Cigarette Companies Investing in Snus

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Although transnational tobacco companies (TTCs) have successfully raised cigarette prices to offset cigarette volume declines, thus maintaining profits, industry analysts have raised doubts about the sustainability of this pricing strategy in the medium to long term.[1] Not surprisingly, TTCs have steadily diversified into alternative tobacco and nicotine products, including a certain type of smokeless tobacco, called Swedish-style snus.[2]

The Global Snus Market

Data from Euromonitor International shows that the global market for snus has steadily increased in size from 7,000 tonnes in 2008 to nearly 10,000 tonnes in 2018 (all figures here rounded to nearest 100).[3] This represents a global increase of over 42%.

Sweden remained by far the biggest single market, accounting for nearly 70% of the global market in 2018 (over 6,900 tonnes) and 80% of the European market. Although a much smaller market than Sweden, sales in the US have shown by far the fastest growth in the last decade, growing by 600% in the 10 years to 2018 (from 200 to 1,600 tonnes). In the more established Norwegian market, sales rose 62% from 1,000 to 1,600 tonnes over the same period. In Sweden, the increase was 21%.[3]

EU Snus Sales Ban

In European Union (EU) countries other than Sweden, the sale of (tobacco derived) snus is illegal. TTCs have unsuccessfully tried to lift the EU sales ban on snus since 2008.[4][5]

Cigarette Company Investments in Snus

From 2002, TTCs started buying up small Swedish snus manufacturers and developing and marketing their own snus. After 2008, snus investments slowed down and tobacco companies focused on e-cigarettes and heated tobacco products (HTPs) instead. Since 2018, TTCs have shown renewed interest in snus-type products, in particular tobacco-free pouches.[6]

Japan Tobacco International

In 2002, Gallaher, now part of Japan Tobacco International (JTI), became the first TTC to add snus to its product portfolio in Europe by acquiring Swedish snus manufacturer Gustavus.[7] Initially, JTI sold three brands of snus in Sweden only: LD in the value segment; mid-priced Gustavus; and premium Camel snus, which it launched in 2009.[8] In 2013, JTI’s parent company, Japan Tobacco briefly trialled ZeroStyle snus in Osaka, Japan, but with little apparent success.[9] From 2017, JTI has been selling snus in Norway and Sweden through its wholly-owned subsidiary, Nordic Snus.[10] It sells two brands: LD and Nordic Spirit, the latter being tobacco-free.[11][12]

British American Tobacco

In May 2005 British American Tobacco (BAT) commenced trial markets of snus in South Africa and Sweden, followed by trials in Norway and Canada, plus a “limited consumer test” in Japan.[13]

Then in July 2008 it acquired Swedish snus manufacturer Fiedler & Lundgren.[2] Initially, BAT sold snus under cigarette brands Lucky Strike, Peter Stuyvesant, and du Maurier, and snus brands Granit, Mocca, and Knekt snus, in South Africa, Canada and Scandinavia. But in March 2011 BAT announced that it had “scaled back” its snus trial markets “to review our [BAT’s] approach to developing new reduced risk product categories”, and in addition, cancelled a test market planned for 2011.[14]

From 2012, the company sold snus in Sweden and Norway only. In 2017 BAT’s snus activity picked up again. Following its acquisition of Reynolds American Inc (RAI) in the United States (US), the company now owns Camel snus in the US. In Europe in the same year, BAT acquired Swedish snus company Winnington AB, adding Epok snus to its portfolio.[15][16]

In 2019, BAT introduced tobacco-free nicotine pouches to its portfolio, marketing them as Lyft in the UK and Velo in the US.[17][18][19] A July 2019 news report suggested that BAT’s nicotine pouches were also on sale in Sweden, Italy and Tanzania.[20] After announcing their intention to sell nicotine pouches in Kenya, BAT launched Lyft in the country in December 2019.[20][21][22]

BAT distinguishes Epok,Lyft and Velo from traditional snus and has allocated them to a new product category, which it calls “modern oral products”.[17]

Imperial Tobacco

Imperial Tobacco, the second largest cigarette company in Europe, entered the snus market in September 2005 when it acquired a 43% share in Swedish Skruf snus, taking full control of the company in 2008.[2][23] Imperial has sold Skruf, its main premium brand, in Sweden and Norway, and Knox, its value brand, in Sweden only.

At Imperial’s 2010 Investor Day, Marcus Diemer, General Manager for Central Europe North, credited snus as a “sizeable, and highly profitable business, and less vulnerable to growing regulatory pressures”.[24]

In May 2018 the company launched a tobacco-free version of Skruf, called Skruf Super White, in Sweden and Norway.[25] This product appears to have been rebranded ZoneX for the UK market in August 2019.[26][27]

Philip Morris International

Of all TTCs, Philip Morris International (PMI) has had the least invested in the snus product category.

In 2006 the company briefly sold 1847 by Phillip Morris on the Swedish market following the company's acquisition of snus manufacturer Rocker Productions.[28] In 2009 it sold Rocker Productions to Swedish Match as part of a deal that saw PMI and Swedish Match set up a joint venture, SMPM International, to “globalise snus”.[29] However, the joint venture was not a success and was dissolved in 2015. This also ended PMI’s brief involvement in snus.

