Nicotine Spirit | To meet customers’ insatiable demand for Zyn, Stacey Kennedy, head of Philip Morris International’s U.S. operations, is investing more than $800 million to build a new production facility in Aurora, Colorado, and expand its factory in Owensboro, Kentucky.
Stacey Kennedy by Jamel Toppin for Forbes
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 study found that the pouches contain “below the respective limit of quantification” of cancer-causing tobacco-specific nitrosamines. The study also found that Zyn contains low levels of other harmful chemicals including ammonia, chromium, formaldehyde and trace amounts of nickel.
Meanwhile Zyn, and other nicotine pouches, have not been authorized by the FDA for sale, although Swedish Match filed an application in March 2020. This means the products are technically illegal, but the FDA is allowing them to stay on the market while the agency reviews applications. The attorney general of Washington, D.C., is investigating PMI and Swedish Match for violating the city’s ban on selling flavored tobacco products through its website. PMI shut down online sales after receiving the subpoena earlier this year, but there are at least five lawsuits alleging that PMI is marketing Zyn to minors. Zyn comes in a brightly colored can and looks similar to a container of Icebreakers mints.
Where There’s No Smoke | While Zyn is safer than cigarettes, the pouches contain low levels of harmful substances (including ammonia and formaldehyde) and have not been authorized by the FDA.
Zyn
Scott Schlesinger, a Florida-based attorney who recently filed a class action against PMI and Swedish Match, says he’s seen this all before. “Zyn is Juul 2.0,” says Schlesinger, who previously led a successful lawsuit against Altria and its popular Juul vaporizer, which was blamed for a sharp rise in teen vaping. “It’s a reboot.”
Kennedy insists that PMI is marketing Zyn only to adults who already smoke or use nicotine. “We believe the complaint is without merit, and we will vigorously defend against it,” she says.
For now, CDC data is on PMI’s side. In this year’s National Youth Tobacco Survey, just 1.8% of middle and high school students admit to using nicotine pouches, while 5.9% currently vape. But since Instagram and TikTok have become littered with “Zynfluencers” celebrating their love for the pouches—a.k.a. “lip pillows”—the FDA has said it is keeping an eye on the “potential increased popularity of these products among youth.”
Plenty of famous adults are caught up in the viral memes and wild claims on the “Zynternet.” Political commentator Tucker Carlson—a.k.a. “Tucker Carlzyn”—jokingly claimed that nicotine boosts sexual performance. Buffalo Bills quarterback Josh Allen confessed that “throwing in a few Zyns” is a “secret trick” for his training regimen. And earlier this year, billionaire Peter Thiel told the Atlantic that he thinks nicotine increases IQ by 10 points.
The pouches have even entered the presidential election. Ohio Senator JD Vance has been photographed holding a container of Zyn, while on the other side of the aisle, Tim Walz levied a 95% tax on Zyn and other nicotine products as governor of Minnesota.
Two thousand miles away from Owensboro, Isaiah Taylor, the 25-year-old CEO and founder of Valar Atomics, a 15-person El Segundo, California, energy startup with $3.5 million in funding, has a photo of NASA engineers during the Apollo 13 mission above his desk. Everyone is smoking. He says Zyn powers his business, with a puck on every desk. “All of our great endeavors have been achieved in the haze of nicotine,” he says. “Zyn is all about American excellence—and maybe excess is part of it, too.”
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Publish date : 2024-09-26 04:25:00
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