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  • PMI Execs Speak at CAGNY

    PMI Execs Speak at CAGNY

    Yesterday, Philip Morris International participated in the Consumer Analyst Group of New York (CAGNY) conference in Orlando, Florida. Chief Executive Officer Jacek Olczak and Chief Financial Officer Emmanuel Babeau spoke about the company’s work toward a smoke-free future, current financial models, and future opportunities.

    (Some quotes were edited for brevity and clarity.) Highlights included:

    Jacek Olczak

    Working toward a smoke-free company

    “We have been quite successful for the first 10 years of the transformations and our quest to become predominantly a smoke-free company. A way to look at what we achieved is [comparing] Marlboro International, which is by far the biggest premium brand in the category. Two years ago in 2023, IQOS for the first time surpassed the revenues of Marlboro and last year exceeded $11 billion. If we take this from that perspective, it took Philip Morris International about 60 or 70 years to get Marlboro to that level, and IQOS, our heat-not-burn brand, has managed to get to that level of performance in roughly 10 years.”

    “What does it mean for us when we set this aspirational target of having two-thirds of our revenue come from smoke-free products by 2030? Obviously, it’s a nice number that looks very nice on a PowerPoint, but the reality is that unless we become a majority smoke-free company, country-by-country, market-by-market, while we operate… the miracle will not happen at the group consolidated level.”

    “There are some countries in the world that despite the science and knowledge and evidence about the new products in terms of the risk profile versus cigarettes, they will not ban cigarettes. But they [essentially] will ban the smoke-free product by allowing cigarettes to continue.”

    ZYN, the company’s acclaimed oral nicotine pouch

    “ZYN in the U.S. is essentially approaching $2 billion in revenues. However, it’s especially exciting for us that ZYN today is the No. 4 nicotine brand as of last quarter, and definitely is the No. 1 smoke-free brand on the U.S. market.”

    Nicotine and the FDA

    “The FDA and others should finally start clarifying what is nicotine. Maybe we don’t wait for FDA clarification. This is what we say about nicotine, and I am not saying what we know, we are just repeating what is known to the public health organizations including the FDA and many other reputable institutions: Nicotine is addictive and, obviously, is not risk-free, but it’s not the primary cause of smoking-related diseases.”

    “Everything else that you find in tobacco smoke is bad, but it’s not the nicotine. Now historically, because we only knew that nicotine can be consumed from cigarettes, nobody had to pay attention to the details or accuracy of the language and whether you call it nicotine or cigarette or smoking, there was not much difference. But over the last 10 years, this has become the fundamental difference.”

    “The most important thing, and I will be repeating this until we succeed, nicotine doesn’t cause cancer. And this is not PMI research. This is research that was done over the last 60 or 70 years when any public authority in the world was looking into cigarettes and the harm caused by cigarettes. And nobody has come up with any conclusion even close that nicotine causes harm and definitively not causes cancer. So that’s the starting point and the industry, and definitely PMI, is going in that direction.”

    “[Nicotine products] have no reason to be given to kids. So we, and Swedish Match, stand very strongly behind responsible sales practices, which go into the product design flavors, et cetera.”

    Future of the industry

    “I think the future will be more complicated, but it will actually create more opportunities. The smokers will not go away. They’re actually looking at these products from the repertoire perspective, because all of these products deliver a different opportunity.”

    “I think the best strategy one can have is to actually keep on with the pace of developing these products and offering them to the consumers without spending too much time [wondering which] one category will win one versus the others.”

    Emmanuel Babeau

    Revenue growth

    “Let me start with a summary of our best-in-class growth and return. The first element is we are a strong growth company in terms of top-line with three drivers. The first one we talk about is growing volumes. If we achieve our objective of growing volume again in 2025, it will be five years in a row of growth in volume. It’s a total change of paradigm for the nicotine industry. Second is price increase, and you have seen over the last two years we’ve been growing and increasing our prices. First on combustible of course, but also on the smoke-free portfolio where we have started to post some nice price increases. Third is the very positive mixed impact that is coming from the growth of our smoke-free portfolio.”