Altria

In 2019 Altria announced that it was acquiring an 80% share in oral nicotine pouch On!, from Swiss tobacco company Burger Sohne.[30][31] It set up a new subsidiary Helix Innovations, through which it would manufacture and market the product.[30][31]

Altria stated that, as the product was already on sale across the US before August 2016, it did not require pre-market authorisation (PMTA) from the FDA.[30]

Company Market Shares

In 2010 Swedish Match, the only listed snus manufacturer without cigarette interests, held a share of over 80% the market in Sweden and Norway (see Table 1).

TTC entry into snus saw the company's market share fall by over 10% in two years in Sweden and by 5% in Norway.[32] This trend continued, with Swedish Match losing further snus market share to Imperial Tobacco and BAT, reducing its market share to 62% in Sweden and below 50% in Norway in 2018 (see Figure 1).[32] Genuine competition between snus and cigarettes on the Scandinavian markets has thus slowly been reduced.

However, Swedish Match continues to hold the largest share of the Western European snus market.

The share of small independent snus manufacturers has always been, and remains, relatively insignificant.


Company

2010

2011

2012

2013

2014

2015

2016

2017

2018

Swedish Match 81.6 79.4 72.4 67.5 66.3 65.5 63.1 61.5 59.5
British American Tobacco 7.9 7.9 9.3 7.7 6.8 6.3 6.7 9.3 11.2
Imperial Tobacco 5.7 6.9 11.4 16.2 17.9 19.3 21.2 21.3 21.3
JTI Sweden 1.6 2.1 4.1 5.6 5.8 5.6 5.4 5.3 5.1
Other companies 3.2 3.7 2.8 3.1 3.2 3.3 3.7 2.6 2.8

Table 1: Companies’ snus market share in Western Europe between 2010 and 2018 (retail volume, %).[32]


Figure 1: Companies’ snus market share in Western Europe between 2010 and 2018 (retail volume, %)

[32]


What’s Next?

Despite these TTC snus investments, smokeless tobacco use is not well established in Europe, other than in Norway and Sweden. This partly reflects the fact that the sale of tobacco-derived snus is prohibited in EU member states other than Sweden.

Shifted Focus to E-Cigarettes and HTPs

From 2012, TTC alternative investments moved from snus to e-cigarette and HTPs. As with snus, TTCs looked to the these categories to ensure their long-term future, should regulation further constrain the cigarette market or reduce its pricing power, and to reassure investors that TTCs have a revenue growth potential.[2]

FDA Authorises Swedish Match to Advertise Snus as Less Harmful in the US

In October 2019, Swedish Match was the first company to have its application approved by the US Food and Drug Administration (FDA) to advertise eight of its snus products (sold under the " General" brand) as less harmful.[33] Swedish Match had submitted the original application in August 2014, so the whole approval process took five years.[34] This is the first tobacco and nicotine product that the FDA has authorised as less harmful. Specifically, the approved health warning on the snus can state “Using General Snus instead of cigarettes puts you at a lower risk of mouth cancer, heart disease, lung cancer, stroke, emphysema, and chronic bronchitis.”[33] The FDA does not consider the products as ‘safe’ and the products will continue to carry the generic health warnings required for smokeless tobacco.[33] The approval to advertise as reduced risk has a time limit of five years, after which Swedish Match will have to put in an application requesting renewal.

It is likely that the FDA’s decision on Swedish Match’s snus will affect TTCs’ strategy on NGPs and snus, in the US and perhaps globally, but in what way is as yet unclear. Industry analysist Bonnie Herzog, who works for investment bank Wells Fargo, was quoted as saying that it was “a huge positive” and “game changer”:[35]

“We view this as very good news for the broader tobacco/nicotine industry as it demonstrates the FDA’s commitment to a ‘continuum of risk’ strategy and provides viable pathway/process for manufacturers”.[35]

She also argued that “less harmful” products should be taxed “less onerously” than other tobacco products.[35]


As of November 2019, the only other TTC that has an FDA reduced risk application pending for its snus products is BAT/RJ Reynolds (Camel snus, submitted on 18 December 2017).[36]

