Will the pandemic prompt smokers to switch to snus or nicotine sachets?
Tobacco is often seen as a recession-resistant segment of the market, because no matter how badly things go, smokers will generally continue to smoke – perhaps even more. Yet because COVID-19, the disease caused by the novel coronavirus, has been shown to hit smokers harder than the rest of the population, many may begin to seriously rethink their habit.
With Altria under fire from critics for its investment in the much-criticized electronic cigarette Juul Labs and British American Tobacco to chase Philip Morris International for patent infringement on its IQOS heating without burning tobacco device, snus and nicotine packets may become the means by which smokers finally break away from cigarettes.
Quitting smoking …
Snus is a moist powdered tobacco usually sold in small sachets that are wedged between the lip and the gum line. It was already among the fastest growing tobacco products on the market. Sales in 2018 jumped 250%, and Nielsen says it’s fast growing into a $ 400 million business, accounting for 4.5% of all tobacco sales this year.
While British American Tobacco is the leader in the snus industry with its Camel brand, Swedish match last year became the first company to obtain a reduced risk label of the Food and Drug Administration when eight of its general brand of snus were approved for designation.
That should give it a big competitive edge, but as the industry continues to evolve, it may be the nicotine pouches that will prove to be the real category killer.
… and then tobacco
Tobacco free and the size of a lozenge, nicotine sachets are quickly gaining traction with users. Swedish Match rolled out the ZYN brand nationwide last year and captured an 87% market share.
It was the great success of Swedish Match that prompted Altria to acquire the Burger Sohne International Affairs for its top! brand of nicotine sachets. Altria was so worried about being left behind that she made sure she could start selling the pouches before the deal even closed.
British American is also investing heavily in nicotine sachets. Last year, it reduced its portfolio of potentially reduced risk products to three brands: Vuse, for steam-based products; glo, for heated tobacco; and Velo, for nicotine sachets (or what he calls modern oral products).
It may be a coincidence with the pandemic landing here, but there has also been an increase in TV advertising around the Velo brand, although the tobacco giant announced last summer that it would expand its introduction. of the brand.
As consumers isolate themselves, precautions to prevent upper respiratory disease as a gateway for COVID-19 infection are increasing. Smoking indoors increases the risks not only for smokers, but also for those around them from second-hand smoke.
In addition, the e-cig has alerted consumers to the fact that there is alternatives to tobacco for nicotine consumption, and these nicotine sachets could be the big winner because they are arguably even safer than snus because they are tobacco free.
The great opportunity
Yet there are risks. In the assault on electronic cigarette use by adolescents, flavored tobacco products have come under fire. Federal, state and local regulators and politicians began to ban their manufacture and sale. But some states go further than others.
California offers ban any flavored tobacco product, whether derived from tobacco or nicotine. Moreover, no matter how a person consumes them, they would be illegal. This would virtually wipe out the nicotine sachet market, as ZYN and Velo only offer citrus and mint flavors, although the latter also offers a potentially licensed unflavored version.
Yet, as many smokers consider the risks to them increased during the pandemic, there is a good chance that nicotine packets will become the preferred alternative to cigarettes.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.