Philip Morris International (PMI) recently announced a $232 million investment to expand production of ZYN nicotine pouches at its Owensboro, Kentucky, facility. The move is designed to meet growing demand for these tobacco-free products, reflecting a trend toward less harmful alternatives to traditional tobacco products.
Context of expansion
In 2022, PMI acquired Swedish Match, the maker of ZYN nicotine pouches, for $16 billion. The acquisition is part of PMI’s strategy to diversify its portfolio with reduced-risk products. ZYN pouches, which do not contain tobacco, have grown in popularity, particularly in the United States. However, strong demand has led to temporary supply chain constraints, slowing shipment growth to 54% in the second quarter of 2024.
Investment details
The $232 million investment will be made through a subsidiary of Swedish Match. Work has already begun on the expansion of the Owensboro plant, with an expected completion date of the second quarter of 2025. Starting in the fourth quarter of 2024, the plant will operate 24 hours a day, seven days a week to increase production. The goal is to reach a production capacity of 24 million cases of ZYN by 900.
Implications for the tobacco industry
This expansion reflects a significant shift in the tobacco industry toward reduced-risk products. Nicotine pouches, such as ZYN, provide consumers with tobacco-free alternatives, meeting a growing demand for less harmful options. PMI’s investment underscores the strategic importance of these products in today’s nicotine market landscape.
Future prospects
With this expansion, PMI aims to consolidate its position in the tobacco-free market. The increased production capacity is expected to better meet growing demand and strengthen ZYN's presence in the US market. This move could also influence other industry players to invest more in reduced-risk alternatives.
