April 2026: Fitch affirms Turning Point Brands’ IDR at “B+”. Outlook Stable
Fitch Ratings has affirmed Turning Point Brands’ (TPB) Long-Term Issuer Default Rating (IDR) at “B+” and senior secured bonds at “BB-” with a Recovery Rating of “RR3”. The rating outlook is Stable. TPB’s ratings reflect its solid position in niche markets, modest EBITDA leverage at close to 3x on a Fitch-adjusted gross leverage basis, and positive FCF expectations due to its asset-light model. The rating is constrained by its small scale with 2025 EBITDA in the low-$100 million range, exposure to the competitive tobacco category which faces long-term secular decline, and regulatory uncertainties in the nicotine pouch category.
Key Rating Drivers
– Modern Oral Growth, Long-Term Uncertainties: TPB’s nationwide launch of FRE and partnership on ALP during 2025 significantly increased the company’s exposure to non-tobacco synthetic nicotine category. The company reports its nicotine pound business under its Stoker’s segment, which grew close to 70% during 2025. The segment now represents 61% of net revenues, up from 47% in 2024, with management projecting continued growth into 2026. Despite current momentum, TPB remains subject to longer-term regulatory uncertainties given pending Premarket Tobacco Product Application (PMTA) approval on both nicotine pouch brands.
TPB’s products compete with significantly larger and better capitalized peers in the U.S. tobacco industry including Altria (BBB+/Stable) and Philip Morris International (A/Stable). The FDA requires PMTA submissions for new tobacco and synthetic products that represent a significant cost for smaller players. While TPB’s products could be differentiated due to its mouthfeel, branding, and higher nicotine strength offerings, it nonetheless faces competition from existing brands including ZYN (owned by Philip Morris International), which has PMTA approval and holds a dominant share in the U.S. oral nicotine pouch market.
– Small Scale, Niche Focus: TPB is a small player within the U.S. tobacco, nicotine and related consumer product industry, with 2025 revenues of $463 million and Fitch-adjusted EBITDA of $114 million. It has a niche portfolio focused on premium rolling paper and cigar wraps under its Zig-Zag segment (39% of 2025 revenue), and nicotine pouches, moist smokeless tobacco (MST), loose-leaf chewing tobacco and under its Stoker’s segment. Despite TPB’s modest scale, the company has a solid position within select categories that it competes, including leading positions in rolling paper, Make-Your-Own (MYO) cigar wraps, and discount chewing tobacco.
– Continued Portfolio Mix Shift: Fitch-adjusted EBITDA grew by around 14% in 2025, driven by modern oral growth, partly offset by business investments. EBITDA is projected to be flat in 2026, as top-line growth is offset by increased investment in modern oral sales and marketing initiatives, and trend in the low-to-mid-$100 million range thereafter. Fitch expects an ongoing mix shift toward the Stoker’s segment as management increases its focus on modern oral. Zig-Zag’s results were modestly weaker in 2025, reflecting declines in the U.S., partly mitigated by growth in Canada. Performance also reflected the wind-down of the Clipper business and de-emphasis of the cigar category.
– Good Historical Growth: TPB generated strong historic top-line growth, with mid-teens CAGR for its combined Zig-Zag and Stoker’s businesses from 2019-2025. This growth was driven by solid demand and pricing realization, increased distribution, consumer shift toward value despite industry secular declines in MST and loose-leaf tobacco, and growth in modern oral more recently in 2025. The company’s CDS business has historically weighed on top-line results given illicit market encroachment in the e-vapor category but was deconsolidated in January 2025 as a 49%-owned joint venture.
– Top-Line Expectations: Fitch expects revenue to increase toward the $500 million range in 2026, compared to $463 million in 2025 and $361 million in 2024. Revenue is expected to continue to increase in the mid-single digits annually thereafter, driven predominately by continued distribution gains and growth in modern oral. Risks to the forecast include adverse regulatory outcomes, greater-than-expected market volatility, ongoing secular declines in tobacco, and normalizing consumer spending that could weaken demand for Stoker’s value offerings over the medium to longer term.
– Low 20% EBITDA Margin: Fitch expects EBITDA margins to decline modestly in 2026 to the 22%-23% range, compared to 24.6% in 2025 and 27.6% in 2024, primarily driven by increased investments. Fitch projects EBITDA margins to sustain at similar levels in 2027 and beyond as the company maintains ongoing growth investments in the business.
