Smokefree products in the US
In the US, Swedish Match sells nicotine pouches under its ZYN brand, the number one brand of nicotine pouches.
The Company sells its snus products under its General brand. The Swedish Match brand portfolio for moist snuff is positioned in the value priced segment, with traditional loose products as well as pouch products. Longhorn is Swedish Match’s largest moist snuff brand in the US. In the US chewing tobacco category, Swedish Match’s premium brand, Red Man, is the country’s number one selling brand, and Big Duke is the Company’s largest brand within the value price segment. The primary channel of distribution is convenience stores. The products are also sold in food stores, gas stations, specialty tobacco shops and e-commerce among other classes of trade.
|Key data||2020||2019||Change, %|
|Operating profit, MSEK||2,802||1,534||83|
|Operating margin, %||48.2||37.6|
|Nicotine pouches, million cans||114.1||50.4||126|
|Moist snuff, million cans||133.3||124||8|
|Chewing tobacco, thousands of pounds (excluding contract manufacturing volumes)||5,687||5,681||0|
|Market shares1), %||2020||2019||Change, %|
|Chewing tobacco (excluding contract manufacturing volumes)||40.5||40.3||0.1|
1) Swedish Match volume shares based on MSA distributor shipments, full year 2020 and 2019. Figures for 2019 have been restated to reflect changes in MSA store measurements.
Due to changes in purchase patterns and changed consumer usage behavior, Swedish Match estimates that there were increased purchases by consumers most notably for moist snuff and chewing tobacco during periods when restrictions were highest.
Market development and highlights
The nicotine pouch category in the US has grown dramatically over the past five years, and in 2020 Swedish Match estimates that the size of the category exceeded 150 million cans, more than doubling in size compared to 2019. The growth potential for nicotine pouches is high, as these products appeal to a broad portion of the adult tobacco consuming population who desire a discrete alternative to both smoking and smokeless tobacco. Competition intensified during 2020 as major cigarette manufacturers as well as some smaller companies expanded their geographic and store footprint for their nicotine pouch portfolios, often accompanied by aggressive promotional activities. Swedish Match maintained its strong leading position both in the western part of the US, where Swedish Match has been present for the longest period of time, as well as in its expansion markets outside of the west. Based on the measure of distributor shipments to retail, ZYN is by far the largest brand in the nicotine pouch category, with more than a 70 percent national share in volume terms.
- Shipments of ZYN in the US more than doubled compared to the prior year and amounted to 114.1 million cans, up from 50.4 million cans in 2019. The volume growth was attributable to both increased store velocities and an increase in store count. By the end of 2020, ZYN was available in around 100,000 stores in the US.
- The Company expanded the availability of both non-flavored and flavored varieties of ZYN, such as Smooth, Chill, and Citrus.
- Swedish Match has invested significant resources into US production capacity for ZYN, a project that was initiated in 2017. The third phase of the project began in 2020 and is expected to be completed during the first half of 2021, effectively doubling capacity installed through the first two phases. The fourth expansion phase is planned to be completed in 2022.
- In March 2020, the Company filed premarket tobacco product applications (PMTA) for its current portfolio of ZYN nicotine pouches with the US Food and Drug Administration (FDA) and after a preliminary review, the FDA determined the applications met filing requirements for a new tobacco product seeking a marketing order.
The snus category in the US amounted to approximately 55 million cans in 2020.1) Based on the measure of distributor shipments to retail, Swedish Match estimates its volume share to be approximately 9 percent, holding the number 3 position in the category.
- The General snus brand, which in 2019 was the first and to date the only snus brand to be granted authorization from the FDA designating eight General snus varieties, including its mint and wintergreen varieties, as Modified Risk Tobacco Products (MRTP). The MRTP designation allows Swedish Match to inform US consumers about the difference in health risk between cigarettes and our US snus products under the General brand.
- During 2020, a number of MRTP related communication efforts were made by the Company. However, the efforts have so far had a limited effect on demand.
1) Source: Swedish Match and industry estimates, full year 2020.
Moist snuff is the largest smokefree category in the US and in 2020 the category is estimated by Swedish Match to have grown by 3 percent and amounted to 1.5 billion cans. In recent years, the category growth has been driven by pouches. In 2020, the pouch segment accounted for approximately 17 percent of the category, growing by approximately 4 percent in volume terms compared to prior year. Swedish Match primarily competes in the value priced segments of the category, segments which account for approximately 70 percent of the total category volume. Swedish Match’s Longhorn branded pouch products were one of the fastest growing offerings in the market during 2020. Swedish Match estimates its share within the moist snuff category to be approximately 9 percent in volume terms.
- Swedish Match’s moist snuff shipment volume measured in number of can equivalents grew by 8 percent compared to 2019, supported by a number of programs including a more efficient pricing and promotional strategy for the Company’s leading moist snuff brand, Longhorn.
- Swedish Match volumes grew in both the loose and pouch segments as well as for its tubs packaging format.
- Swedish Match’s share of the growing pouch segment increased during the year, reaching approximately 9 percent of that segment.1)
In most years, the chewing tobacco category in the US has declined in volume terms in the range of 5 to 7 percent per year. However, in 2020, with changes in consumer behavior, impacted by COVID-19, the category experienced an unusual year with stable volumes versus 2019. In recent years the category has experienced a shift away from premium products toward the value segment. In 2020, this trend continued, with the size of the value segment in volume terms surpassing the size of the premium segment. Swedish Match holds the leading position in the premium segment and despite the shift away from premium products, the Company maintained its total category market share of approximately 40 percent in volume terms.1)
- In 2020, Swedish Match increased its share in both the premium and value segments.1)
- The Group’s Red Man premium brand is the largest chewing tobacco brand in the US, accounting for approximately one third of all volumes sold.1)
- The Big Duke brand is Swedish Match’s best-selling value priced product and the brand has demonstrated impressive share growth within the growing value price segment.
1) Based on MSA distributor shipments, full year 2020.