragua, and Luciano Cigars will distribute them.

“This partnership is an extraordinary moment—a fusion of expertise and passion,” said Meirelles in a press release. “My love for the Peter James brand goes beyond their craft and luxury products.

“There is an intentionality in everything they do: even the smallest details reveal beauty where most people won’t see it. That act of generosity carries beauty and passion into our world. We couldn’t be more excited for what’s to come.”

January 31, 2024

The Potential of Pouches

Some markets have been more receptive to modern oral products than others.

By Stefanie Rossel

The modern oral nicotine category continues growing but struggles to reach a wider global audience. Modern oral nicotine products, which are white, pre-portioned little bags comprising a nicotine-containing carrier material, are considered the advanced, cleaner version of Swedish snus, a pasteurized oral tobacco that is available as loose products or pouches and is credited with helping Sweden achieve its record-low smoking prevalence by offering smokers a less harmful way to consume nicotine.

According to Euromonitor International, global sales of nicotine pouches grew from 17.09 billion units in 2022 to an estimated 20.77 billion units in 2023. The overwhelming majority of sales, however, take place in the U.S., where an estimated 14.97 billion units were sold in 2023 compared to 12.61 billion units in 2022. Sweden ranks second, with 1.8 billion units sold in 2022 and an estimated 2.2 billion units sold in 2023. It is followed by Denmark with a forecast 745.3 million units in 2023 (versus 589.2 million units in 2022), Pakistan and Austria with estimated sales of 695 million units and 477 million units, respectively.

As far as value is concerned, Euromonitor estimates the category to be worth $10.29 billion globally, up from $8.47 billion in 2022. By 2027, the business intelligence firm expects the segment’s value to reach $15.99 billion. Despite their relentless expansion, modern oral nicotine products remain a niche within a niche—they are a small part of a larger oral tobacco market, which accounted for only around 2 percent of the global nicotine industry in 2022.

In the U.S., retail sales of nicotine pouches generated $8.58 billion in 2023 compared to $7.23 billion in the previous year. Raphael Moreau, head analyst at Euromonitor, expects the U.S. modern oral nicotine market to reach $11.03 billion by 2027.

“The U.S. has benefited from a solid legal framework, with the Food and Drug Administration controlling the market chain, requiring authorization to market, nicotine health warnings and premarket assessment,” Moreau says. “Generally, the U.S. has a strong tradition of oral, i.e., chewing, tobacco. This definitely helped. Nicotine pouches are convenient and discreet to use, and they are taking share from chewing tobacco and Swedish-style snus, which has boosted U.S. sales.”

As consumers become more familiar with the product, Moreau anticipates the market to continue growing rapidly. In 2023, just under 3 percent of the U.S. adult population consumed modern oral nicotine products. “Over the next five years, we will see an increase because of more awareness of the brands,” he says. “There is a wide flavor selection, which appeals to consumers who can’t use flavored vape products anymore as they are banned. The return to office work after the Covid pandemic will also contribute to the category’s growth: When working from home, people were more likely to vape. At the office, pouches are more convenient. Besides, the products are used as a cessation aid away from cigarettes and other combustibles.”

Moreau suspects that the majority of modern oral nicotine is used in combination with other tobacco products. “This also has caveats because potentially, consumers may just try them and not become regular users, so prediction is difficult,” he says.

Zyn Pulls Further Ahead

With a 77 percent category retail value share in the third quarter of 2023, Zyn is the U.S. market leader by a large margin. Shipment volume of Zyn nicotine pouches amounted to 104.5 million cans during that period, a 65.7 percent increase compared to the third quarter of 2022, according to Philip Morris International. PMI became the owner of the Zyn brand through its acquisition of Swedish Match for $16 billion in late 2022. The move has given PMI a comfortable lead in the U.S. nicotine pouch market, where it previously had no presence to speak of, and will help the company to achieve its goal of becoming substantially smoke-free by 2023.

At PMI’s Investor Day Conference in September 2023, Lars Dahlgren, president of smoke-free oral products and CEO of Swedish Match, forecast “stellar growth” for the product also because Zyn is cheaper than cigarettes, retailing at $5 per can compared to a price of $8 for a pack of cigarettes. According to news platform Seeking Alpha, the brand is popular among Generation Z, which has otherwise been a hard market for traditional tobacco companies to crack.

