Certain global crises present significant challenges for various sectors, and the tobacco industry and its supply chain are no exception. Reportlinker’s post on the global cigarette market notes that it’s estimated to reach a value of $1.6 trillion by 2030 from 2022’s $1 trillion. However, major international conflicts, food and fuel inflation, changing consumer habits, growing trade tensions, and pressure to prioritize anti-climate change efforts will factor into the complex challenges faced by the market.

As these issues and many other disruptions threaten the tobacco supply chain, companies are looking at other ventures to remain relevant and minimize the strain amidst changing times. Modern oral products like tobacco-free nicotine pouches are the industry’s newest interest.

Here’s why tobacco companies are turning to these cigarette alternatives:

Trying times for tobacco

After the impact of Covid-19 and the world’s gradual and ongoing recovery, the Russia-Ukraine war brought even more instability and uncertainty to the tobacco industry. Rising gas and energy prices disrupted supply chain operations, affecting consumption and increasing prices. The transportation of goods is also in peril due to these high costs and strained trade relationships, hindering supplier access.

Another issue is the illicit tobacco trade; it’s estimated that between 6% and 8.5% of the global cigarette trade is illegal. Counterfeit and contraband cigarettes affect tax collections and hamper economic gain. We highlight the need for compliance in our post on the ‘Tobacco Products Directive’, which requires the tracing and tracking of product movement through a Unique Identifier (UI) code that moves throughout the supply chain. Though this initiative is aiding in the crackdown on illegal trade, implementing it is also a disruptive process in itself.

Consumer attitudes towards smoking are yet another problem. Smoking rates are declining, and many are staying away due to its health effects, which could see a major shift in the demand for cigarettes. Consumers are also becoming more environmentally conscious and seeking to align themselves with brands with the same values. For instance, cigarette production and manufacturing are notorious for their environmental impact, and a lack of change can drive people away.

Pivoting to pouches

With instability requiring a shift in operations, certain tobacco companies are looking into investing in tobacco-free nicotine pouches. Phillip Morris International recently announced its acquisition of Swedish Match, a producer of smokeless oral products. The company intends to veer away from cigarettes to enter a smoke-free future. Other tobacco giants like Altria acquired equity stakes in Burger Sohne Holding AG in 2019; now, the former owns its nicotine pouch brand.

An appealing aspect of nicotine pouches is their reduced impact on health and the environment. The pouches are tobacco and smoke-free, placed under the upper lip to release nicotine instead of smoking it. The nicotine used can be tobacco-derived or synthesized in a lab. In their article on where nicotine comes from, Prilla discusses synthetic nicotine, which is another way manufacturers obtain it. While natural nicotine is extracted from tobacco leaf, the synthetic version is created by mixing the chemical compounds of nicotine, involving no tobacco. Their chemical properties are identical and provide the same effect to users. This presents an opportunity for companies to alleviate the pressure on the tobacco supply chain and cigarette production and can put their brand in a good light.

Synthetic nicotine pouch production has less environmental footprint than other tobacco products. Since tobacco doesn’t have to be involved, there’s less of a strain on nature, which can be easier on the supply chain and production process and is appealing to the public. In their write-up on sustainability, the World Economic Forum points out that it’s consumer-driven; they believe brands bear responsibility for positive change. Demand for eco-friendly products is high, and many ways exist to incorporate that into nicotine pouches. Some brands have invested in recyclable packaging, increasing sustainability efforts for the industry.

Health is also a significant concern, and the draw of nicotine pouches is that they can be marketed as safer alternatives to cigarettes. Being tobacco-free makes them less harmful to health for consumers and even for workers who won’t need to be exposed to harmful pesticides from growing tobacco for its production.

Though nicotine pouches aren’t exempt from supply chain issues, they offer companies a chance to cushion the impact of the blow to the manufacturing and selling of tobacco products. There can be economic gain from tapping into a growing market and the opportunity to redeem themselves in the eyes of consumers.