• by Steve Ellwanger , April 24, 2023

Non-combustible nicotine products are on the rise as cigarette sales decline and more regulators ramp up efforts to ban menthol cigarettes.

Following its recent $16 billion acquisition of Swedish Match AB and its Zyn brand of oral nicotine pouches, Philip Morris reported last week that Zyn sales increased by 47% year over year to 73 million cans in Q1 of 2023 ended March 31.

The number of cans sold per week—a metric called velocity—were up as well.

“Zyn velocities continue to grow sequentially and by an impressive 21% compared to prior year as the brand continues to resonate with adult nicotine users,” Philip Morris CFO Emmanuel Babeau said on a conference call with financial analysts.

Seven years after its U.S. launch, Zyn grew its retail distribution by 13% in Q1 to approximately 140,000 doors versus the year-earlier period.

“There remains ample opportunity to further increase this over time,” said Babeau.

In outlets tracked by NielsenIQ, dollar sales of smokeless products rose by 7.4% in the 12-weeks ended April 8.

During the same period, dollar sales of cigarettes declined by 3.8% while sales of vape products were down 3.0%.

Meanwhile, New York is trying to become the third state—following Massachusetts in 2019 and California last year—to ban menthol cigarettes.

As New York Governor Kathy Hochul’s proposal is considered as part of the state’s 2023-24 budget, tobacco giants Altria Group and R.J. Reynolds Tobacco are lobbying against it, while public health and anti-smoking groups have spent $1 million on supportive ads, as reported by The New York Times.

In California, new “California-compliant” cigarettes rolled out by British American Tobacco’s Reynolds American subsidiary in response to the state’s December 2022 ban on menthol are helping to recoup lost menthol-cigarette sales.

The new smokes contain a lab-made chemical that mimics the cooling sensation of conventional menthol cigarettes.

As reported by Politico, R.J. Reynolds sold 2.8 million packs of Camel-branded menthol cigarettes and 2 million packs of Newport-branded menthol cigarettes in California in March of 2022. This year, Camel has sold 1.4 million “California compliant” packs and Newport sold about 800,000 “California compliant” packs.

At the federal level, the U.S. Food and Drug Administration is expected to issue a final rule by year’s end that would ban menthol cigarettes.

Analysts at TD Cowen have opined that such a ban would likely result in litigation by tobacco marketers that could stretch out three to five years.