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Still from BAT promo film: Velo launch in Japan in 2019. (Credit: BAT/Craig McKenna)
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The 2ONE white pouch range is among some of the latest products inwhose development NGL lent a helping hand. The brand is owned byUS firm, 2ONE Labs. (Credit: Next Generation Labs LLC)
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Velo’s variety of flavors and nicotine strengths gives consumers amplechoice to enjoy nicotine without the tobacco taste. (Credit: BAT/jamesmcquat.com)
By Thomas Schmid
“Smokeless tobacco” is a product segment that mainly comprises snus (or pouches), chewing tobacco, tobacco bits, and snuff. It’s been a rather small niche market in most regions, although it does enjoy widespread popularity in some others (Scandinavia with its love for snus immediately springs to mind). But, things seem to have been slowly picking up in recent years – probably also because of increasingly strict smoking restrictions in many countries. Even the ongoing Covid-19 pandemic appears to have given “smokeless tobacco” some boost.
Swedish Match: getting a head start
One of the top market leaders in the “smokeless” category is Swedish Match. Judging from a spate of acquisitions and buy-outs over the years, the company is obviously resolved to fortify and expand an already quite comfy position. For instance, in 2017 Swedish Match acquired Danish outfit V2 Tobacco, a producer of chewing pouches and snus. Only a year later the company took over another Danish firm, Oliver Twist, which manufactures traditional tobacco bits. Both companies are now fully owned by Swedish Match. Likewise in 2018, Swedish Match purchased a 95% stake in Swedish snus company, Gotlandssnus.
Further companies join in
But, the product category has also caught the attention of other tobacco industry players – well established companies and newcomers alike. This rising interest in “smokeless” products perhaps also is driven by the relatively recent appearance of synthetic nicotine on the scene of self-described “tobacco-leaf free nicotine” (which is generally purified tobacco-derived nicotine) and totally nontobacco-derived synthetic nicotine now widely used in tobacco-free nicotine pouches and “white” snus. These additions to the “smokeless” scope appeal to certain potential consumer demographics; for example, ex-smokers who dislike the idea of switching from cigarettes to another tobacco leaf containing product such as conventional snus. But, there also are smokers who wish to quit without forcing themselves to go nicotine “cold turkey”; as well as consumers looking for a nicotine “buzz” without needing to touch anything derived from actual tobacco.
BAT: building “A Better Tomorrow”
Cue BAT. For many years the business has been offering its adult consumers alternatives to smoking. This fits in very well with the global firm’s vision of building “A Better Tomorrow,” which is characterized by reducing the health impact of its business through providing a range of potentially reduced risk products “We will be expanding our global footprints across [these] ‘new categories Products’ in 2021,” a BAT spokesperson* told Tobacco Asia. The company certainly does not need to start from scratch to pursue that goal. “BAT has modern oral category leadership in Scandinavia,” the BAT spokesperson claimed, adding that BAT’s modern oral products were currently available in more than 20 countries around the world. “The decisions whether to launch in any [new] market varies from country to country [and is] based on different factors, including consumer choice and acceptance for these new products, the regulatory environment, or cost of goods,” the spokesperson said.
Over the course of 2020, BAT further consolidated its leadership across its markets and Dryft was effectively re-branded into Velo. “The re-branded product has already launched in some stores in the United States, and we have started to increase distribution,” explained the BAT spokesperson. The pouches, marketed by Nicoventures Trading Limited, a wholly-owned BAT subsidiary, also are available in a number of European nations and some Asian countries (Indonesia, Pakistan).
Velo is promoted as “an innovative tobacco-free nicotine pouch that offers adult smokers and nicotine consumers a convenient, discreet and exciting way to consume nicotine ‘on the go,” the BAT spokesperson elaborated. The brand range’s variety of flavors and nicotine strengths gives consumers ample choice to enjoy nicotine without the tobacco taste.
All of BAT’s “new category products” are aimed at existing adult smokers and nicotine consumers. Underpinned by robust science, the category allows BAT “to understand the reduced health impact switching [from combustibles to oral alternatives] can deliver,” the spokesperson said. “We conduct cutting-edge research to evaluate our new category products and apply the highest standards for product safety and quality – building the science that can motivate, reassure and encourage smokers to make the switch.” BAT has “committed to switching 50 million consumers to its potentially reduced risk products by 2030,” the spokesperson said, claiming the company was “making good progress towards achieving this.”
NGL: The synthetic nicotine pioneer
Next Generation Labs LLC (NGL) is the leading manufacturer of TFN® branded synthetic nicotine in North America, according to the company’s own claims. As such, the firm is heavily involved in assisting independent companies develop their vaping, herbal smokeless, and tobacco cessation brands. The list of “smokeless” oral products in which the San Diego-based firms has had a hand includes some of the best-known new-entry brands in the MON (modern oral nicotine) category.
To efficiently provide its bespoke white label brand development services to customers in the US and Europe, NGL has established a partnership with Indian smokeless tobacco manufacturer, Dholakia Pvt. “NGL does not actually manufacture or sell any end consumer products under its own brand name, but brand owners can have their products manufactured to their specific tobacco-free requirements by Dholakia if they so choose,” pointed out NGL’s co-founder, Ron Tully.
Accessible turnkey white label services
The nicotine pouch market, Tully said, has been growing in the US and Europe over the past five years, reaching an estimated retail value of US$800m in 2020. “[Synthetic nicotine pouches have] become an attractive option for discerning adult nicotine/ tobacco consumers seeking a totally non-tobacco leaf-based form of nicotine with none of the visible signs and aromas normally associated with smoking or vaping.” By offering accessible turnkey white label services, NGL and Dholakia are able to achieve manufacturing scale and pricing that makes it possible for smaller industry players to enter the market with virtually no overhead costs, Tully explained. The company is also currently working with clients on nicotine gums, lozenges, and oral gel products that contain NGL’s trademarked synthetic nicotine.
Helping independents get off the ground
Corroborating BAT’s view that “smokeless” alternatives still represented a niche market when compared to combustibles or vaping products, Tully also agreed that it developed at a rather rapid pace. This was illustrated by the fact that practically all of the independent “smokeless” brands his company has helped get off the ground were launched over the course of 2020. In his opinion, it is not just a matter of smokers switching in order to circumvent increasingly restrictive legislation for conventional smoking products either. “Adult consumers are constantly making decisions about how products fit with their lifestyles,” he said. “It would be too simplistic to say that adverse regulatory pressure on tobacco as a social choice alone is making consumers transition to oral products.” Instead, a growing range of oral products – whether they contain tobacco-derived or synthetic nicotine – is driving “a new series of decisions [among consumers] about what products fit situational, family, and lifestyle choices as well as a personal tolerance to risk in using such products.”
*BAT requested anonymity for the individuals who shared information in this article, preferring to collectively attribute quotes to “a BAT spokesperson”. The identities of the contributing individuals are on file with Tobacco Asia.