Tag: Turning Point Brands

Setting It Fre

Image: Turning Point Brands

Turning Point Brands prepares to roll out its FRE nicotine pouch nationally in the U.S. this year.

By Timothy S. Donahue

It’s looking like a FRE market in 2024. Turning Point Brands (TPB) is expected to release its 2023 financial results in late February. While the Louisville, Kentucky, USA-based nicotine product conglomerate remains one of the best stock bets in the tobacco sector, its 2024 goals are taking a more “modern” approach. TPB is getting ready to go full force with its premium modern oral nicotine product and is expecting that this year more consumers will trade in their combustible sticks for its FRE white pouch nicotine product.
Graham Purdy, president and CEO of TPB, said during an earnings call that the company is excited about FRE’s U.S. national rollout in 2024. The product will compete in a billion-dollar-plus market that continues to grow rapidly. The company spent much of 2023 shoring up FRE’s supply chain to ensure consistent product quality, according to leadership.
“[We have been] analyzing consumer feedback and testing online [and] select in-store marketing and merchandising programs to ensure a successful national rollout. Given our progress to date, we are now focusing on prudently ramping up our sales and distribution efforts to achieve steady growth over time,” said Purdy. “Our early learnings and performance in test markets have given us more confidence to now leverage our sales and distribution expertise to profitably expand FRE’s profile in-store count similar to what we achieved with Stoker’s Moist Snuff over time.”
While confident about FRE’s prospects, Purdy expects market share gains to be “small and incremental.” “I think Q4 is sort of the time of the year where we [start] expanding out the foundation. I think our expectation for the product is to look similar to Stoker’s over time as we compete against the large players in the category,” Purdy explained. “It’s really a store output focus on the product, similar to some of the past practices we’ve had with other categories, specifically Stoker’s …. We focus on the stores that have the highest volume.”
TPB reported a 5.6 percent drop in sales for the third quarter, ending Sept. 30, as it faces stiff challenges in a tight market. The company, known for its Zig-Zag and Stoker’s brands, reported a decline in consolidated net sales to $101.7 million, which is believed to be due to the current economic challenges faced by the consumer goods sector.
Zig-Zag, a stalwart in TPB’s portfolio, suffered a 10.2 percent sales decrease compared to the same quarter last year. However, sales in the Stoker’s segment, TPB’s smokeless tobacco division, which includes FRE, rose by 10.1 percent. This illustrates modern nicotine’s growing popularity among consumers seeking traditional tobacco alternatives.
It isn’t surprising that TPB is embracing FRE’s potential. The global modern oral market is booming. In a recent report, Polaris Market Research valued the worldwide nicotine pouches market at an estimated $1.6 billion in 2022 and projected the segment’s revenue to reach more than $26.8 billion by 2032.
Summer Frein, chief revenue officer at TPB, said FRE has been well received in the marketplace and that consumer engagement has been encouraging. “We continue to focus on maximizing the value of our brands, executing against the plan we’ve established and growing our business with both our retail and end consumers,” she said. “We continue to focus on maximizing [the] value of our world-class brands and extensive distribution capabilities.”
Asked during the conference call whether the company would go after stores with higher volumes and potentially higher price points, Frein said the company considers FRE a premium brand that can hold its own against bigger brands.
“We have a strong belief in our point of difference … which is higher nicotine strength options available for our consumers, which we continue to see resonate both in-store and there’s been a strong response online, and [we] plan to profitably compete in the segment against those big brands,” she said.
Purdy added that despite this year’s challenges, which included navigating wholesale inventory reductions at Zig-Zag Canada, and continuing with some additional difficult comparisons, he feels good about 2024. “Particularly our progress in the [alternative] channel and FRE,” he said. “We remain focused on demonstrating further progress for the balance of the year and into 2024.”
TPB is also going to continue expanding into the alternatives markets, such as cannabis products. Purdy said that as additional states greenlight medical and recreational cannabis, his company will focus on providing a better shopping experience for consumers. In addition to more legal dispensaries and manufacturing and processing facilities, other retail outlets like head shops are drafting off this trend, he explained. “Our alternative B2B business saw Zig-Zag sales accelerate, growing over 40 percent during the quarter,” he said. “We also continue to be proactive in optimizing our capital structure.”
Frein said the company’s future isn’t based exclusively on next-generation nicotine products. Online sales are also growing. While it may be making progress on its multiyear roadmap to establish FRE and continue Zig-Zag as lifestyle brands, it’s particularly focused on the cannabis market with Zig-Zag. After all, Zig-Zag continues to increase its brand awareness, and TPB’s leadership wants to build on Zig-Zag being well-known in the alternative market segment.
The company is also focusing firmly on FRE being a premium product and continuing to boost its growing online sales segment. Frein said the nicotine market can be challenging and often takes a company in multiple directions simultaneously.
“In our B2B alternative segment, we had a strong quarter with increased sales of Zig-Zag papers and cones. We also saw a double-digit rise in both the number of customers and orders on our alternative platform, with an increase in average order size. We made significant progress across the business this past quarter as we saw growth in every subcategory with the alt channel, which includes head shops, smoke shops, dispensaries, including … distributors, cultivators and manufacturers and processors,” Frein emphasized. “Additionally, we are seeing increased engagement across our digital platforms. The total online traffic sessions on our dedicated B2C site are up 33 percent [compared] to a year ago.”

