Philip Morris tackling ZYN shortages, CFO says, while analysts warn of black market
LONDON, July 23 (Reuters) -Philip Morris International PM.N is taking steps to remedy supply problems that have dented U.S. growth of nicotine pouch brand ZYN, its chief financial officer said on Tuesday, as analysts warned of illicit trade in the brand.
The world's top tobacco company has enjoyed booming growth of ZYN ever since it took over the brand via its acquisition of nicotine company Swedish Match, which completed in 2022.
PMI reported the first slowdown in ZYN's growth since then on Tuesday amid the shortages, ending five quarters of accelerating uptake in the U.S., ZYN's largest market. It grew by 54% in the second quarter, down from 90% in the first three months of the year.
The company was working to expand ZYN production, including by expanding a manufacturing facility in Kentucky and via the recently announced investment in a new manufacturing plant in Colorado, its CFO Emmanuel Babeau told investors on the day of the company's second-quarter results.
These and other initiatives would result in enough production to meet expected consumer demand in the fourth quarter and a capacity of 900 million ZYN cans in 2025, he continued.
Analysts from Jefferies and Bernstein told Babeau on the call that ZYN pouches intended for the Scandinavian market were being sold in the U.S., with one warning this seemed widespread in New York especially.
This suggested retailers were filling supply gaps by purchasing product from other regions, they said, adding the sale of these products was likely illegal as they did not have required regulatory approvals.
Black market trade in ZYN products could also eat into PMI's legitimate sales.
"I don't have any data on what you are saying," Babeau responded, adding the company does everything it can to control the flow of ZYN and to ensure compliance with regulations.
"If we knew, we would certainly tackle that," he continued.
Reuters was unable to immediately verify the analysts' claims.
PMI's suspended online ZYN sales in the U.S. in June after it found some flavoured products had been sold in the District of Columbia, where flavoured tobacco products are banned.
Reporting by Emma Rumney and Juveria Tabassum; Editing by Jan Harvey
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