Along the Ohio River, inside a clean, well-lit factory in Owensboro, Kentucky, dozens of gleaming stainless-steel machines, manned by employees in hair nets and safety glasses, churn out millions of tiny, pillow-shaped white fabric pouches filled with flavored pharmaceutical-grade nicotine powder. Every 15 seconds, 24 hours a day, five days a week, these automated machines fill a white plastic can the size of a hockey puck with 15 pouches.
In a few days’ time, containers of the wildly in-demand Zyn will appear in convenience stores, gas stations and bodegas across the United States. And a few days after that, the shelves will be reliably empty and retailers will be begging Philip Morris International, which owns Zyn’s manufacturer, Swedish Match, for more.
Elizabeth Leary, who has managed River’s Edge Tobacco Outlet in Owensboro for a decade, says she has never sold a nicotine product with such fervent acolytes. “Fifty percent of my customers come here for Zyn,” Leary says, explaining that she’s constantly out of stock, despite being just a few miles from the factory. “I’ve never seen a product this popular.”
By the end of 2024, Stamford, Connecticut–based PMI expects to sell as much as 580 million cans of Zyn, a 50% increase over the 385 million sold last year. Forbes estimates that Zyn sales, which PMI does not break out in public filings, generated $1.3 billion last year (about 3.7% of PMI’s $35 billion in total revenue) and could hit $1.9 billion this year. Overall, PMI’s smoke-free products (Zyn, vaporizers, its heat-not-burn device IQOS and chewing tobacco) hit $12.5 billion in sales last year, up from $9.9 billion in 2022, and account for nearly 40% of the company’s gross revenue as of the fourth quarter.
Zyn, in particular, is insanely lucrative. A can—which comes in 10 flavors, including cinnamon, citrus and wintergreen—retails for about $6.50. Zyn is six times more profitable than PMI’s cigarette division, says Bonnie Herzog, an analyst for Goldman Sachs who covers the tobacco industry. And unlike cigarettes, which have been steadily declining in volume for the last decade, Zyn is in hypergrowth mode. Shipment volume in the U.S. has jumped a staggering 238% since 2020.
“Zyn is our fastest-growing brand in the U.S.,” says Stacey Kennedy, the 51-year-old head of PMI’s U.S. operations.
It’s a new business for PMI, which bought Swedish Match and its Zyn brand for $16 billion in 2022, but the cult nicotine pouch is critical to its future. PMI makes the world’s number one cigarette brand, Marlboro, but its stated goal is eventually to stop selling cigarettes. That may sound crazy, if not improbable, given that global cigarette sales rang up $22.3 billion for the company in 2023. But PMI, which spun out of Altria in 2008, a decade after the Tobacco Master Settlement, has seen the socio-legal writing on the wall. (PMI does not sell cigarettes in the U.S., but Altria does.) Since then, it has invested $12 billion to create less harmful smoke-free nicotine delivery systems.
“I think Zyn is proof that nicotine can be used [to replace] more harmful products,” says Kennedy, who smoked Marlboros for 10 years before switching to the IQOS—and the occasional Zyn.
This year, after a supply shortage affected 60% of retailers across the country—dubbed the “Zynpocalypse” by consumers—PMI invested $600 million to build a new factory in Aurora, Colorado, to meet demand; that facility will come online in 2026. But that new factory alone won’t be enough to satisfy America’s insatiable appetite for nicotine.
A few miles down the river in Owensboro on a 90-degree morning in August, Kennedy steps up to a podium and announces to a crowd of locals and politicians, including Kentucky Governor Andy Beshear, that PMI is investing $232 million to end the Zynpocalypse for good by expanding the Owensboro factory by 40% and adding 450 new full-time jobs. Soon, it will operate 24 hours a day, seven days a week. By the end of 2025, Kennedy estimates, Swedish Match can manufacture 900 million Zyn containers. That could bring Zyn sales to $2.9 billion, Forbes estimates.
“This will ease the squeeze on what’s been a bit of a supply constraint,” Kennedy says.
Last fiscal year, total U.S. nicotine retail sales hit $76 billion, down 3.2% from 2022, with sales of cigarettes and vapes dropping 5.2% and 8.3%, respectively. Smokeless products including pouches, by contrast, are up nearly 12% for the year—the only segment to post growth. Every tobacco company has its own brand of nicotine pouches, but with Zyn, PMI controls nearly 70% of the market.