– Moderate Leverage Close to 3x: TPB’s EBITDA leverage was approximately 2.6x at year-end 2025, compared to 2.5x in 2024 and 4.0x in 2023. Leverage is expected to sustain at similar levels over the medium term, absent material capital allocation decisions. Fitch’s projections do not assume any M&A, with stable debt levels.
– Asset-Light Model, Good FCF: Fitch notes that TPB’s asset light model enables the company to have solid FCF conversion. The company relies on long-standing relationships and agreements for the production and distribution of its products, with the majority of manufacturing outsourced to suppliers. Fitch projects FCF of close to $50 million annually, assuming stable dividend levels and modest capex requirements.
Peer Analysis
Peers include Altria (BBB+/Stable), a peer in the tobacco industry with significantly larger scale, and Northeast Grocery (B+/Stable), a similarly rated company in the “B+” rating category. Altria’s rating reflects leading U.S. cigarette market position, conservative leverage profile, and ability to generate consistently strong profitability and cash flows, despite ongoing cigarette secular headwinds and U.S. market regulatory challenges. Fitch expects Altria to maintain a consistent capital allocation framework that balances shareholders returns, reflecting mid-single-digit dividend growth and share repurchases in the $1 billion range annually, while sustaining EBITDA leverage around 2x.
Northeast Grocery’s “B+” rating reflects the company’s modest scale and footprint relative to peers, somewhat offset by its good local market share positions and synergy benefits from the recent merger of the Tops and Price Chopper/Market 32 banners. The Stable Outlook reflects stabilizing results in recent quarters, including positive sales growth, stable-to-improving EBITDA, and positive FCF. Fitch expects modest growth in sales and EBITDA from current levels over time, yielding positive FCF and EBITDAR leverage below 4.5x.
Fitch’s Key Rating-Case Assumptions
– Top line approaching the $500 million range in 2026, up from $463 million in 2025. Revenue is expected to continue to increase in the mid-single digits annually thereafter, driven predominately by continued distribution gains and growth in modern oral
– EBITDA is projected to be relatively flat in 2026 compared to $114 million in 2025, as revenue growth is offset by higher investment in modern oral sales and marketing initiatives. EBITDA is forecasted to trend in the low-to-mid-$100 million range thereafter. EBITDA margins are expected to decline modestly in 2026 to the 22%-23% range, down from 24.6% in 2025, and sustain at similar levels over the medium term as the company maintains ongoing growth investments in the business
– FCF is forecasted at around $50 million annually assuming stable dividend levels and modest capex requirements
– Leverage is expected to sustain at close to 3x over the medium term, absent material capital allocation decisions
– No adjustments were made to the Standalone Credit Profile (SCP) based on the Corporate Rating Tool (CRT)
Recovery Analysis
Fitch’s recovery assumes TPB’s value is maximized as a going concern (GC) in a post-default scenario, given a GC valuation of approximately $290 million compared with close to $100 million in value from a liquidation of assets. Fitch’s GC value is derived from a projected EBITDA of around $65 million. The scenario assumes accelerated market share losses due to secular declines in the tobacco industry, with increased price competition between peers combined marketing denial orders on its FRE and ALP brands resulting in revenue declining to around $290 million.
EBITDA margins are assumed to be in the low 20% range reflecting top-line headwinds and increased spend in efforts to improve sales, offset by benefits achieved through bankruptcy. A GC multiple of 4.5x was selected, within the 4x-8x range observed for North American corporates, reflecting Fitch’s assessment of TPB’s industry dynamics and company-specific factors such as limited scale and diversification. After deducting 10% administrative claims from the $290 million GC valuation and considering TPB’s senior secured ABL in the capital structure, the company’s $300 million senior secured note is rated at “BB-“/”RR3”.
Rating Sensitivities
– Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: A downgrade could result from total EBITDA leverage sustained above 4.0x on lower-than-expected operating results, negative FCF generation, and/or debt-financed M&A or shareholder remuneration.
– Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: Upward rating action is constrained by TPB’s EBITDA scale, niche focus, and exposure to the highly competitive and regulated tobacco and nicotine category. An upgrade could result from the following: Significantly larger operating scale in terms of revenue and EBITDA, reflecting increased portfolio diversification while maintaining EBITDA leverage below 3.0x; Tangible progress toward increased and sustainable contribution to revenue, operating profit and cash flow from TPB’s smoke-free product offerings, including obtaining PMTA authorization on the modern oral portfolio.
