For years, snuff, or loose tobacco, dominated the smokeless tobacco category. Then came snus — tobacco pouches that produce less spit — which added new life to the other tobacco product (OTP) segment. But the category really received a boost four years ago when Swedish Match launched ZYN, a tobacco-free nicotine pouch, often referred to as an all-white pouch.
This OTP addition has generated a reliable revenue stream for convenience stores. IRI, a Chicago-based market research firm, reported spitless tobacco sales in c-stores, including snus, posted noteworthy dollar gains this summer compared with the same time last year: more than 75% for the four weeks ending July 12, 2020, and slightly more than 77% for both the 12 weeks and 52 weeks prior. Although snuff continues to tally more in total dollars, revenue growth for the legacy product line has been stymied at less than 5% for each of the time periods.
Power of the Pouch
ZYN has consistently expanded its retail profile throughout the country. Swedish Match reported shipments in the U.S. for the first six months of this year exceeded total U.S. shipments for all of 2019.
“ZYN has been especially strong. I think adults are looking for alternative nicotine delivery devices,” said Bailey Lyden, vice president of retail for True North Energy, which operates 143 c-stores in Illinois, Michigan and Ohio.
“It’s great to see some increase on such a new SKU,” added Dan Dunstan, vice president of retail for Parkland USA. The Minot, N.D.-based company includes 58 retail sites.
A year ago, British American Tobacco released Velo, its all-white pouch brand. Originally available in 70,000 stores, it successfully expanded the company’s modern oral category, which earned more than $162 million in 2019, signifying a 273% year-over-year increase, per Bloomberg.
Altria also entered the all-white pouch market in 2019 with on!, tested in 28,000 retailers, including five c-store chains. Its successful reception has prompted the company to scale up its retail presence later this year. Plus, Altria submitted a premarket tobacco application to the Food and Drug Administration (FDA) for on! in June.
“We’ve decided 40% of our stores will carry it,” said Lyden.
“I think the all-white appearance of nicotine pouches may set these products apart from traditional smokeless tobacco when it comes to perceptions of risk,” said Alex Clark, CEO for Consumer Advocates for Smoke-Free Alternatives Association (CASAA).
“Our managers said straight cigarette users are the biggest pull on the product. People may think the non-tobacco product is better for you. They’re looking for a good alternative when they feel the need,” said Dunstan.
Replacing Flavored Vape
Flavor selection for both snus and all-white pouches could be another factor driving sales since the FDA banned most flavored vaping products earlier this year. Currently, on! is available in seven flavors, ZYN offers nine, including flavor ban-approved Chill, and Velo comes in citrus and mint.
“I think that vaping flavor bans create a hole that nicotine pouches might fill,” said Clark. “In some places, like Massachusetts, gas stations and c-stores filled slots on tobacco racks left empty by Governor Baker’s vapor sales ban in response to lung injuries linked to illicit THC products. I suspect that seeing those products where vapes used to be may have piqued the interest of many people and maybe inspired them to try something different.”
“All three (moist, snus and white pouches) have seen increases over prior year. Is that due to the ban? Possibly, but I’m not saying that is the exact reason,” said Layne Stuckey, vice president for C.E. Taylor Oil Inc., which owns and operates 28 Chuckles convenience stores.
Still, such a strong showing during a disruptive COVID-19 market suggests the power of the pouch is well positioned to keep producing profits for c-stores.