February 2025: ZYN is now the largest new nicotine brand in the USA
From humble beginnings in Colorado in 2014, ZYN pouches became the best-selling new nicotine in 2024 in the USA following ten years of explosive growth. ZYN-owner, Philip Morris International (PMI) sold 581.4 million cans of ZYN in the USA and generated US$1.88 billion net revenue in 2024 (US$3.2 per can sold). Consequently, ZYN moved above the VUSE vapes, sold by British American Tobacco’s US-affliate Reynolds American, to become America’s most preffered new nicotine product. In 2024, Reynolds American sold 287 million VUSE vape pods and generated US$1.27 billion net revenue (US$4.4 per pod sold). In terms of retail turnover, ZYN pouches lead VUSE pod by around US$700 million: in 2024, Americans spent around US$3 billion on ZYN pouches and US$2.3 billion on VUSE pods.
More importantly, with 3.4% share, ZYN is now the 4th largest brand in the US nicotine market – behind Marlboro, Newport and Camel, but ahead of any other cigarette brand (including Natural American Spirit, Winston, Kool, Lucky Strike and Pall Mall).
But, who are ZYN users? According to PMI’s discloures, 45% of ZYN users are smokers and 33% are vapers. Only 22% are oral tobacco users (“dippers”). In this regards, ZYN is – to a great extent – transforming the consumption of nicotine from something inhaled to something sucked (absorbed). Compared to the smokers and vapers, ZYN users are more male and signicantly better-off in terms of household income. The age profile of ZYN users resemble that of vapers and is signicantly younger than smokers.
June 2024: ZYN increased its can price by ¢50 following the lack of stock at retail
The supply shortage and consequent lack of stock at the retailers continue to have an adverse effect on ZYN’s growth momentum in the US. In Q1 2024, ZYN-owner, Philip Morris International (PMI) reported a shipment volume of 131.6 million ZYN cans in the US, corresponding to +79.7% year-on-year growth. The shipment growth (reported by PMI) was in line with the (retail) consumer off-take growth (reported by NielsenIQ) – which peaked just above 80% in April 2024. Since then, ZYN’s off-take growth is down to 50%.
PMI shipped 384.8 million ZYN cans to the US market in 2023 and initially guided 520 million cans for 2024. PMI later increased the FY24 guidance to 560 million cans and, most recently at the DB Global Consumer Conference, re-iterated its guidance. Thereby, PMI’s most recent guidance implies 45.5% year-on-year growth – well-below the consumer off-take growth observed so far at any point this year. In the absence of supply-chain constraints, PMI could achieve 650 million cans volume in FY24 in the US according to our internal estimates – corresponding to an estimated 90 million cans in lost volume. Taking advantage of the supply shortages and in an attempt to (financially) compensate for the lost volume, PMI increased ZYN’s Manufacturer’s Suggested Retail Price (MSRP) by ¢50.
Winner of the lack of ZYN stock at retail? Swisher’s Rogue and BAT’s VELO with year-on-year consumer off-take growth reaching +90%-100% range most recently. Recall that, at the H1 2024 Pre-close Update, BAT mentioned that the early results from the phased roll-out of refreshed VELO brand expression are encouraging. For further details: BAT – H1 2024 Pre-close Update.
June 2024: ZYN sales volume will reach 560 million cans in the USA in 2024
At the DB Global Consumer Conference, PMI states that ZYN’s strong growth in the US is creating some tension on retail availability whether at the level of retailer or SKU. Capacity expansion at the existing Owensboro, Kentucky factory is underway and the supply should progressively improve in the second and third quarter of 2024 – with the aim to be back to a normal level in the final quarter of the year.
PMI re-confirms 560 million cans volume target for ZYN in the US in 2024 despite the supply challenges. Moreover, PMI is now working on a new location in the US for the production of ZYN in 2025.
