Here's How Zyn Conquered America

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Philip Morris International is rehabilitating nicotine’s image with its wildly popular flavored pouches, embraced by celebrities, entrepreneurs and star athletes. The highly addictive stimulant is making billions, but is it good for anyone other than PMI?

Read the full story on Forbes: https://www.forbes.com/sites/willyakowicz/2024/09/26/how-zyn-took-over-america/

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Transcript
00:00Today on Forbes, How Zin Conquered America.
00:05Along the Ohio River, inside a clean, well-lit factory in Owensboro, Kentucky,
00:11dozens of gleaming stainless steel machines, manned by employees in hairnets and safety glasses,
00:17churn out millions of tiny, pillow-shaped white fabric pouches
00:21filled with flavored, pharmaceutical-grade nicotine powder.
00:25Every 15 seconds, 24 hours a day, 5 days a week,
00:28these automated machines fill a white plastic can the size of a hockey puck with 15 pouches.
00:35In a few days' time, containers of the wildly in-demand Zin
00:39will appear in convenience stores, gas stations, and bodegas across the United States.
00:45And a few days after that, the shelves will be reliably empty,
00:48and retailers will be begging Philip Morris International, also known as PMI,
00:53which owns Zin's manufacturer, Swedish Match, for more.
00:58Elizabeth Leary, who has managed River's Edge tobacco outlet in Owensboro for a decade,
01:03says she has never sold a nicotine product with such fervent acolytes.
01:08She explains that she's constantly out of stock, despite being just a few miles from the factory.
01:13She says, quote,
01:1550% of my customers come here for Zin. I've never seen a product this popular.
01:21By the end of 2024, Stanford, Connecticut-based PMI expects to sell as much as 580 million cans of Zin,
01:29a 50% increase over the 385 million sold last year.
01:34Forbes estimates that Zin sales, which PMI does not break out in public filings,
01:39generated $1.3 billion last year, about 3.7% of PMI's $35 billion in total revenue,
01:47and could hit $1.9 billion this year.
01:51Overall, PMI's smoke-free products, Zin, vaporizers, its heat-not-burn device IKOZ,
01:58and chewing tobacco, hit $12.5 billion in sales last year, up from $9.9 billion in 2022.
02:07And they account for nearly 40% of the company's gross revenue as of the fourth quarter.
02:12Zin, in particular, is insanely lucrative.
02:16A can, which comes in 10 flavors including cinnamon, citrus, and wintergreen, retails for about $6.50.
02:24Bonnie Herzog, an analyst for Goldman Sachs who covers the tobacco industry,
02:28says that Zin is six times more profitable than PMI's cigarette division.
02:33And unlike cigarettes, which have been steadily declining in volume for the last decade,
02:37Zin is in hyper-growth mode.
02:40Shipment volume in the U.S. has jumped a staggering 238% since 2020.
02:46It's a new business for PMI, which bought Swedish Match and its Zin brand for $16 billion in 2022.
02:53But the cult nicotine pouch is critical to its future.
02:57PMI makes the world's number one cigarette brand, Marlboro,
03:01but its stated goal is eventually to stop selling cigarettes.
03:04That may sound crazy, if not improbable,
03:07given that global cigarette sales rang up $22.3 billion for the company in 2023.
03:14Since 2008, PMI has invested $12 billion to create less harmful smoke-free nicotine delivery systems.
03:22Stacey Kennedy, the 51-year-old head of PMI's U.S. operations,
03:26and who smoked Marlboros for 10 years before switching to the Icos and the occasional Zin, says,
03:39PMI is investing $232 million to expand the Owensboro factory by 40%,
03:45adding 450 new full-time jobs.
03:48Soon, it will operate 24 hours a day, 7 days a week.
03:52By the end of 2025, Kennedy estimates, Swedish Match can manufacture 900 million Zin containers.
03:59That could bring Zin sales to $2.9 billion, Forbes estimates.
04:04Kennedy says,
04:11While pouches have successfully divorced nicotine from the cigarette, they still have health risks.
04:16For one, nicotine is ferociously addictive.
04:19It is also a vasoconstrictor, meaning it narrows blood vessels.
04:23And it raises blood pressure.
04:25Cancer seems to be less of a concern.
04:28A Swedish Match-funded study found that the pouches contain,
04:38The study also found that Zin contains low levels of other harmful chemicals,
04:42including ammonia, chromium, formaldehyde, and trace amounts of nickel.
04:48For full coverage, check out Will Yakowitz's piece on Forbes.com.
04:53This is Kieran Meadows from Forbes. Thanks for tuning in.

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