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Notes

  1. ↑ Citigroup Global Markets, Tobacco: What If the Last Smoker Quits in 2050? We're cutting BAT, PM and IMT as short-term trends have worsened, but we're more concerned about the very long term, 2011, accessed July 2012 (behind paywall)
  2. ↑ 2.0 2.1 2.2 2.3 S. Peeters, A. Gilmore, Transnational tobacco company interests in smokeless tobacco in Europe: Analysis of internal industry documents and contemporary industry materials, PLoS Medicine, 2013,10(9):1001506
  3. ↑ 3.0 3.1 Euromonitor International, Smokeless Tobacco: Market Size, 2013-2018 (behind paywall)
  4. ↑ S. Peeters, H. Costa, D. Stuckler, et al, The revision of the 2014 European tobacco products directive: an analysis of the tobacco industry’s attempts to ‘break the health silo’, Tobacco Control, 2016; 25:108-117, doi 10.1136/tobaccocontrol-2014-051919
  5. ↑ S. Peeters, A.B. Gilmore, How online sales and promotion of snus contravenes current European Union legislation, Tobacco Control, 2013; 22:266-273
  6. ↑ M.O. Robichaud, A.B. Seidenberg, M.J. Byron, Tobacco companies introduce ‘tobacco-free’ nicotine pouches, Tobacco Control, Published Online First: 21 November 2019. Doi: 10.1136/tobaccocontrol-2019-055321
  7. ↑ Gallaher Group Plc Interim Results for the Six Months Ended June 30, 2002, accessed January 2017
  8. ↑ Datamonitor. Industry Profile: Tobacco in Sweden. Report No.: 0181-0817, London, June 2010, Euromonitor International, accessed July 2012 (behind paywall)
  9. ↑ Japan Tobacco, Zerostyle Snus regular and Zerostyle Snus Mint to be added to the Zerostyle smokeless tobacco line, Media release, 13 June 2013, accessed November 2019
  10. ↑ Nordic Snus, LinkedIn Profile, www.linkedin.com, undated, accessed November 2019
  11. ↑ Nordic Snus, LD Nordic Spirit, undated, accessed November 2019
  12. ↑ JTI Sweden, JTI Sweden and Nordic Snus, accessed November 2019
  13. ↑ British American Tobacco, Smokeless snus to be pioneered in Canada, News release, 13 September 2007
  14. ↑ British American Tobacco, British American Tobacco Sustainability Report 2010
  15. ↑ British American Tobacco’s acquisition of Swedish snus maker Winnington Holding AB, 23 January 2017, Global Legal Chronicle, accessed November 2019
  16. ↑ L. Waters, Why did BAT kill the EPOK brand for LYFT? 18 March 2019, SnusCENTRAL, accessed November 2019
  17. ↑ 17.0 17.1 British American Tobacco, Modern and traditional oral products, BAT website, undated, accessed November 2019
  18. ↑ C. Gretler, Grandad’s Tobacco Gets a Makeover, Bloomberg, 23 August 2019, accessed November 2019
  19. ↑ British American Tobacco sets the pace in Potentially Reduced Risk Products, Grocery Trader, 31 March 2019, accessed November 2019
  20. ↑ 20.0 20.1 Capital FM, Kenya: BAT to Launch Smoke-Free Cigarettes in Kenya, allafrica.com, 19 July 2019, accessed November 2019
  21. ↑ T. Rajula, Explainers: All about nicotine pouches, Daily Nation, 4 December 2019, accessed December 2019
  22. ↑ J. Otieno, All eyes on Health ministry over control of tobacco use, Standard Digital, 15 December 2019, accessed December 2019
  23. ↑ Euromonitor International, Smokeless Tobacco - Is it the Future of the Industry? April 2010, euromonitor.com, accessed July 2012 (behind paywall)
  24. ↑ Imperial Tobacco, Investor Day Presentation Transcript Marcus Diemer on Snus, 28 September 2010
  25. ↑ Imperial Brands, Tobacco-Free Innovation Ushers in New Era Skruf, 13 December 2018, accessed November 2019
  26. ↑ Paul, ZoneX Nicotine Pouches Review, 26 August 2019, heatnotburn.co.uk, accessed November 2019
  27. ↑ Imperial Tobacco Limited, ZoneX UK website, registered in August 2019, accessed November 2019
  28. ↑ Tobacco Reporter, PMI buys into Swedish Snus, Tobacco Reporter Magazine, December 2006
  29. ↑ Swedish Match, Interim Report: January-March 2010, accessed December 2011
  30. ↑ 30.0 30.1 30.2 A. LaVito, Altria takes stake in Swiss tobacco company Burger Sohne's global businesses for $372 million as cigarette sales shrink, CNBC, 3 June 2019, accessed January 2020.
  31. ↑ 31.0 31.1 Altria Enters Growing Oral Nicotine Products Category with on! Pouch Product, Business Wire, 3 June 2019, accessed January 2020
  32. ↑ 32.0 32.1 32.2 32.3 Euromonitor International, Smokeless Tobacco: Company Share, 2013-2018 (behind paywall)
  33. ↑ 33.0 33.1 33.2 U.S. Food and Drug Administration, FDA grants first-ever modified risk orders to eight smokeless tobacco products, News Release, 22 October 2019, accessed November 2019
  34. ↑ U.S. Food and Drug Administration, Swedish Match USA, Inc., MRTP Applications, last modified 19 November 2019, accessed November 2019
  35. ↑ 35.0 35.1 35.2 FDA Grants First-Ever Modified Risk Orders to Tobacco Products, Convenience Store News, 23 October 2019, accessed November 2019
  36. ↑ U.S. Food and Drug Administration, R.J. Reynolds Tobacco Company Modified Risk Tobacco Product (MRTP) Applications, last modified 23 October 2019, accessed November 2019
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