The tobacco enjoyment landscape is rapidly changing. As sales of combustible cigarettes continue their downward trend, convenience store owners are hoping to replace lost revenue just as much as former cigarette smokers are looking for alternatives for continuing their enjoyment of nicotine—and tobacco companies are seeking to provide those alternatives. In recent months, one of those alternative categories, e-cigarettes and other vapor products, has drawn a lot of negative attention as news stories abound with various legislative efforts to outright ban flavored e-cigarettes and vapor products in the midst of widespread use by youths and reports of illnesses, and, in a few cases fatalities, linked to them.
While e-cigarettes and vapor products are grabbing most of the headlines, another alternative nicotine product is gaining momentum among adult consumers: modern oral nicotine pouches. Modern oral nicotine pouches are a tobacco-derived nicotine (TDN) product, which means that there is no tobacco inside the pouch—the nicotine is merely extracted from tobacco plants, crystallized into nicotine salts, and then mixed with sweeteners and natural flavors to produce the material inside the pouch that offers users 20-30 minutes of enjoyment.
Sales of modern oral nicotine pouches, while still small when compared to cigarette sales, are exploding. In 2019, modern oral nicotine pouches are expected to eclipse $160 million in retail sales nationwide, according to the most recent Nielsen data, and awareness of these products’ availability is growing among adult consumers. Traditional tobacco companies have seen this potential growth in the modern oral nicotine pouch category and are now in the midst of expanding their own portfolios in the fertile ground that the category represents. In the past year, several of the biggest tobacco companies in the world have ramped up their commitment to producing modern oral nicotine pouches—and convenience store owners have surely noticed.
Modern Oral Nicotine Pouches Defined
Modern oral nicotine pouches are designed to offer an alternative to traditional tobacco products, and they are completely free of tobacco. For adult consumers who want to quit smoking but still want to use nicotine, modern oral nicotine pouches offer the ideal solution. Unlike traditional tobacco products, modern oral nicotine pouches do not require the user to spit, chew or smoke; and unlike other alternative nicotine sources, such as e-cigarettes and vapor devices, modern oral nicotine pouches can be enjoyed without batteries or pods. Adult nicotine users also love that modern oral nicotine pouches are discreet enough that they can be enjoyed almost anywhere and anytime.
Like other alternative nicotine-delivery systems, modern oral nicotine products have varying levels of nicotine strength—1 mg, 2 mg, 3 mg, 4 mg, 6 mg, 7 mg and 8 mg—with strength offerings varying by brand. While modern oral nicotine pouches do not contain any tobacco, the U.S. Food and Drug Administration (FDA) considers them to be tobacco products because the nicotine contained within them is derived from tobacco plants—thus modern oral nicotine pouches are subject to the FDA’s deeming regulations regarding tobacco products. Modern oral nicotine pouch packages also must carry a warning label that cautions potential users that nicotine is an addictive chemical.
Adult consumers of modern oral nicotine pouches simply place the pouch anywhere between their upper lip and gum. Enjoyment typically lasts 20-30 minutes, and after they are used the pouches may be discarded. When not in use, modern oral nicotine pouch containers do not require special storage conditions, and they may be kept at room temperature in a dry and well-ventilated room, making the purchase, use and storage of the products convenient and easy.
The Major Players
Over the past few years, several of the world’s largest multinational tobacco companies have entered the tobacco-free modern oral nicotine pouch market. Swedish Match began marketing its Zyn modern oral nicotine pouch in the U.S. in 2015, first in Colorado and later in ➤ other Western states. In April 2019, Swedish Match expanded Zyn’s distribution nationwide. Zyn is available in six flavors: wintergreen, spearmint, peppermint, cinnamon, coffee and cool mint. Each flavor is available in a nicotine strength of either 3 mg or 6 mg, and each Zyn container holds 15 pouches.
On! modern oral nicotine pouches have been available on the U.S. market since 2015 and are made by the Swiss company Burger Sohne Holding AG. On! is offered in seven flavors—wintergreen, mint, cinnamon, coffee, citrus, berry and original—and comes in five strengths—1 mg, 2 mg, 3 mg, 4 mg and 8 mg. Packages of On! contain 20 pouches. In June 2019, Altria Group entered an agreement with Burger Sohne Holding AG to acquire 80 percent of its assets for $372 million with plans to introduce On! worldwide through Altria’s newly created subsidiary Helix Innovations to expand On!’s growth.
“We’re excited to add On! to our companies’ terrific noncombustible portfolio,” said Howard Willard, Altria’s Chairman and CEO in announcing the acquisition. “Through our companies and investments, we have access to the leading products and brands in the moist smokeless tobacco, e-vapor and heated-tobacco categories. This acquisition will add another noncombustible product to our portfolio in what we believe is a high-potential, rapidly developing oral TDN products category.”
In July, R.J. Reynolds Vapor Co., a subsidiary of R.J. Reynolds, released is first modern oral nicotine pouch, Velo, in two varieties, citrus and mint, which are available with 4 mg of nicotine strength. The company followed up the release of its 4 mg Velo modern oral nicotine pouch with a 2 mg version for both flavors recently. All of Velo’s strengths and flavor varieties are packaged in 15-count metal cans.
The Field Expands
In September, Kretek International announced the formation of DRYFT Sciences to focus on the manufacture and sale of DRYFT modern oral nicotine pouches. While Kretek International has distributed DRYFT pouches nationwide since 2016, the company has invested heavily in DRYFT Sciences to ramp up its presence in the burgeoning category and has appointed its former chief marketing officer, Jason Carignan, to president of DRYFT Sciences. The company will operate out of a new factory based in the United States that will be capable of producing 30 million cans in 2020 and twice that number in 2021.
According to Nielsen scan data provided by DRYFT Sciences, DRYFT sales grew by 130 percent since March, appearing mainly in convenience store chains predominantly in the Western U.S. DRYFT modern oral nicotine pouches are available in eight flavor varieties—spearmint, wintergreen, dragonfruit, citrus, black cherry, cinnamon, coffee and peppermint—that are all made in three different strengths—2 mg, 4 mg and 7 mg. In October, at the National Association of Convenience Stores show, DRYFT Sciences rolled out a new label design and new branding elements and promised a new consumer website that will appear soon.
“The time is right for DRYFT nicotine pouches,” says Carignan, who will now devote his full attention to presiding over DRYFT Sciences. “With changing consumer behaviors and retail trends, the oral nicotine category is growing rapidly around the world. We predicted the broad shift away from traditional tobacco products and launched DRYFT nicotine pouches in July 2016. Our initial sales and marketing efforts proved very successful with consumers and retailers, and we recognized the need to create a new company focused solely on realizing our vision of bringing innovative nicotine solutions to the broader market.”
To echo Carignan’s words concerning DRYFT, the time is clearly right for the entire modern oral nicotine pouch category as nearly every major tobacco company has entered, or has plans to enter, the market with its own products. While still dwarfed by traditional tobacco sales, as well as the sales of other alternative nicotine products, modern oral nicotine pouch sales are gaining momentum, and as the large tobacco companies allocate more resources to growing adult consumer awareness of the segment that momentum is sure to increase. Will modern oral nicotine pouches become the ultimate replacement for tobacco in nicotine enjoyment? Only time will tell, but companies such as R.J. Reynolds, Altria and Swedish Match rarely invest resources at the scale that these companies are doing to back a product category that doesn’t have a bright future.
This story first appeared in the November/December 2019 issue of Tobacco Business magazine. Members of the tobacco industry are eligible for a complimentary subscription to our magazine. Click here for details.
– Story by Stephen A. Ross, editor-in-chief of Tobacco Business Magazine.