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Hard Value Fund

PMI Investments in Snus, Nicotine Bags, Cannabis Inhalers, etc.

Philip Morris International (PMI) is, like the entire tobacco sector, undergoing change. The Group intends to build its future on smoke-free products under the slogan "Delivering a smoke-free future".

"Smoke-free" means moving away from burning tobacco in cigarettes and cigars in particular. The reason is the associated health risks.

Instead, the Group is increasingly focusing on alternative solutions. Tobacco heaters are an important component of this strategy. More recently, however, products such as snus or nicotine pouches (nicotine bags) have also become increasingly popular with consumers.

Since the start of the international cannabis legalization trend, PMI has also been focusing on this product line. By investing in electric inhalers, PMI also enables smokeless consumption of cannabis.

The following video clearly illustrates PMI's new health-focused communication:

In the areas of snus, nicotine pouches and alternative delivery systems (inhalers, chewing gum, tablets, etc.), PMI has invested in various products or acquired various companies, particularly in 2020 and 2021.

Strengthening Own Market Power

Philip Morris International (PMI) is the world's leading tobacco company by market capitalization, excluding state-owned China National Tobacco Corporation.

biggest tobacco companies worldwide
Tobacco Companies (ex. China)

In 2021, PMI sold its products in over 180 markets, notably including cigarettes, other tobacco products, and novel nicotine and tobacco products.

The company reported in 2021 that it held 27.3% of the global market for cigarettes and heated tobacco products (HTPS), excluding the U.S. and China. In Germany, PMI's market share was 38.6% in 2021. In 100 countries, the company holds a market share of at least 15%.

The company offered five of the top fifteen international cigarette brands in the global market (excluding the U.S.) in 2021:

  • Marlboro

  • L&M

  • Chesterfield

  • Philip Morris

  • Parliament

However, the tobacco group should not be confused with Philip Morris USA. Its U.S. counterpart is part of the Altria Group, from which PMI was spun off in 2008.

Investment in Snus and Nicotine Pouches

Snus is described as a traditional Scandinavian form of tobacco enjoyment. Small portions of tobacco are placed in pouches between the gum and lower lip. Unlike chewing tobacco, snus is not fermented or soaked in sauce.

Product line Snus Swedish Match
Snus packaging maschine, © Swedish Match, Fotograf: Peter Knutson

There is a ban on the sale of snus in the European Union. However, this has not stopped the major Western tobacco companies from acquiring stakes in snus manufacturers. In addition to Sweden, which is exempt from the ban, and Norway, the USA is also an important sales market.

Nicotine pouches are very similar to snus. The difference, however, is that they contain nicotine but no tobacco and are therefore not covered by the snus sales ban. However, in some German states, authorities have banned the sale if they contain a lot of nicotine.

Swedish Match, Sweden

PMI acquired more than 90% of Swedish Match in November 2022, has withdrawn the shares from trading and intends to gain full control of the company via a squeeze-out. With this acquisition, PMI aims to consolidate its product portfolio in the smokeless products sector.

Swedish Match is a Swedish tobacco company based in Stockholm and specializes in particular in the following product types:

  • Snus pouches (see picture above)

  • Nicotine pouches

  • moist snuff

  • Cigars

  • Chewing tobacco

  • Matches and lighters

Swedish Match's main snus brands, depending on the sales market, are:

  • Sweden: General, Göteborgs Rapé, Kaliber, Kronan, Ettan

  • Norway: General, G.3, The Lab, Nick & Johnny

  • USA: General

Originally, the company also sold cigarettes. However, Swedish Match sold its cigarette business to Austria Tabak in 1999. The CEO at the time, Lennart Sundén, justified this decision in part because of the company's low market power compared to its major competitors.

Swedish Match also sells snus-like nicotine pouches, which do not contain tobacco leaves and are therefore not considered tobacco products in most countries. Its leading brand in the global market is Zyn. The major transnational tobacco companies have only recently entered this fast-growing market.

AG Snus, Denmark

In 2021, Philip Morris International (PMI) acquired snus and nicotine pouch manufacturer AG Snus. The Danish company has been in existence since 2010. PMI did not publicly announce the acquisition, unlike Swedish Match.

global sales of smokeless nicotine products from Philip Morris International

Investments in Alternative Delivery Systems

In addition to snus and nicotine pouches, another investment focus of Philip Morris International (PMI) in recent years has been on alternative delivery systems. These include inhalers in particular, but also tablets and chewing gum.

In the case of inhalers, PMI is focusing firstly on what is estimated to be a generally growing market for inhalation therapies. In addition, inhalers are also suitable for ingesting nicotine or even cannabis.

Syqe Medical, Israel

Syqe Medical, an Israeli company, is a 2016 cannabis investment from Philip Morris International (PMI). PMI invested $20 million but did not publicly disclose the deal. Syqe Medical specifically sells cannabis inhalers.

Syqe Air Inhaler from Syqe Medical
Syqe Air, © Syqe Medical

Vectura, UK

In July 2021, Philip Morris International (PMI) acquired Vectura, a British company specializing in inhalation drug delivery products. The price tag was approximately $1.2 billion. PMI has not commented on whether Vectura's products can also be used for cannabis inhalation.

Oti-Topic, USA

In August 2021, Philip Morris International (PMI) acquired Oti-Topic, a US-based company specializing in the manufacture of inhalers. At that time, the company was in the final stages of developing an inhalable agent for the treatment of acute myocardial infarction (heart attack).

Along with Syqe Medical and Vectura, Oti-Topic is another investment by PMI in the inhaler market. According to a press release, PMI intends to leverage Oti-Topic's expertise to develop a line of inhaled therapeutics and respiratory medicines.

Fertin Pharma, Denmark

Also in July 2021, Philip Morris International (PMI) acquired Fertin Pharma for approximately $820 million. The Danish company is considered a leader in the manufacture of oral delivery systems, including chewing gum, sachets, tablets and other solid oral systems for the delivery of active ingredients, including nicotine. The company is also a manufacturer of nicotine replacement therapy solutions.

Investments in Biopharma

Medicago, Canada

In May 2019, Philip Morris International (PMI) invested approximately CAD 16 million in a minority stake in Medicago, a Canadian biopharmaceutical company.

Medicago developed, among other things, the COVID-19 vaccine Covifenz, which was to be produced using tobacco plants but was rejected by the World Health Organization (WHO) due to PMI's involvement.

In February 2023, majority owner Mitsubishi Chemical Group announced its intention to wind down the company because it was not economically viable.

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