    “What I think is super important is the mix impact and understanding of why the growth on smoke-free products is a very positive element for our growth, both at the top-line level and at the margin progression as well.”

    “Today we are spending a lot of time on AI and what AI can mean for us in terms of notably saving on our back-office cost. We believe that AI is pervasive to the organization. To be clear, AI will have a lot of impact in the way we connect with the consumer and in the way we develop our marketing activity. It’s also going to have a very positive impact on cost, in terms of standardization, in terms of automatization, and we’re going to leverage that.”

    Smoke-free products

    “Look at IQOS versus combustible cigarettes. IQOS reaches $80 per thousand in revenue, which is around 2.2 times higher than the average of our combustible portfolio. Therefore, when we grow IQOS, not only do we come with volume growth, but we accelerate the revenue growth with this positive mix effect on revenue. The level of gross profit is $54 per thousand. This is around 2.4 times higher than a combustible cigarette.”

    “Maybe the most spectacular impact in terms of positive contribution is the U.S. ZYN number. The revenue per thousand is about 6 times the average of our cigarette business. And at this level, the gross profit is $185, which is about 8 times the profit that we make on average for our combustible business.”

    “So obviously, when we grow IQOS and ZYN, we are growing very nicely in volume, remember close to 14% growth in volume for our smoke-free portfolio in 2024.”

    For more than 50 years, CAGNY has been connecting investors, management teams, and the media dedicated to the consumer industry. It asserts to be “the largest not-for-profit of its kind” and hosts various events throughout the year, highlighted by the CAGNY conference in Boca Raton, Florida.

  • N.Y. Lawmakers Want to Ban Zyn for its Flavors

    N.Y. Lawmakers Want to Ban Zyn for its Flavors

    New York lawmakers have introduced a bill in the legislature that would ban flavored oral nicotine pouches such as Zyn, which recently received FDA approval. The pouches do not contain tobacco and are the fastest-growing product on the U.S. tobacco market, but lawmakers are comparing their flavors to flavored vape cartridges that were banned in the state in 2020 because they are attractive to children.

    “You always have to keep on top of this industry,” said Assemblywoman Linda Rosenthal, who is sponsoring the bill. “Because as we extinguish some of the availability to youth in particular, the industry comes up with more ways to entice people to be addicted to nicotine and their products.”

    The legislation — which is sponsored in the Senate by state Sen. Brad Hoylman-Sigal — asserts that minors could turn to nicotine pouches as flavored vapes become harder to find under New York’s ban.

    Zyn is manufactured by Swedish Match, a subsidiary of Philip Morris International, which maintains that Zyn is intended and marketed only for those 21 and older, and that the vast majority of Zyn’s clientele are not new nicotine users, but adults switching to a safer delivery method.

    “Almost everyone has come from another product,” Brian Erkkila, Swedish Match’s director of regulatory science, said. “That’s who the product is designed for. If you think about the flavors our product comes in, they come in flavors that have been in smokeless tobacco products like moist snuff and dip, for decades. These aren’t new flavors. They’ve been around for a long time.”

    Alan Mathios, a professor at Cornell University who studies the economics of tobacco regulation, called the potential ban shortsighted and said it could lead to the proliferation of illicit products, make the market more difficult to regulate, and have the opposite result in terms of keeping them away from underage users.

    “A lot of menthol smokers really like their menthol,” Mathios said. “If they don’t have an alternative menthol product, they’re unlikely to move away from cigarettes. So even if you do see some youth movement into menthol-flavored pouches, you have to weigh that against the role that menthol-flavored products play in helping adults switch.”

  • FDA Authorizes 20 ZYN Pouch Products

    FDA Authorizes 20 ZYN Pouch Products

    Today, the U.S. Food and Drug Administration (FDA) authorized the marketing of 20 ZYN nicotine pouch products through the premarket tobacco product application (PMTA) pathway following an extensive scientific review. This is the first time the agency has authorized products commonly referred to as nicotine pouches, which are small synthetic fiber pouches containing nicotine designed to be placed between a person’s gum and lip. 

    The FDA determined that the specific products receiving marketing authorization met the public health standard legally required by the 2009 Family Smoking Prevention and Tobacco Control Act. This standard considers the risks and benefits of products to the population as a whole.

