Portable, Single-use, Flavored: Can Nicotine Pouches Replicate Success of Disposables?

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In 2017, Swedish Match launched ZYN, a nicotine pouch without tobacco, which is widely seen as a turning point in the rapid increase of modern oral nicotine consumption. According to data from the Centers for Disease Control and Prevention (CDC) in the United States in 2021, sales of nicotine pouches in the American market have grown 300 times in the past 5 years. Since 2019, the use of nicotine pouches in the United States has doubled every year, with sales in the first three months of 2022 increasing by 700% compared to the second half of 2019.

Currently, the international market for nicotine pouches is still in its early stages of development and remains a niche product. However, its market potential is growing rapidly, with market growth far exceeding other tobacco alternatives. The portability of the product, along with the rapidly evolving flavor offerings from major players in the industry, is reminiscent of the early days of e-cigarettes as a harm reduction product. As a highly anticipated new player in the harm reduction product market, can nicotine pouches replicate the success of e-cigarettes and carve out a new path for themselves?

Flavors Unable to Replicate

Nicotine pouches originated in the Nordic region of Scandinavia as a form of "snus," providing users with a convenient and strong way to ingest nicotine in environments where combustible tobacco is not easily accessible.

Therefore, looking at its consumption history, the tobacco flavor has always been dominant in this category. However, traditional nicotine pouches are too stimulating, with a strong bitter taste and a harsh flavor, attracting a "hardcore" audience. As they entered the new era, it became difficult to tap into new markets. With market competition heating up, more and more brands and manufacturers have noticed this issue. When e-cigarette manufacturers entered the fray, they often followed the same old thinking, hoping to replicate the success of vape: launching flavored products, investing more in technological research and development to innovate new flavors.

In 2017 and 2023, there were two rapid increases in patent applications related to oral tobacco products. In 2017, traditional tobacco companies dominated the market, but by 2023, new e-cigarette companies had quickly entered the industry. One of the most representative companies is GEELIQ Technology Co., Ltd. based in Dongguan, which holds 23 patents in this field. Historically, the company's main business has been in flavors and fragrances, as well as research and production of flavored e-liquids. However, its rapid entry into the oral tobacco market and establishment of a "patent moat" demonstrate the current importance placed on e-liquids and their flavors in this sector, which is closely related to vaping.

However, can the successful flavoring methods in the vape industry really be seamlessly transferred to nicotine pouches?

Nicotine pouches accepted by the American market are generally dry, known as "dry snuff." This category is mainly made from fermented tobacco, with a finished product in powder form and a water content between 4% and 6%. The taste is on the sweeter side, with a stable and strong release curve. Swedish Match (and later acquired by PMI) introduced flavors such as wintergreen, liquorice, cool mint, citrus, mint, cinnamon, coffee, and menthol that adapt well to the dry snuff nature, aiming to closely match the market and achieve success in the United States.

However, on the other side of the European market, an e-cigarette giant's "magic weapon" failed. The e-cigarette brand ELFBAR launched the nicotine pouch brand TACJA in the UK, Switzerland, and Sweden, offering two flavor series: "MELLOW" and "FROZEN". The MELLOW series includes four flavors - watermelon ice, cherry ice, lemon mango, and blueberry sour raspberry; while the FROZEN series also has four flavors - spearmint, mint, menthol, and freezing ice.

It is evident from the matrix of flavors and cooling effects that ELFBAR is hoping to replicate its success in disposable vapes in the nicotine pouch line. However, traditional nicotine pouch products popular in the European market have high humidity and a salty taste. It is difficult to attract consumers by replicating e-cigarette flavors in these wet process products. Some industry insiders have told 2FIRSTS that common flavoring methods used in vapes "naturally do not adapt well to the wet process of nicotine pouches." Many industry insiders have also told 2FIRSTS that this is why ELFBAR's flavor attempts have not been widely accepted in these markets.

Relying on reserves accumulated in the vape industry to shortcut the development of nicotine pouches appears to be a relatively unrealistic idea at this time.

Changing Landscape of Regulatory Boundaries

In entering the nicotine pouch market, brands and manufacturers must be aware that simply relying on e-cigarette-style flavors may not garner a positive response from consumers. Additionally, it is important to note that nicotine pouches currently occupy a rather awkward position in the main nicotine consumption markets.

In the United States, currently no nicotine pouch product has received PMTA marketing authorization. In Europe, because nicotine pouches do not contain tobacco, they have circumvented the restrictions of the EU's existing tobacco TPD. As a result, most EU member countries are in a legal gray area, essentially operating in an unregulated state. Some countries, like Belgium, treat them as food products by default. However, some member states have taken the initiative to implement their own regulations on the legality of nicotine pouches.

Using the German market as an example, in 2021, a German court initially classified nicotine pouches as food, therefore requiring them to comply with EU food regulations. However, EU food regulations prohibit nicotine from being used as food, a food ingredient, food additive, or flavoring. After a series of back and forth, the German Federal Office for Consumer Protection and Food Safety (BVL) ruled that nicotine pouches are not covered by tobacco legislation or food regulations, and therefore cannot be legally sold. As a result, BAT also removed its Velo brand from the German market in July of the same year.

In contrast to Europe, the presence of the Tobacco Products Directive (TPD) has also made the UK the only fully open market for nicotine pouches in Europe. The country contributes 10% of global nicotine pouch revenue and is currently the third largest market in Europe after Sweden and Denmark.

