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Philip Morris International (PM) is riding the wave of smoke-free nicotine products with Zyn.
The category has grown so much that convenience stores like Casey's (CASY) and Murphy USA (MUSA) have changed their shelves to cater to consumers looking for tobacco alternatives to satisfy their nicotine fix.
"This is a multiyear growth story ... and there's a lot of potential there," CFRA analyst Garrett Nelson said in an interview. Zyn, which produces nicotine pouches without tobacco, was part of Philip Morris' acquisition of Swedish Match in late 2022. Zyn gained so much popularity in the US that it's facing a shortage that started in April 2024. The shortage will be over in the third quarter, the company said.
"They are still a market share leader," Needham analyst Gerald Pascarelli said in an interview. "They've been capacity constrained because they were growing so rapidly ... they simply couldn't service the amount of demand."
Shipment volumes of the product to the US increased from 132 million cans in Q1 2024 to 202 million in Q1 2025. Earlier this year, the FDA approved authorization to market 20 pouches per can under regulations that, among other things, would ensure that ads are targeted to adults ages 21 and older. Currently, nicotine merchants can sell 15 per can, with each individual pouch weighing 0.4 grams. (The total weight of the can is 6 grams.)
Philip Morris' smoke-free business also includes heated tobacco products like IQOS and e-vapor products like Veev. In the most recent first quarter, it accounted for 42% of total net revenue.
On June 13, Philip Morris International stock hit an all-time high record close of $184.33. Shares are up nearly 80% from a year ago. That's far more than what Nelson calls its "closest" competitor, Altria (MO), up more than 30%, which produces the brand called On! Nicotine Pouches.
In the same period, the S&P 500 (^GSPC) was up roughly 11%.
Philip Morris International's net revenue grew 5.8% in the first quarter to $9.3 billion. Smoke-free products like Zyn grew 15% to $3.9 billion; "combustibles," like cigarettes, showed flat growth at $5.4 billion. Gross profit grew 11.8% in the quarter to $6.3 billion overall, with smoke-free products specifically posting a 27.7% surge in gross profit to $2.7 billion.
CFO Emmanuel Babeau told investors its gross profit was "fueled by the rapid growth of Zyn."
In the US, the shipment volume of oral smoke-free products in pouches or pouch equivalents increased by 27.2%. Outside of the US, nicotine pouch volume also grew by 53% in emerging markets like South Africa and Europe, among others.