    “As a public health scientist and former Director of the Office of Science at FDA’s Center for Tobacco Products, I couldn’t be more excited for public health with FDA’s decision today,” Matt Holman, vice president of U.S. Scientific Engagement and Regulatory Strategy at PMI said on X. “Authorizing products that can help the nearly 30 million smokers in the United States switch to a better form of nicotine has the potential to save countless lives.”

    Among several key considerations, the agency’s evaluation showed that, due to substantially lower amounts of harmful constituents than cigarettes and most smokeless tobacco products, such as moist snuff and snus, the authorized products pose a lower risk of cancer and other serious health conditions than such products. The applicant also provided evidence from a study showing that a substantial proportion of adults who use cigarette and/or smokeless tobacco products completely switched to the newly authorized nicotine pouch products.

    “To receive marketing authorizations, the FDA must have sufficient evidence that the new products offer greater benefits to population health than risks,” said Matthew Farrelly, Ph.D., director of the Office of Science in the FDA’s Center for Tobacco Products. “In this case, the data show that these nicotine pouch products meet that bar by benefiting adults who use cigarettes and/or smokeless tobacco products and completely switch to these products.”

    Additionally, the FDA found that the applicant showed these nicotine pouch products have the potential to provide a benefit to adults who smoke cigarettes and/or use other smokeless tobacco products that is sufficient to outweigh the risks of the products, including to youth. As part of its evaluation, the FDA reviewed data regarding youth risk and found that youth use of nicotine pouches remains low despite growing sales in recent years. For example, the 2024 National Youth Tobacco Survey showed that 1.8% of U.S. middle and high school students reported currently using nicotine pouches.

    “It’s critical that the manufacturer market these products responsibly to prevent youth use,” said Brian King, Ph.D., M.P.H., director of the FDA’s Center for Tobacco Products. “While current data show that youth use remains low, the FDA is closely monitoring the marketplace and is committed to taking action, as appropriate, to best protect public health.”

    While today’s actions permit these specific tobacco products to be legally marketed in the U.S. to adults 21 and older, it does not mean these tobacco products are safe, nor are they “FDA approved.” There is no safe tobacco product; youth should not use tobacco products and adults who do not use tobacco products should not start. 

    The FDA will closely monitor the marketing and use of these products. To reduce the potential for youth exposure to advertising of these products, the authorizations impose stringent marketing restrictions for digital, television, and radio, including measures to ensure ads are carefully targeted to adults ages 21 and older and the demographics of the audiences reached by the ads are tracked and measured by the manufacturer. The company also stated that they intend to implement additional measures to restrict youth access, reduce youth appeal, and limit youth exposure to their labeling and advertising, such as: not using mass-market advertising on radio and TV; employing actors/models for marketing that are no younger than 35 years old, or styled to appear under 35; and avoiding any content designed to target youth, including characters, images or themes. The agency may suspend or withdraw a marketing granted order issued under the PMTA pathway for a variety of reasons if the agency determines the continued marketing of a product no longer meets the necessary public health standard, such as if there is a notable increase in youth initiation.

    The products for which the FDA issued marketing granted orders are the following, each with two nicotine strengths (3 milligrams and 6 milligrams): ZYN Chill, ZYN Cinnamon, ZYN Citrus, ZYN Coffee, ZYN Cool Mint, ZYN Menthol, ZYN Peppermint, ZYN Smooth, ZYN Spearmint and ZYN Wintergreen. Importantly, today’s actions are specific to these products only; the authorizations do not apply to any other nicotine pouch or other ZYN products. Additionally, the authorization does not allow the company to make reduced-risk claims about the authorized products, which would require a modified-risk tobacco product application.

    Today’s actions are the latest of many the FDA has taken to ensure all new tobacco products marketed in the U.S. undergo science-based review and have received marketing authorizations by the agency. To date, the FDA has received applications for nearly 27 million products and has made determinations on more than 26 million of those applications. This includes authorization of other flavored oral tobacco products, including nicotine mints and chews in 2021 and mint smokeless tobacco in 2015. To find a list of tobacco products that may be legally marketed and sold in the U.S., visit the FDA’s Searchable Tobacco Products Database.

