Nicotine pouches emerge as key growth driver for big tobacco

Nicotine pouches have emerged as a primary growth driver for major tobacco companies as traditional cigarette sales decline. Brands such as Philip Morris International’s Zyn and British American Tobacco’s Velo are attracting significant investor interest due to rapid volume growth and high profit margins.

British American Tobacco (BAT) expects the global pouch market to expand from £4 billion in 2025 to £11 billion by 2030. The company reported that pouch volumes in Asia, the Middle East, and Africa increased by 27.5% to approximately 700 million units in the first half of 2026. BAT CEO Tadeu Marroco noted the potential for pouches to serve as a long-term replacement for cigarettes, citing their ease of use and lower cost compared to other alternatives.

Profitability is a key differentiator; Philip Morris reported that its U.S. oral nicotine business generated eight times the gross profit per 1,000 units of its international cigarette business in 2024. This significantly outperformed its heated tobacco product, IQOS, which generated 2.4 times the profit per 1,000 units.

Despite this momentum, the industry faces challenges including regulatory scrutiny regarding youth uptake and marketing. While pouches are widely used in Scandinavia and the United States, expansion into markets without an established oral nicotine culture remains uncertain. Additionally, some regions are implementing restrictions, such as France’s ban on pouches and tightening rules in the UK, the EU, and Finland.