Liquidity and Debt Structure
As of December 31, 2025, TPB had about $222.7 million cash and cash equivalents and no borrowings on its $75 million ABL facility, with $65.8 million of availability constrained by its borrowing base. The ABL has a $40 million accordion feature and has a first-priority claim on inventory. Fitch projects the company to generate FCF of around $50 million annually, assuming stable dividend levels and moderate capex levels. Fitch projects the company could use FCF toward opportunistic share repurchases and M&A. TPB upcoming maturities include its $75 million ABL due November 2027 and its $300 million senior secured notes due March 2032, which Fitch expects would be refinanced.
February 2025: Fitch assigns “B+” credit rating to Turning Point Brands
Fitch Ratings assigned Turning Point Brands (TPB) a first-time long-term Issuer Default Rating (IDR) of “B+” with outlook Stable. Fitch also assigned a “BB-” rating to TPB’s proposed $300 million senior secured bonds with a Recovery Rating of “RR3”.
TPB’s (B+/Stable) rating reflects its solid position in niche markets, modest Fitch-adjusted EBITDA leverage at around 3x and adequate FCF expectations given its asset-light model. The rating is constrained by its small scale with projected 2024 EBITDA of around $100 million and exposure to the competitive tobacco category that is in long term secular decline. Fitch expects TPB to generate mid-single digit revenue growth annually across both its Zig-Zag and Stoker’s segment over the medium term while maintaining leverage of close to 3x.
Key Rating Drivers
– Small Scale, Niche Focus: TPB is a small player within the U.S. tobacco and related consumer product industry, with forecasted 2024 revenues in the low $400 million range and Fitch-adjusted EBITDA of close to $100 million. The company has a niche focus, with a portfolio that centers around premium rolling paper and cigar wraps under its Zig-Zag segment, and moist smokeless tobacco (MST), loose-leaf chewing tobacco and a developing nicotine pouch business under its Stoker’s segment. Fitch notes that despite TPB’s small scale and niche offerings, the company has established a solid position within various categories that it competes, including leading positions in rolling paper, Make-Your-Own (MYO) cigar wraps, and discount chewing tobacco.
– Competitive Industry Environment: TPB’s tobacco and nicotine products compete with significantly larger and better capitalized peers. The FDA requires Premarket Tobacco Product Application (PMTA) submissions for new tobacco products that represent a significant cost for smaller players. TPB’s nationwide launch of FRE nicotine pouches is subject to longer-term regulatory uncertainties given its pending PMTA approval. While FRE could be differentiated from competitors due to its mouthfeel and higher nicotine strength offerings, it nonetheless faces competition from existing brands including ZYN (owned by Philip Morris International), which has recently received PMTA approval and controls more than 70% share of the category (by revenue).
– Good Historical Growth: TPB generated strong top-line growth from 2019 to 2024 with estimated low double-digit CAGR for its combined Zig-Zag and Stoker’s business, and low single-digit CAGR when including the Creative Distribution Solutions (CDS) segment. This growth was driven by solid demand and pricing realization, increased distribution, and consumer shift towards value products despite secular industry decline in MST and loose-leaf tobacco. CDS has been pressured by illicit vape market. In January 2025, TPB transferred its CDS ownership to General Wireless Operations (GWO), its 49%-owned Joint Venture, and will no longer consolidate CDS’s results.
– Top Line Expectations: Fitch expects low single-digit increase in consolidated revenues for 2024, reflecting high-single digit top line growth in Zig-Zag and Stoker’s offset by declines in CDS. Top line in 2025 is expected to decline towards the high $300 million range given the deconsolidation of CDS, and increase in the mid-single digits annually thereafter, supported by continued distribution gains, innovation and growth from FRE. These tailwinds are expected to be partially offset by tobacco industry secular declines, regulatory and market uncertainties, and normalizing consumer spending patterns, which could reduce demand for Stoker’s value offerings over the medium to longer term.
– Modest Near-Term Margin Expansion: Fitch expects EBITDA margins to increase modestly to the mid-20% range in 2024, up from around 23% in 2023 and 22% in 2022. This growth is driven by benefits from increased distribution and other efficiency initiatives, offset by investments in FRE. EBITDA margins are projected to increase further to the mid-to-high 20% range in 2025 and beyond, as the impact of TPB’s deconsolidation of CDS is partially offset by continued investments in the business. CDS contributes immaterial EBITDA compared to its projected revenue of $60 million in 2024. Its deconsolidation is expected to support a higher margin structure for TPB moving forward.
