Marlboro cigarette maker is betting big on nicotine pouches placed under the upper lip

Marlboro cigarette maker is betting big on nicotine pouches placed under the upper lip

Marlboro cigarette maker is betting big on nicotine pouches placed under the upper lip

Swedish Match derives most of its profits from Swedish-style smokeless snuff, also known as “snus”.

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Marlboro maker Philip Morris International on Wednesday confirmed a $16 billion bid to buy rival Swedish Match as part of its accelerated push for smokeless tobacco alternatives.

Shares of the Stockholm-based manufacturer hit an all-time high in early trading after its board accepted the Swiss-US tobacco giant’s 161.2 billion kroner cash offer.

Swedish Match is now trading at a premium of 32% since talks between the two companies were first announced on Friday. After a bumpy ride since Friday, shares of Philip Morris International are trading slightly higher.

The deal, which is now subject to shareholder approval, marks the latest phase in Philip Morris International’s ongoing efforts to reduce its dependence on traditional cigarettes amid growing public scrutiny.

A market leader in smokeless snus

Swedish Match, 107, is best known for producing traditional Swedish-style snuff, branded “General Snus”, a type of smokeless tobacco pouch that is placed between the upper lip and gum line as an alternative to smoking.

Despite being illegal in the EU for health reasons, Swedish Match’s General Snus won clearance from the US Food and Drug Administration in 2019 after it was found to have lower risks of “mouth cancer, heart disease [and] lung cancer” than cigarettes.

Still, the FDA noted at the time that these products were not implicitly safe in general, nor were they FDA-approved. “All tobacco products are potentially harmful and addictive,” he added.

Philip Morris International’s bid for Stockholm-based Swedish Match is part of its wider plans to expand beyond traditional cigarettes.

Bloomberg | Bloomberg | Getty Images

Meanwhile, the company has seen rapid growth in recent years of its new tobacco-free nicotine pouches, “Zyn”, amid growing consumer demand for alternatives to cigarettes.

In first-quarter results released Wednesday, Swedish Match reported a significant increase in Zyn’s sales and profits in the United States, with shipments up 35%.

The United States is now Swedish Match’s biggest market after Scandinavia, and its Zyn sachets dominate a market flooded by rivals such as British American Tobacco PLC and Altria Group, from which Philip Morris International spun off in 2008.

Philip Morris quits smoking

Philip Morris International is based in the United States, but does not sell its products there. Instead, it distributes its products internationally, including Marlboro, L&M, Lark and Philip Morris cigarettes.

With this agreement, it aims to regain access to a ready-to-use distribution network in the original territory of its former owner.

This is Philip Morris International’s latest move to diversify beyond traditional tobacco-based revenue streams. In 2021, he agreed to take over the development of asthma drugs Vectura Group and is also responsible for the creation of the IQOS heated tobacco system.

As of last year, the company’s smoke-free portfolio accounted for about 29% of its net revenue, or $31.4 billion.

Campaign groups have condemned big tobacco, which has long denied the health risks of smoking, for defending themselves in the transition to a smoke-free world while continuing to sell and promote tobacco cigarettes. worldwide.

Other smokeless tobacco products from Swedish Match include America’s Best Chew, a chewing tobacco product, and Longhorn, a type of wet snuff brand.

Philip Morris International said completion of the offer was conditional on regulatory approval and no other company making an offer.

However, Credit Suisse analysts said in a note that potential counter-bids appear unlikely. Japan Tobacco International has little appetite to enter the US market, he noted, while British American Tobacco and Imperial are said to be reluctant due to anti-trust concerns in the US and Scandinavia.

—CNBC’s Sam Meredith contributed to this article.

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