Nicotine bags are on the rise, and product regulation is catching up - from niche to popular

Nicotine bag VS Swedish cigarette

Swedish oral tobacco is a pasteurized oral tobacco that has been around for 200 years. Nicotine packs are a similar product, but more fashionable and hygienic. They are independent of each other as oral smoke. Consumers place the nicotine bag between their upper lip and gums, after which the nicotine is released. Sweden's cigarette and nicotine packs are disposable products. Unlike Swedish cigarettes, nicotine packs do not contain tobacco - they are small, white bags pre-filled with food-grade nicotine material. The product is available in a variety of nicotine concentrations and flavors.

It's a niche product in a niche market that's growing extremely fast. An analysis published by 360 Market Updates estimates that the current nicotine bag market size is about $619.9 million, and this market will reach $12.97 billion in 2026. This means that the nicotine bag market will grow at a compound annual growth rate of 53.8%.

This emerging product has been rapidly adopted by consumers in Scandinavia and Central and Eastern Europe.

Sweden has one of the lowest rates of cigarette consumption in the European Union, which many believe is due to the prevalence of oral smoking in the country.

Since 1992, there has been an EU-wide ban on the sale of tobacco in the mouth (Sweden negotiated an exemption when it joined the EU in 1995). Switzerland, which is not a member of the European Union, has also lifted its ban on smoking.

In recent years, multinational tobacco companies have incorporated oral tobacco into their product systems, either by acquiring existing products or developing their own. At the same time, they have also entered the nicotine bag market. By now, all the world's leading tobacco companies have a presence in this space, and nicotine packs as new oral cigarettes have begun to eat into the market share of traditional oral cigarettes.

Competition is heating up

The nicotine bag market has become highly competitive, with well-known manufacturers increasing production capacity for their "modern mouth feel products."

The competition started when Swedish Match introduced the Zyn brand. Swedish Match is the world's largest producer of oral tobacco and holds a significant position in the U.S. smokeless products market.

The Zyn brand has grown rapidly and has played a key driving role in smoke-free sales in the United States since 2019. In the first quarter of 2020 alone, Swedish Match sold approximately 70 million cans of Zyn nicotine packs in the United States, compared to only 18 million cans sold in the same period in 2019. Swedish Match has also filed a premarket tobacco product application with the U.S. Food and Drug Administration (FDA).

Demand for the Zyn nicotine packs was so strong that Swedish Match twice announced it would expand its production in the United States. Upon completion of the expansion, its annual output will exceed 200 million cans.

Swedish Match's competitors have not been idle either. After acquiring 80% of the global shares of Burger Soehne, Altria Group became the On! The owner of the nicotine bag brand. Altria Group will also distribute the On! Product. On! It is currently available in retail stores in the United States, Canada, Sweden and Japan, and on Altria Group's online store. It comes in seven flavors and five different nicotine concentrations to choose from.

British American Tobacco's representative product in the nicotine bag market is "rifle". The brand is available in the UK, Sweden and Kenya. In the future, BAT also plans to use "Willow" as a product name to market all of its new oral tobacco products - Reynolds American Limited, a British American Tobacco unit, has been using the name to sell its nicotine packs since June 2019.

To meet demand, BAT opened a new nicotine bag plant in Hungary in September 2020, aiming to increase its nicotine bag production capacity to more than 1 billion packs that year, a figure that should grow further in 2021. The plant's products are mainly for the European market.

In June 2019, Nikki International also joined the race, with its main product being "Nordic Spirits". Developed in Sweden and available in Switzerland, Sweden and online, the nicotine pack is available in four flavors.

Imperial Brands has a wide range of products in the market for new oral cigarettes, including the Pablo nicotine pack, which is called the "strongest" nicotine pack on the market because it contains 50 milligrams of nicotine per gram. Generally, new types of oral tobacco products contain between 2 mg and 24 mg of nicotine per gram.

Supervision is not absent

In the United States, tobacco-free nicotine packs are required to have "This product contains nicotine." "Nicotine is an addictive chemical," the warning label says, and many nicotine packs are sold only to consumers over the age of 21. The nicotine bag industry has lower barriers to entry than other tobacco products, but this type of product also needs to be regulated by the FDA. In contrast, the nicotine bag market in the European Union currently operates in a regulatory vacuum. Tobacco-free products are not regulated by the EU's new Tobacco Products Directive (TPD2) and do not fall under any other regulated category. Unlike tobacco products, they can be promoted through television, radio and billboards.

Christopher Fjellner was a Member of the European Parliament from 2004 to 2019. He predicts that in the next few years, all important markets will adopt new regulatory policies. A report he submitted in April 2020 said Sweden and Norway were likely to be the first countries to enact regulations on nicotine bags, and their moves could also influence legislation in other European countries. At present, Sweden has determined that nicotine packs are not food and put them on the market through indirect licensing on this basis.

Sweden has already started to define and classify nicotine bag products: the government has tasked a special commissioner with drawing up new regulations. At the same time, the Austrian Chemicals Authority is referring to the European Union's classification, labelling and packaging regulations to require all products containing nicotine to carry a health warning.

According to Fegenal, the World Health Organization has not considered the issue of nicotine bags. He expects that the European Commission's guidance on nicotine pack products will be included in the report on the implementation of the Third Amendment to the Tobacco Products Directive, which will be published in May 2021.

He said: "How the EU regulates nicotine bag products is influenced by at least three factors. Will EU member states become suspicious and call for a ban on the product? Will existing product regulations or national bans in individual Member States conflict with new EU legislation? Is there sufficient willingness among consumers of nicotine packs and the general public in particular member States to push for new restrictive regulations or bans?"

That last factor, Fegenal added, is why e-cigarettes have not been banned in the European Union before. The way the EU regulates e-cigarettes in 2014 is likely to affect the way it regulates nicotine bag products, that is, focusing on measures such as printing warnings and limiting the maximum amount of nicotine used.