In addition to Zyn, some other brands have made gains recently, according to Moreau. With a retail volume of 15.4 million units and a value share of 11 percent in 2022, Altria’s On! Brand ranks second behind the market leader, followed by Swisher International Group’s Rogue nicotine pouches, with 7.9 million units sold during that period.

The “attractive category dynamics” in the highly competitive U.S. nicotine pouch market also holds potential for new players. In June 2023, ITG Brands acquired a range of nicotine pouches from Canada-based TJP Labs in order to facilitate its entry into the U.S. modern oral market. Following further consumer testing, ITG Brands plans to launch 14 pouch product variants in 2024.

“The category still is very young, so there is no strong brand loyalty, and consumers are likely to try new brands,” comments Moreau. “This makes the market attractive to new entrants. And there’s quite a lot of room for them, as the category is growing very fast.”

Regulation Required

Except for the Nordic countries, where consumers have been familiar with snus for two centuries, the modern oral category is still underdeveloped in the rest of the world.

Japan Tobacco International, present in the segment with its brand Nordic Spirit, sees vast untapped potential. Nordic Spirit was developed in Sweden and has rapidly grown since its launch in 2018. The product is available in the U.K., Ireland, the Philippines and Switzerland. “While the tobacco-free nicotine pouches category is still in its infancy, we already see that many adult tobacco and nicotine consumers globally will be interested in trying the product, helping the new category to grow significantly over the coming years,” says a JTI spokesperson. “For example, smoke-free nicotine pouches have become increasingly popular in the U.K. Responding to this growing trend, the Nordic Spirit brand has witnessed growth and increased its market share to around 45 percent.”

According to Euromonitor, U.K. consumers bought 92.1 million nicotine pouches in 2022. In 2023, the category there grew 54.6 percent.

Pakistan, however, was the country with the largest year-on-year growth rate, with sales in 2023 expected to be 70.7 percent, up from the 127.8 million units sold in 2022. In Pakistan, an estimated 10 million people use smokeless tobacco, which corresponds to more than 40 percent of the country’s total tobacco market. In December 2022, BAT announced that its modern oral nicotine brand Velo, which it had launched in Pakistan in early 2020, had achieved a monthly volume of more than 40 million pouches in the country, making it the company’s third-largest market for nicotine pouches.

Most growth in the category will come from Asia-Pacific and Eastern Europe, according to Moreau. In Poland, for instance, the category increased by 69.5 percent in 2023. “The Czech Republic is also interesting because it had quite strong demand in 2022 and 2023,” Moreau says. “This is likely to stay [this way], particularly since nicotine pouches are regulated in the country now.”

In May 2023, Czechia’s Ministry of Health issued a decree, modeled on tobacco and e-cigarette legislation, which regulates the composition, appearance, quality and characteristics of nicotine sachets. It also defines the legal age for sale and requires manufacturers and importers of nicotine sachets to register their products with the Ministry of Health. The legislation entered into force on July 1, 2023.

Other countries, by contrast, have been less accommodating, with the Netherlands and Belgium banning modern oral products in April 2023 and October 2023, respectively. The European Commission, too, is reportedly mulling a ban on nicotine pouches for the common market. The products are also prohibited in Australia and New Zealand.

“History has repeatedly shown that bans of legal products often do not lead to their intended goals and instead encourage criminal gangs to increase supply of illegal products to make up for the shortfalls,” warns JTI’s spokesperson. “Instead of an outright ban, we should aim for an evidence-based regulatory framework that acknowledges the potential of nicotine pouches to reduce the risks associated with smoking. At the same time, we must ensure that oral nicotine products aren’t marketed or sold to minors under any circumstances.”

In Germany, modern oral tobacco continues to operate in a regulatory gray area. Nicotine pouches are classified as food in the country, which makes them subject to European food law. Because the EU has not approved nicotine as a food or food ingredient, this means that nicotine pouches cannot be legally traded in Germany.

Despite the German Federal Institute for Risk Assessment’s October 2022 acknowledgement that tobacco-free nicotine pouches could reduce the health risks compared to smoking, the products’ legal status remains unchanged. “It will only change after a decision at EU level,” says Moreau. “Germany is a typical case where an uncertain or hostile landscape and a lack of familiarity with the products are two negative factors that are feeding each other. Whenever the legal status is unclear, not exactly defined or restrictive, retailers will basically avoid selling them. Therefore, consumers will not be aware of the products, and they will not trust them. In Germany, nicotine pouches are still available online, but the products are obviously now not as widespread as [they would have been] if they were sold in stores.”

Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.

January 30, 2024