Ongoing talks could lead to Philip Morris' acquisition of Swedish Match

May 13, 2022

Par: National Committee Against Smoking

Dernière mise à jour: May 13, 2022

Temps de lecture: 4 minutes

The cigarette manufacturer is particularly targeting Swedish Match's snus and pouches businesses, which are experiencing strong growth in the United States, but is also interested in its cigar, match and lighter branches. The information should be confirmed in the coming days, in a particularly competitive context. The announcement in The Wall Street Journal on Monday, May 9, of a possible takeover of Swedish Match by Philip Morris International (PMI) caused a 28 billion dollar increase in the Swedish Match share price in one day, while that of PMI lost 1 billion dollar. The amount of this transaction could amount to 16 billion US dollars, a sum considered insufficient by some of Swedish Match's minority shareholders. Japan Tobacco International (JTI) is also said to be among the potential buyers of this company in the event that the negotiation with PMI does not succeed.[1].

A leader in the oral tobacco and nicotine products industry

A pioneer in the field of snus, these small tobacco pouches placed between the gum and the lip, Swedish Match has established itself in recent years in the segment of pouches, synthetic nicotine pouches resembling snus in their presentation and instructions for use. While ZYN is the most famous, Swedish Match also markets pouches under other brands, including G.3, Volt and XR, some of which are nicotine-free (Qvitt). The company also produces matches, lighters, snuff, chewing tobacco and flavored cigars; the launch of one of these cigars in the United States was however suspended in March 2022 due to failure to receive approval from the Food and Drug Administration (FDA). Although its U.S. pouch sales increased by $52 billion in 2020, Swedish Match accounted for just $64 billion of that U.S. market in 2021, down from $75 billion in 2020.

With the boom in the non-tobacco market, pouches are experiencing strong growth in the United States and Asia. According to the Nielsen Institute, sales of On! pouches from Altria – which markets Marlboro in the United States – increased by 1,22% in the United States between April 2020 and April 2021, while pouches and lozenges[2] Velo, from Reynolds American (a subsidiary of British American Tobacco/BAT), increased theirs by 47%[3]Over the same period, Nielsen estimates that the e-cigarette market grew by 11%.

At PMI, the excitement of diversification

For PMI, which has been discreetly present on the pouch market with the Shiro brand, this substantial investment would be an opportunity to expand its range of tobacco-free products and establish itself as the leader in the oral products segment. The Swedish Match distribution network would also be used to distribute its IQOS heated tobacco device and its electronic cigarettes in the United States. PMI could thus free itself from its partnership with Altria for the distribution of IQOS, thus confirming the complete separation of the two entities.[4]The acquisition of Swedish Match would also be a way of distancing itself from BAT, which is ahead in the non-tobacco products sector with its Vuse and Velo brands.

If confirmed, this acquisition would be PMI's fifth major acquisition since the beginning of 2021, after those of Fertin Pharma, OtiTopic and Vectura, which have marked its desire to establish itself in the medical and "well-being" products sector. It would confirm Philip Morris' diversification objectives and would be supposed to give more weight to its discourse based on risk reduction. By displaying its interest in the cigar, match and lighter branches of Swedish Match, PMI nevertheless shows that it is far from giving up on combustible tobacco products, despite its noisy declarations. This acquisition would above all demonstrate that the trend towards concentration is continuing in the highly competitive tobacco and nicotine products sector.

[1] David R, Nair D, Swedish Match Soars as Philip Morris Weighs $16 Billion Deal, Bloomberg, published May 9, 2022, accessed May 11, 2022. [2] Nicotine lozenges. [3] Dummett B, Philip Morris International in Talks to Buy European Smokeless-Tobacco Rival, The Wall Street Journal, published May 9, 2022, accessed May 11, 2022. [4] After separating their activities in 2008, PMI and Altria outlined a merger in 2019 before quickly resuming their respective positions. Girard L, Philip Morris to Bet $15 Billion on Swedish Match Tobacco Powder, Le Monde, published May 10, 2022, consulted May 11, 2022. National Committee Against Smoking |