Swedish Match rolls out non-tobacco nicotine pouch in U.S.

STOCKHOLM (Reuters) - Tobacco group Swedish Match said on Wednesday it was rolling out its new non-tobacco pouch product similar to its “snus” pouch across the United States this year, as it reported quarterly profits that roughly matched expectations.

FILE PHOTO: Information signs and menus are seen at a Swedish Match moist powder tobacco "snus" store in Stockholm, Sweden October 24, 2018. REUTERS/Anna Ringstrom/File Photo

The firm, whose main business is its moist snuff snus in Scandinavia, which is typically held in the mouth by the gums, said operating profit inched up to 1.20 billion crowns ($130 mln) from 1.18 billion a year ago . The mean forecast in a Reuters poll of analysts had been for unchanged profit.

Swedish Match has expanded in the U.S. cigar market in recent years and is pushing for similar success in the country with snus, which is banned in most of Europe and whose home market has become crowded.

More recently, it has also stepped up efforts to grow within the still small but fast-growing non-tobacco nicotine pouch segment in the United States with its ZYN product, as well as in Scandinavia, and it is building a new factory in the U.S. for the product.

“In the US, we will broaden the distribution for ZYN, to make this popular nicotine pouch product available to consumers nationally. Further for ZYN, selected additional geographies outside the US will be considered,” the company said.

ZYN is currently sold in the United States’ western region.

“The decision to further scale up the investment in ZYN production capacity in the US is expected to result in increased capital expenditures in 2019 compared to 2018.”

It said its snus and nicotine pouches segment outside Scandinavia reached profitability in 2018 on the back of “extraordinary” ZYN volume growth and significantly lower marketing spend on snus in the United States.

Operating margin at the snus, snuff and nicotine pouch division widened in the quarter to 44.4 percent from 43.5 percent against a forecast 44.8 percent.

Swedish Match proposed a dividend of 10.50 crowns per share, up from 9.20 crowns for 2017 and in line with expectations.

Its shares opened 4.4 percent up.

Reporting by Anna Ringstrom, Editing by Helena Soderpalm and Alexandra Hudson