  • PMI Settles D.C. Flavor Ban Violations Case

    PMI Settles D.C. Flavor Ban Violations Case

    Image: PMI

    Swedish Match North America (SMNA) will pay $1.2 million to settle an investigation into violations of Washington D.C.’s flavored tobacco ban, reports Reuters.

    The District of Columbia attorney general’s office accused SMNA of facilitating online sales of “tens of thousands” of flavored Zyn nicotine pouches to D.C. consumers between Oct. 1, 2022, when the ban was enacted, and June 30, 2024.

    SMNA parent company Philip Morris International must now monitor its distributor’s compliance with D.C.’s ban quarterly and stop sales of flavored Zyn pouches through Zyn.com and related e-commerce platforms.

    Nicotine pouches became the second most commonly used tobacco product in the U.S. after combustible cigarettes, according to the Centers for Disease Control and Prevention.

    PMI suspended sales on Zyn.com after it had been issued a subpoena by the D.C. attorney general earlier this year.

    Swedish Match would continue to focus on its brick-and-mortar stores, PMI said in a statement e-mailed to Reuters.

    .

  • Zyn Sued for Overcharging

    Zyn Sued for Overcharging

    TR Archive Photo

    Swedish Match North America is being sued for allegedly overcharging U.S. customers for its popular tobacco-free Zyn nicotine pouches.

    The class action lawsuit, filed on Monday in federal court in Richmond, Virginia, alleges that the Philip Morris International subsidiary is violating federal and state antitrust laws concerning the market for modern oral nicotine pouches.

    The plaintiff, a resident of Florida, claimed that Swedish Match illegally gained monopoly power through various business practices aimed at eliminating rival Dryft from the market, Reuters reports.

    Swedish Match now has an estimated 80 percent of the market for nicotine pouches, which the company sells in different flavors and strengths for about $6 a tin, according to the lawsuit.

    In a statement, Philip Morris, which was not named as a defendant, said, “We believe the plaintiff’s claims are without merit, and we intend to vigorously defend against them.

    Marlboro maker Philip Morris, in 2022, acquired the Swedish tobacco and nicotine products company for $16 billion. Philip Morris has stated an ambition to move away from health-harming cigarettes.

    The consumer lawsuit seeks class action status for Zyn consumers and damages of more than $5 million.

  • The Zyn Marketing Fallacy

    The Zyn Marketing Fallacy

    Photo: Swedish Match North America

    Blaming the manufacturers for irresponsible marketing is a red herring.

    By Peter Clark

    The social media presence of nicotine pouches has recently come under fire from public health experts. For example, Jai Surana believes that “aggressive marketing” has contributed to the spike in popularity in this product category.

    Some perceive that nicotine pouches and e-cigarette markers present their products as a safe alternative to tobacco. With this perception of tobacco substitutes, coupled with the appealing variety of flavors, many are worried that kids will start using these products. Zyn’s robust meme culture and numerous influencers only fuel misconceptions about its marketing.

    Contrary to the immersive online subculture of Zyn, nicotine pouches are not an exploding health epidemic among teens. The headlines of the droves of nicotine-addicted youth are exaggerations.

    Blaming the manufacturers for irresponsible marketing is nothing but a red herring. Because most nicotine users are adults, many content producers are unaffiliated with producers, and the marketing hasn’t effectively targeted teens.

    Despite the public health crusade to shield children from nicotine pouch advertisements on social media, only a minority of kids are using these products. The largest demographic for nicotine pouches is the “35–45” age group, making up 60 percent of the market. Per the Centers for Disease Control and Prevention, most pouch users are either current or former smokers. Most of the evidence suggests that most Zyn users are adults trying to quit smoking or are getting their nicotine fix when smoking isn’t an option.

    How many kids use nicotine pouches? The number of teens using these products is minuscule. In 2024, only 1.8 percent of “middle school and high school students reported currently using nicotine pouches.” This pales in comparison to the significantly higher numbers of teens smoking in the 1990s. A jaw-dropping 16.8 percent of high school students were “frequent smokers” in 1999. This was still only a minority of teens but significantly higher than the number of kids currently using nicotine pouches.