While pouches have successfully divorced nicotine from the cigarette, they still have health risks. For one, nicotine is ferociously addictive. It is also a vasoconstrictor and raises blood pressure. Cancer seems to be less of a concern: A Swedish Match–funded st...
In a few days’ time, containers of the wildly in-demand Zyn will appear in convenience stores, gas stations and bodegas across the United States. And a few days after that, the shelves will be reliably empty and retailers will be begging Philip Morris International, which owns Zyn’s manufacturer, Swedish Match, for more.
Elizabeth Leary, who has managed River’s Edge Tobacco Outlet in Owensboro for a decade, says she has never sold a nicotine product with such fervent acolytes. “Fifty percent of my customers come here for Zyn,” Leary says, explaining that she’s constantly out of stock, despite being just a few miles from the factory. “I’ve never seen a product this popular.”
By the end of 2024, Stamford, Connecticut–based PMI expects to sell as much as 580 million cans of Zyn, a 50% increase over the 385 million sold last year. Forbes estimates that Zyn sales, which PMI does not break out in public filings, generated $1.3 billion last year (about 3.7% of PMI’s $35 billion in total revenue) and could hit $1.9 billion this year. Overall, PMI’s smoke-free products (Zyn, vaporizers, its heat-not-burn device IQOS and chewing tobacco) hit $12.5 billion in sales last year, up from $9.9 billion in 2022, and account for nearly 40% of the company’s gross revenue as of the fourth quarter.
Zyn, in particular, is insanely lucrative. A can—which comes in 10 flavors, including cinnamon, citrus and wintergreen—retails for about $6.50. Zyn is six times more profitable than PMI’s cigarette division, says Bonnie Herzog, an analyst for Goldman Sachs who covers the tobacco industry. And unlike cigarettes, which have been steadily declining in volume for the last decade, Zyn is in hypergrowth mode. Shipment volume in the U.S. has jumped a staggering 238% since 2020.
“Zyn is our fastest-growing brand in the U.S.,” says Stacey Kennedy, the 51-year-old head of PMI’s U.S. operations.
It’s a new business for PMI, which bought Swedish Match and its Zyn brand for $16 billion in 2022, but the cult nicotine pouch is critical to its future. PMI makes the world’s number one cigarette brand, Marlboro, but its stated goal is eventually to stop selling cigarettes. That may sound crazy, if not improbable, given that global cigarette sales rang up $22.3 billion for the company in 2023. But PMI, which spun out of Altria in 2008, a decade after the Tobacco Master Settlement, has seen the socio-legal writing on the wall. (PMI does not sell cigarettes in the U.S., but Altria does.) Since then, it has invested $12 billion to create less harmful smoke-free nicotine delivery systems.
“I think Zyn is proof that nicotine can be used [to replace] more harmful products,” says Kennedy, who smoked Marlboros for 10 years before switching to the IQOS—and the occasional Zyn.
This year, after a supply shortage affected 60% of retailers across the country—dubbed the “Zynpocalypse” by consumers—PMI invested $600 million to build a new factory in Aurora, Colorado, to meet demand; that facility will come online in 2026. But that new factory alone won’t be enough to satisfy America’s insatiable appetite for nicotine.
A few miles down the river in Owensboro on a 90-degree morning in August, Kennedy steps up to a podium and announces to a crowd of locals and politicians, including Kentucky Governor Andy Beshear, that PMI is investing $232 million to end the Zynpocalypse for good by expanding the Owensboro factory by 40% and adding 450 new full-time jobs. Soon, it will operate 24 hours a day, seven days a week. By the end of 2025, Kennedy estimates, Swedish Match can manufacture 900 million Zyn containers. That could bring Zyn sales to $2.9 billion, Forbes estimates.
“This will ease the squeeze on what’s been a bit of a supply constraint,” Kennedy says.
Last fiscal year, total U.S. nicotine retail sales hit $76 billion, down 3.2% from 2022, with sales of cigarettes and vapes dropping 5.2% and 8.3%, respectively. Smokeless products including pouches, by contrast, are up nearly 12% for the year—the only segment to post growth. Every tobacco company has its own brand of nicotine pouches, but with Zyn, PMI controls nearly 70% of the market.
While pouches have successfully divorced nicotine from the cigarette, they still have health risks. For one, nicotine is ferociously addictive. It is also a vasoconstrictor and raises blood pressure. Cancer seems to be less of a concern: A Swedish Match–funded st...
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Forbes (Digital) - 1 Issue, October - November 2024