Timothy Donahue is the assistant editor of Tobacco Reporter. Since joining our team in January 2013, he has become not only an expert on the traditional tobacco business but also a well-respected voice in the rapidly developing vapor industry. Tim spends much of his time on the road, attending conferences and interviewing industry representatives. His networking skills, work ethic and quick mind are valuable assets to our diverse audience.

February 1, 2024
TPB Quarter In Line With Expectations

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Turning Point Brands (TPB) reported net sales of $101.72 million in the three months that ended Sept. 30, down from $107.8 million in the comparable quarter of 2022. Net income was $10.83 million, compared with $11.54 million in the prior-year quarter.
“Our third quarter results were consistent with our expectations,” said TPB President and CEO Graham Purdy in a statement.
“The Zig-Zag segment was stable sequentially from the second quarter and notwithstanding some transitory headwinds posted its third-highest revenue quarter. Stoker’s had another solid quarter of performance led by double-digit growth year-over-year in Stoker’s MST. We further de-levered the balance sheet with an opportunistic purchase of $15 million in aggregate principal amount of our convertible notes during the third quarter.
“With a new $75 million ABL revolving credit facility, our strong cash balance and our free cash flow generation, we now have more than ample liquidity to address the remaining balance of convertible notes maturing next year.”

November 8, 2023
Turning Point Releases First-Quarter Results

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Turning Point Brands announced financial results for the first quarter ended March 31, 2023.
Total consolidated net sales increased 0.1 percent to $101 million from the first quarter of 2022. Zig-Zag product net sales decreased by 8.3 percent from the previous year due to anticipated reduction of trade inventory during the quarter. Stoker’s product net sales increased by 6.2 percent. Creative Distribution Solutions net sales increased by 8 percent.
Gross profit decreased 6.1 percent to $48.6 million, and net income decreased 30.9 percent to $7.6 million. Adjusted net income decreased 18.1 percent to $11.9 million, and adjusted EBITDA decreased 17.7 percent to $20.8 million.
“We are encouraged by our first-quarter operating results, which fell within our expectations,” said Turning Point Brands President and CEO Graham Purdy in a statement. “The Zig-Zag segment had an anticipated inventory reduction with certain wholesale customers but saw strong performance from the alternative channel and the rollout of Clipper lighters. With the adjustment in trade inventory, Zig-Zag is now well positioned to demonstrate growth for the balance of the year.
“Stoker’s had a solid quarter of performance as the value proposition of Stoker’s MST and looseleaf led to another quarter of market share gains. We opportunistically purchased another $13.9 million in aggregate principal amount of our convertible notes during the first quarter while maintaining a strong cash balance. We are currently maintaining our annual guidance as we focus on executing against our plan for the balance of the year.”