    Yes, nicotine pouches have social media sites, but what about the third-party content producers? There is a lot of finger-wagging at nicotine pouch companies for Instagram posts lacking warning labels, but will a Zyn fan account adhere to market guidelines? The problem is that internet culture tends to take on a life of its own. The marketing edicts of the Food and Drug Administration are not even a forethought to most Zyn enthusiasts making humorous memes.

    There is no way to limit or regulate third-party content. The best companies can do is comply with the current laws and acknowledge that nicotine is addictive on official social media content. Attempting to shut down all third-party content is a game of whack-a-mole. For example, Juul failed at many attempts to remove underage fan sites from social media.

    Even the high-profile Zyn influencers, from Joe Rogan to Tucker Carlson, are unaffiliated with the brand. Philip Morris International hasn’t paid anyone to promote its pouches. PMI spokesman Corey Henry has stated, “Zyn doesn’t have partnerships or product promotion with any social media influencers or celebrities.” Before Carlson’s culture war on Zyn and his recent venture into the market, PMI tried to distance itself from his more outlandish claims about the product.

    As mentioned previously, youth nicotine pouch use is low. However, has the social media market influenced teen use? Less than half of teens and young adults surveyed in a Georgetown study were even aware of the existence of this product. Less than a quarter of nontobacco-using participants were familiar with nicotine pouches. If Zyn is trying to market its pouches to young people, their plan has failed. Only young people predisposed to using nicotine are familiar with nicotine pouches.

    At first glance, it is easy to attack nicotine pouch brands like Zyn for irresponsible marketing, but it is not the crisis that experts and the press are making it out to be.

    Only a small number of teens are using nicotine pouches, most of the egregiously irresponsible “marketing” is coming from third-party creators, and there is little evidence that the official product marketing is pushing kids toward nicotine pouches. If we want to protect kids from nicotine addiction, we should attack the social issues driving them to use nicotine, not flashy marketing.

    Peter Clark is a fellow with the World Vapers’ Alliance. You can follow him on X at @blog_logic.
  • PMI Seeks Dismissal of Zyn Lawsuit

    PMI Seeks Dismissal of Zyn Lawsuit

    Photo: PMI

    Philip Morris International and its Swedish Match North America subsidiary have asked a U.S. federal judge in Connecticut to dismiss a lawsuit claiming they falsely marketed nicotine pouches as safe and targeted adolescents, according to the USA Herald.

    In July, Florida resident Ethan Norris filed a court case claiming that Philip Morris and Swedish Match marketed Zyn nicotine pouches to adolescents by promoting them as a healthy alternative to tobacco. The lawsuit suggests the companies misled consumers by highlighting the pouches’ “food-grade flavorings” and “natural additives.” Norris further alleges that the companies employed social media influencers to target younger consumers.

    In its motion filed Sept. 24, PMI argues that the lawsuit is preempted by federal law as the labeling of its Zyn nicotine pouches is approved by the U.S. Food and Drug Administration.

    In a separate motion, Swedish Match North America made a similar argument and added that because Norris is a Florida resident who purchased and used the products in Florida, the case has no direct connection to Connecticut.

    PMI urged the court to dismiss the lawsuit or require Norris to provide a more specific complaint.

  • PMI to Further Expand U.S. Zyn Production

    PMI to Further Expand U.S. Zyn Production

    Photo: PMI

    Philip Morris International’s Swedish Match affiliate will invest $232 million to expand the production capacity of its Owensboro, Kentucky, USA, manufacturing facility, which produces the popular Zyn nicotine pouches.

    The expansion is expected to create an additional 450 direct jobs with an ongoing annual economic impact of $277 million and 410 indirect jobs for the Commonwealth of Kentucky.

    “Philip Morris International’s Swedish Match affiliate has been an important partner and job creator in this region for many years, and I’m excited to see this incredible new investment and the 450 great job opportunities it is creating for families in Owensboro and the surrounding region,” said Kentucky Governor Andy Beshear in a statement.

