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Philip Morris can market Zyn as lower risk than cigarettes

Redd Brown and Jennifer Creery, Bloomberg News on

Published in Business News

The Food and Drug Administration authorized Philip Morris International Inc. to market its Zyn nicotine pouches as less harmful than cigarettes, the first time the category has received the distinction.

The company is allowed to say that 20 variants of the pouches pose less risk than the combustible alternatives for a litany of diseases including lung cancer, stroke and emphysema, according to statements from the company and posted on the FDA website.

It’s the first time a nicotine pouch has received the designation and could provide a boost to the popular Zyn brand that has shed market share to competitors in recent months. The decision lets consumers “make informed choices,” according to Bret Koplow, acting director of the FDA’s Center for Tobacco Products.

The FDA said its order covers specific products, including Zyn flavors such as coffee, cool mint and cinnamon across two nicotine strengths.

Shares of Philip Morris fell 1.5% at 12:06 p.m. in New York trading, erasing an earlier gain. The stock has risen 14% this year through Monday’s close. The FDA authorization was first reported by Axios.

Bloomberg Intelligence senior analyst Kenneth Shea said that the impact on Zyn’s business may be limited.

“Most consumers, I believe, are aware that non-combustibles are less harmful to health,” Shea said, adding “it’s only a matter of time before” the brand’s competitors gain a similar distinction.

Prior to the FDA’s latest order, some heated tobacco products such as IQOS, also sold by Philip Morris, have been allowed to use similar language.

 

The FDA’s order will expire in five years, with the company able to request authorization to continue using the marketing language.

The authorization comes after Philip Morris said earlier this month it would launch an updated version of the product to better compete with newer market entrants. Those pouches, dubbed Zyn Ultra, will come in high-potency nicotine strengths and aren’t covered by the FDA’s order on Tuesday.

Zyn held 31% share of the smokeless tobacco market in the 52 weeks ending June 14, according to Circana data analyzed by Bloomberg Intelligence. Its position has been eroded by Velo Plus, made by a unit of British American Tobacco Plc, which has expanded its position around 6% from last year while Zyn grew around 1%.

Cigarettes still dominate the nicotine market, selling more than $57 billion through retail channels tracked by Circana, compared with nearly $14 billion for smokeless alternatives. Still, the latter have expanded 12% over the last year, while cigarettes have declined by 1%.

Earlier this year, under pressure from the White House to give consumers more options, the FDA said it would relax its enforcement of new nicotine products, including vapes and pouches, that had applications for authorization accepted and were not using flavors overtly appealing to underage users.

In May, the FDA authorized four Glas Inc. vapes including two fruit-flavored versions, the first products of that kind to earn the distinction.


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