May 3, 2023
Sales Down at Turning Point

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Turning Point Brands reported consolidated net sales of $103.4 billion the fourth quarter of 2022, down 1.8 percent from the comparable 2021 quarter. Gross profit decreased 1.5 percent to $49.6 million. Net sales for the Zig-Zag and Stoker products increased 0.9 percent and 2.6 percent, respectively, while sales of new-generation products declined by 11.1 percent.
For the full year, consolidated net sales decreased by 6.8 percent to $415 million. Gross profit was down 5.6 percent to $205 million. Net sales for Zig-Zag and Stoker’s products increased 7.9 percent and 5.3 percent, respectively, while sales of new generation declined by 35.2 percent
“The fourth quarter operating results finished in-line with our expectations with solid execution across our segments,” said TPB President and CEO Graham Purdy in a statement.
“The Zig-Zag segment grew during the quarter despite the impact of a previously disclosed pull-forward in the prior quarter, benefitting from continued market share gains and the contribution from a full quarter of CLIPPER lighters. We are pleased with the ongoing roll-out and strong channel receptivity to the world’s No. 1 reusable lighter. Stoker’s MST experienced strong share gains as consumer trade-downs to value accelerated, consistent with the current inflationary and economic backdrop.
“The challenging regulatory environment continues to negatively affect the NewGen segment which was down materially vs. 2021, but with declines moderating in the back half of the year. In addition to returning capital to our shareholders through share repurchases, we opportunistically purchased $10 million notional of our convertible notes during the fourth quarter while maintaining a strong cash balance.
”Over the last few months since taking on the CEO role, my primary objective has been to re-direct our focus and energy towards driving organic long-term growth. This starts with allocating resources to products, initiatives, and channels best positioned towards this goal. Our organization is now better aligned towards capitalizing on the opportunities in front of us and we look forward to delivering against our long-term plans going forward.”

February 24, 2023
Turning Point Reports Quarterly Results

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Turning Point Brands (TPB) reported net sales of $107.8 million for the third quarter ended Sept. 30, 2022, down 1.9 percent.
Net sales for Zig-Zag and Stoker’s products increased 23.3 percent and 10 percent, respectively, while net sales for new-generation products declined by 40.3 percent. Gross profit decreased 2.9 percent to $52.7 million and net income decreased 14.3 percent to $11.5 million.
“Zig-Zag and Stoker’s segments demonstrated strong double-digit growth during the quarter despite a challenging economic backdrop with inflationary pressures continuing to impact consumers,” said TPB President and CEO Graham Purdy in a statement.
“Zig-Zag benefitted from solid growth in the U.S. papers and Canadian businesses during the quarter and the successful launch of CLIPPER lighters.
“Meanwhile, Stoker’s MST experienced continued share gains driven by consumer trade-down to the value category. NewGen sales decreased slightly compared to the previous quarter, and the segment remained profitable as we monitor ongoing regulatory developments.
“We continued to return capital to our shareholders during the quarter while maintaining a strong cash balance that provides us with the ability to navigate the current financing environment. While our competitive position remains strong and we outperformed our markets during the quarter, it is prudent to adjust our outlook for the year in light of the current economic environment.”

October 27, 2022
Turning Point Appoints Graham Purdy as CEO

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Turning Point Brands appointed Graham Purdy as CEO and board director, effective Oct. 16, 2022, following Yavor Efremov’s resignation as CEO and director. Additionally, David Glazek will transition from nonexecutive to executive board chairman, effective January 2023.
Purdy will lead TPB’s strategy, execution and operations, with a focus on growing and maximizing the value of the company’s portfolio of brands. Prior to his appointment as CEO, Purdy served as TBP’s chief operating officer since 2019. Since joining TPB in 2004, Purdy has held various leadership positions, including president of the new ventures division and senior vice president of sales.
During his tenure at TPB, Purdy oversaw two successful brand extensions, rolling out Zig-Zag Cigar Wraps and Stoker’s MST. In addition, he built an effective sales organization driven by an industry-leading performance management system, positioned a number of successful new products and led the integration of many of the company’s most important strategic initiatives. Purdy led day-to-day operations during the Covid-9 pandemic, managing complex challenges while completing three of the most successful years in the company’s history.
“Graham is a highly experienced operator who has been integral to Turning Point’s success. His deep knowledge of the company’s operations and industry make him ideally suited to lead TPB today. We are confident in his ability to oversee Turning Point’s brand strategy and sharpen the company’s operational focus,” said Glazek, chairman of TPB’s board of directors, in a statement.
“The board would also like to thank Mr. Efremov for his many contributions during his tenure. In the last year, he has launched key initiatives, including the expansion of our distribution platform, enhancing our IT infrastructure and adding new leadership talent. We wish him well going forward.”
“I am excited to serve as Turning Point’s next CEO and drive the company’s strategic priorities to enhance shareholder value,” said Purdy. “Over the past three decades, Turning Point has built a leading industry position through our portfolio of large and leading brands, innovative marketing and omni-channel distribution capabilities, along with our strong track record of new product innovation. I look forward to working with our highly talented team to continue to build a world-class consumer products company for the benefit of our employees, customers and shareholders.”
“I am proud of what we have accomplished in a short period of time and the progress that has been made on key initiatives over the past year,” said Efremov. “I am grateful to have had the opportunity to serve as CEO and meet and work alongside the many hardworking and dedicated employees of Turning Point.”