According to the 2024 Global Nicotine Pouch Market Blue Book by 2FIRSTS, nicotine pouches are currently only sold as consumer products in the UK and are not considered tobacco products or medicines. As a result, they are not subject to regulation by the Tobacco, Medicines, and Healthcare Products Regulatory Agency (MHRA) and are not covered by the Tobacco and Related Product Regulations (TRPR). Currently, the default regulations that apply to nicotine pouches are the General Product Safety Regulations (GPSR). There is no maximum limit on nicotine concentration in nicotine pouches, and there are also no specific restrictions on their advertising.

However, this "unrestricted" situation is unlikely to last long and is equally dangerous. While e-cigarette liquid in Europe is limited to no more than 2ml and a concentration of no more than 20 mg/ml, the potentially unregulated strength of nicotine pouches may bring about even greater troubles.

Different brands have different concentration levels. According to guidance released by Zyn, for heavy nicotine consumers who smoke more than 20 cigarettes a day or consume e-cigarettes with a concentration of 20mg, it is recommended to use nicotine pouches with a concentration of 9mg. However, some brands offer concentrations much higher than this, with TACJA reaching an alarming 20mg. If this is not overstated, it could be a dangerous level.

Furthermore, whether it is vaping or heated tobacco, the intake requires a certain process, with the act of inhaling forcibly controlling the consumer's intake density within a range. However, nicotine pouches are different, as their intake method essentially poses a much higher risk of overdose for consumers during use. It is foreseeable that restrictions on the intensity of contents will soon be put on the agenda.

In addition to nicotine content, public exposure is another area that is likely to be regulated in the foreseeable future. As a significant number of e-cigarette brands enter the nicotine pouch market, they are introducing nicotine pouch products with the mindset of e-cigarette products, borrowing from e-cigarettes in terms of packaging and marketing tactics. This also brings the "original sin" of attracting minors and inappropriate tobacco advertisements present in the e-cigarette industry into the nicotine pouch market.

For example, TikTok collaboration with KOL to promote products on social media and achieve synergies is not the traditional business method in the nicotine pouch market. However, in the Australian market, ZYN has completely chosen this promotional method that helped disposable e-cigarettes get off the ground. Since the second half of 2023, several young Australian internet celebrities have proposed using nicotine pouches instead of smoking e-cigarettes in their videos, which often receive tens of thousands of views and hundreds of comments. Many people inquire where they can buy these products, and some ask, "Can these products be brought to school?

According to the regulations of the Therapeutic Goods Administration (TGA) of Australia, these products require a prescription to be legally supplied in Australia. The popular trend of key opinion leaders (KOLs) promoting these products directly to the public is clearly causing trouble. Many educators in Australia have also expressed to the media that the widespread use of nicotine pouches is causing serious problems for school management and the goal of achieving a "smoke-free generation" among young people. After being reported by The Guardian, the World Health Organization immediately took note of the situation and issued a warning that the increasingly popular nicotine pouches could become the next public health issue among teenagers.

The situation has caught the attention of both the media and regulatory authorities. Faced with this risk, regulatory agencies may take a similar approach to e-cigarettes to limit the development of nicotine pouches, and the nicotine pouch market may soon find itself facing a complete ban.

When vaping first became popular, most governments in the market were not prepared to classify this emerging phenomenon. This led to a period of rapid growth and expansion in the market. In countries like the UK, authorities even promoted vaping as a means to quit smoking, creating a honeymoon period for the industry. However, as nicotine pouches are now facing scrutiny and regulation, discussions have become more comprehensive. The outcome of various debates has resulted in intense regulatory measures for the tobacco industry's new products.

With the improvement of people's awareness of personal health and public health, nicotine pouches may be favored in the long term for their "smoke-free" feature. However, the regulatory chaos and public opinion turmoil brought about by the vape industry, such as illegal transactions and inappropriate guidance for adolescents, have put nicotine pouches under close scrutiny. Any misstep will be magnified under the spotlight. How to comply with regulations in the ever-changing environment is a concern that every player in the nicotine pouch race needs to consider.

Difficult-to-monitor Covert Consumption

In marketing, many nicotine pouch brands currently attract consumers with the convenience of being "smoke-free" and "usable at all times," as well as the moral appeal of "reducing secondhand smoke pollution and minimizing harm to others and the surrounding environment." However, on the flip side of these selling points, nicotine pouches as a smokeless alternative to vaping and heated tobacco products also face inherent flaws.

Currently, a can of Zyn costs about $5, containing 15 pouches with a recommended usage time of no more than half an hour per pouch. Heavy nicotine users can use one can a day, while moderate to light users can use one can a week. The price falls between traditional cigarettes and e-cigarettes, with the low unit cost making it easily accessible to teenagers. The "smokeless" and "oral" nature of its use makes it harder to detect in settings such as schools, which may lead to stricter regulations in the future.

At the same time, as research by 2FIRSTS has shown, smokers often rely on traditional cigarettes for more than just nicotine intake. The sensory experience, throat hit, emotional value, and social role of smoking traditional cigarettes can all be well replicated by vaping at this stage. However, nicotine pouches, due to their different usage method, cannot achieve the same level of satisfaction and do not have the potential to become a symbol of consumer identity like holding and playing with a cigarette.

In the case where consumer's "hidden needs" cannot be met, the positioning of nicotine pouches as simply "nicotine consumption products" has limited the future prospects of nicotine pouches. Compared to vape and heated tobacco products that can be designed towards "3C" products, such as the recent trend of "dual-screen quad-coil", if nicotine pouches and their manufacturers hope to transcend the product cycle and become one of the main fixed choices for people seeking "smoking substitutes", their area of innovation is relatively narrow, focusing on taste and texture, and it is difficult to introduce more variety, seemingly reaching a limit. Whether brands and manufacturers can accept this limited potential compared to e-cigarettes is another consideration when entering the race.

2FIRSTS will continue to monitor the market trends of nicotine pouches.