– Moderate Leverage: TPB has a net leverage target of 2.0x-3.0x, which equates to a 3.0x-4.0x range on a Fitch-adjusted gross leverage (EBITDA Leverage) basis assuming $100 million of cash. Given the new proposed $300 million secured note offering, Fitch expects 2024 EBITDA Leverage at around 3x – which will remain at similar levels over the medium term. This compares to leverage of 4.0x in 2023 and 4.5x in 2022. Fitch’s projections do not assume any M&A, with stable debt levels and EBITDA maintained in the low $100 million range.
– Asset-light Busines Model & Adequate Liquidity: Fitch notes that TPB’s asset-light model enables the company to have solid FCF conversion. The company relies on long-standing relationships and agreements for the production and distribution of its products, with the majority of manufacturing outsourced to suppliers. Fitch projects TPB to generate FCF of close to $50 million annually assuming stable dividend levels and modest capex requirements. The company has adequate liquidity with pro forma Q3 2024 cash of close to $80 million and $59 million of availability on its $75 million ABL.
Key Assumptions
– Revenue: Projected to increase in the low-single digits in 2024, with growth in Zig-Zag and Stoker’s offset by declines in CDS. Top line in 2025 is expected to decline towards the high $300 million range given the deconsolidation of CDS, and is forecasted to increase in the mid-single digit range annually thereafter.
– EBITDA: Projected at around $100 million in 2024 and to remain in the low $100 million range over the medium term. EBITDA margin is expected to increase modestly to the mid-20% range in 2024, up from around 23% in 2023 and 22% in 2022, driven by benefits from increased distribution and other efficiency initiatives, offset by investments in FRE. EBITDA margins are projected to increase further to the mid-to-high 20% range in 2025 and beyond, as the impact of TPB’s deconsolidation of CDS is partially offset by continued investments in the business.
– FCF: Projected at around $50 million annually assuming stable dividend levels and modest capex requirements.
– EBITDA leverage: Projected at 3.0x in 2024, down from 4.0x in 2023, and is expected to remain at close to 3x over the medium term in the absence of M&A, reflecting stable debt levels and EBITDA maintained in the low $100 million range.
Recovery Analysis
Fitch’s recovery assumes TPB’s value is maximized as a going concern in a post default scenario, given a going-concern valuation of approximately $290 million compared with less than $100 million in value from a liquidation of assets. Fitch’s going-concern value is derived from a projected EBITDA of around $65 million. The scenario assumes accelerated market share losses given secular declines in the tobacco industry, with increased price competition between peers combined with weaker-than-expected demand for FRE resulting in revenue declining to around $290 million.
EBITDA margins are assumed to be in the low 20% range reflecting top line headwinds and increased spend in efforts to improve sales, offset by benefits achieved through bankruptcy. A going-concern multiple of 4.5x was selected, within the 4x-8x range observed for North American corporates, reflecting Fitch’s assessment of TPB’s industry dynamics and company-specific factors such as limited scale and diversification. After deducting 10% administrative claims from the $290 million going-concern valuation and considering TPB’s $75 million senior secured ABL in the capital structure, the company’s new proposed $300 million senior secured notes is rated at “BB-/RR3”.
Rating Sensitivities
– Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: a downgrade could result from total EBITDA leverage sustained above 4.0x on lower-than-expected operating results, negative FCF generation, and/or debt-financed M&A or shareholder remuneration.
– Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: upward rating action is constrained by TPB’s EBITDA scale, niche focus, and exposure to the highly competitive tobacco and nicotine category. An upgrade could result from significantly larger operating scale in terms of revenue and EBITDA, reflecting increased portfolio diversification, while maintaining EBITDA leverage below 3.0x.
Liquidity and Debt Structure
TPB has adequate liquidity with pro forma Q3 2024 cash and cash equivalents of close to $80 million. Fitch projects the TPB to generate FCF of around $50 million annually assuming stable dividend payments and moderate capex levels. Fitch believes the Company could use FCF towards opportunistic share repurchases and M&A. TPB has limited near term refinancing risk, with its $75 million ABL due 2027 and its new proposed $300 million senior secured notes due 2032.