October 17, 2022
Turning Point Brands’ Sales And Profits Down

Turning Point Brands (TPB) reported net sales of $102.9 million in the second quarter ended June 30, 2022, down 16.1 percent from the comparable 2021 quarter. Net sales of new-generation products declined by 45.1 percent while gross profit decreased 14.2 percent to $51.5 million. Combined net sales for Zig-Zag and Stoker’s products demonstrated comparative resilience and decreased by 0.9 percent for the quarter.
“We are pleased with the stable performance of both the Zig-Zag and Stoker’s segments during the quarter in light of a heightened inflationary environment for our customers, with rising prices at the pump impacting consumer traffic in convenience stores,” said TPB President and CEO Yavor Efremov in a statement.
“While overall sales decreased 16 percent from the previous year, Zig-Zag and Stoker’s sales were steady despite weakness in the wraps and loose leaf subsegments. Zig-Zag maintained its leading positions in both the roll-your-own paper and cigar wraps markets while Stoker’s MST experienced accelerated share gains driven by consumer trade-down to the value category.
“Despite NewGen revenue decreasing 45 percent from last year, the segment remained relatively stable from the previous quarter and profitable as we continue to monitor FDA regulatory developments. We continued to deploy a substantial amount of our free cash flow toward share repurchases during the quarter while maintaining a strong balance sheet, providing us with optionality on further capital deployment.”
“Going forward, we maintain a favorable outlook on our underlying business and our competitive positioning. However, given the market environment during the second quarter, along with continued inflationary pressures and resulting uncertainty of consumer confidence, we feel it is prudent to adjust our outlook for the year.”

July 28, 2022
TPB’s Quarter ‘In Line With Expectations’

Yavor Efremov (Photo: TPB)

Turning Point Brands announced financial results for the first quarter ended March 31, 2022.
Net sales for the first quarter of 2022 decreased 6.3 percent to $100.9 million compared to the previous year. Net sales for Zig-Zag and Stoker’s Products increased 10.1 percent over 2021. Gross profit decreased 2.8 percent to $51.8 million while net income decreased 6.7 percent to $11 million.
“Our first- quarter results were in line with our expectations as we continued to grow our market share for both Zig-Zag and Stoker’s while navigating a difficult consumer and regulatory environment to drive profitability in each of our segments, including NewGen. Sales decreased 6 percent from the previous year driven by a 37 percent decline in NewGen sales but showed double-digit growth excluding NewGen,” said Yavor Efremov, president and CEO of Turning Point Brands, in a statement.
“Zig-Zag delivered another strong growth quarter led by our U.S. papers business, which built on its market-leading share during the quarter. At the same time, Stoker’s maintained its growth trajectory driven by double-digit growth in the moist snuff tobacco business, which benefited from consumer trade-down as a leading value brand. Despite the expected sales decline, NewGen maintained positive profitability during the quarter while improving the distribution reach for its regulated products.”
“We continue to monitor FDA developments. While added regulation may cause short-term disruption, this is a necessary step to fully regulate the industry, create a level playing field and provide consumers with additional reduced-risk alternatives to cigarettes,” continued Efremov.
“We maintain a strong balance sheet that is allowing us to deploy a substantial amount of our free cash flow toward share repurchases, which continued during the quarter. While inflationary pressures, including a spike in gas prices, are impacting the consumer wallet, we remain favorably positioned as we continue to execute and outpace the overall industry. In addition to solid execution on the business side, we have completed both the ERP and CRM scopes we discussed on our last earnings call. I am particularly proud of the fact that the organization undertook a detailed review of the business with heavy involvement from every level of the company while delivering a solid quarter.”