    Construction of the expanded facility is already underway, including adding more production space. Progressive production increases are expected during the project, which is targeted for completion by the second quarter of 2025. The construction phase alone is expected to create nearly 2,800 jobs and have an economic impact of about $414 million.

    In addition to facility expansion and ongoing optimization of processes to increase capacity progressively over the coming quarters, the Kentucky facility will move from a 24-hour, five-days-per-week schedule to a 24-hour, seven-days-per-week schedule to boost production, starting in the fourth quarter of this year.

    The Swedish Match Owensboro facility currently has about 1,100 employees. The ongoing expansion of the facility in Kentucky is expected to provide around 900 million cans of capacity by 2025.

    In July, PMI announced an investment of $600 million over the next two years through its U.S. affiliate to open a nicotine pouch manufacturing facility in Aurora, Colorado. The Aurora facility and Owensboro expansion are designed to provide the capacity needed in the near term and midterm to meet the ferocious U.S. demand for Zyn.

  • PMI to Expand Zyn Production

    PMI to Expand Zyn Production

    Photo: PMI

    Philip Morris International will invest $600 million in in a factory in Aurora, Colorado, USA, to help meet U.S. consumers’ ferocious appetite for the company’s Zyn nicotine pouches. The factory is poised to begin operations by the end of next year with regular production starting in 2026.

    “PMI and its U.S. affiliates are accelerating their mission to move adults who smoke away from cigarettes in the U.S. by investing in new U.S. manufacturing capacity to meet the increasing demand for nicotine options that are scientifically substantiated as better alternatives,” said PMI Americas President and U.S. CEO Stacey Kennedy in a statement.

    “We believe Colorado is likeminded in its commitment to innovation, economic opportunity and public health, and we’re eager to work with the state and its talented workforce as we expand our U.S. manufacturing presence.”

    Sales of Zyn jumped 80 percent in the first quarter, leaving PMI struggling to keep up with demand. Retail stores have been experiencing Zyn shortages, with some even limiting the number of cans customers can buy each month.

    Supply was further constrained after the company decided to halt online sales nationwide in June following a subpoena in the District of Columbia asking for information on the sale of flavored pouch products that are banned there.

    PMI is also increasing production of Zyn at its factory in Owensboro, Kentucky. In addition to meeting U.S. demand, the investments will also help create capacity for exports, according to PMI.

    Zyn accounted for more than 70 percent of the $8.6 billion nicotine pouch market in 2023, according to Vaping360. Given the relatively young age of the category, there is little brand loyalty, and analysts believe continued supply constraints may prompt some consumers to defect to other brands.

  • PMI Suspends Zyn Sales Due to DC Probe

    PMI Suspends Zyn Sales Due to DC Probe

    Photo: Swedish MAtch

    Philip Morris International halted sales of Zyn nicotine pouches on its U.S. website as Washington, D.C., officials investigate the company’s compliance with the district’s ban on the sale of flavored tobacco products, reports The Wall Street Journal.

    On June 17, the company’s Swedish Match North America division announced it had received a subpoena from the District of Columbia’s attorney general, requesting among other things information about the unit’s compliance with local restrictions on flavored tobacco.

    A preliminary investigation by the company indicated that there had indeed been sales of flavored nicotine pouch products in the district. According to PMI, these related predominantly to certain online sales platforms and some independent retailers.

    Swedish Match is currently conducting a full review of its sales and supply chain arrangement in D.C. and other U.S. localities where flavor bans apply.

    Pending the investigation, PMI has suspended all online sales on Zyn.com. Sales on this platform have represented “a very small” percentage of the company’s U.S. Zyn volumes, according to PMI.

    In the March quarter, Philip Morris’ shipment volumes of oral smoke-free product volumes surged by 40 percent, mainly driven by Zyn nicotine pouches in the U.S., where shipment volume reached 131.6 million cans.

    Zyn has been available in the U.S. since 2014, but its sales have skyrocketed over the past year and a half, and its parent company is investing in Zyn capacity in the U.S.

    Philip Morris bought Swedish Match in a $16 billion deal in 2022 as the company looked to reduce its reliance on cigarettes amid stricter regulations and a consumer shift toward alternatives to tobacco and traditional cigarettes.