April 27, 2022
Turning Point Appoints Chief Marketing Officer

Turning Point Brands has appointed Summer Frein as the company’s chief marketing officer, effective immediately. In this role, Frein is responsible for driving Turning Point Brands’ marketing strategy across the company’s extensive brand portfolio.
“As Turning Point Brands continues to transform into a more diversified consumer packaged goods company, Summer’s vast experience leading the planning, strategic development and execution for notable consumer brands will be extremely valuable,” said Yavor Efremov, president and CEO of Turning Point Brands, in a statement. “I look forward to working closely with Summer as she helps our team to improve our differentiated, world-class brands’ profile and consumer acceptance.”
Frein previously served as general manager at Cronos Group USA, where she designed and implemented the company’s sales and marketing strategy. Frein also previously led Cronos Group’s U.S. brand sales operations, including building and managing brand and retail partnerships for the Lord Jones and Happy Dance brands.
Prior to joining Cronos Group, Frein held a variety of senior leadership roles at Altria Group across sales, digital and brand marketing, strategy and business development. Notably, in 2018, she led Altria’s cannabis research investment initiative as part of Altria’s strategy and business development group.
“Over the course of my 15-year career, I have worked with leading adult-use consumer brands on many different sides of the business and watched Turning Point Brands evolve into the leading company that it is today,” said Frein. “This new opportunity will allow me to work with the dynamic team at Turning Point Brands to develop a long-term marketing strategy and help to fully unlock the value of the company’s iconic Zig-Zag and Stoker’s brands.”

April 13, 2022
Turning Point Brands Reflects on Strong 2021

Yavor Efremov (Photo: TPB)

Turning Point Brands (TPB) announced financial results for the fourth quarter and full year ended Dec. 31, 2021.
Net sales were comparable with the fourth quarter of 2020 at $105.3 million despite a 22 percent decline in sales of new-generation (“NewGen”) products.
Gross profit decreased 3.8 percent to $50.3 million compared to the fourth quarter of 2020. Net income decreased 20.3 percent to $11.5 million. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) decreased 7.6 percent to $23.8 million.
Full-year 2021 net sales increased 10 percent to $445.5 million. Gross profit increased 14.7 percent to $217.8 million. Net income increased 36.3 percent to $52.1 million. Adjusted EBITDA increased 19.8 percent to $108.1 million.
“Our fourth-quarter results capped off another strong year of performance for Turning Point Brands, with EBITDA growing 20 percent for the fiscal year. Sales for the fourth quarter finished above our previous guidance and in line with the previous year despite a 22 percent decline in NewGen sales, which fell within our previous guidance,” said TPB President and CEO Yavor Efremov, in a statement.
“Zig-Zag delivered another quarter of double-digit growth against a tough comparable period while Stoker’s reaccelerated to high single-digit growth driven by mid-teens growth in the moist snuff tobacco business. Additionally, NewGen managed through a challenging quarter clouded by the evolving regulatory landscape while maintaining long-term upside potential in a post-PMTA [premarket tobacco product application] environment.
“Turning to capital deployment, we increased our share repurchase activity during the quarter and continue to maintain a strong balance sheet. Going forward, I am eager about the opportunity to work with a great organization, continue our momentum and invest further to deliver future organic and inorganic growth.”
In related news, TPB entered into an agreement with Flamagas, a lighter manufacturer, for exclusive distribution of Clipper lighters in the United States and Canada.
“Given Flamagas’ global reach and renowned product portfolio, this partnership represents a tremendous opportunity to expand Clipper’s reach in the United States and Canada,” said TPB Senior Vice President ff Sales And Marketing Frank Vignone in a statement.

February 22, 2022