MarketsJul 9, 2026
Tobacco's Smokeless Pivot Is Repricing the Whole Sector
Market Revaluation
Rhea Lobo
Discover
Big Tobacco has spent a decade being shunned by institutional investors. That's starting to change, and the catalyst is a product most people hadn't heard of five years ago — the nicotine pouch.
In May, the FDA issued new guidance on vapes and oral nicotine pouches that changed the rules of the game. Previously, companies had to wait years for full regulatory approval before selling a new product. Now they can sell while that application is being reviewed.
That single change lets tobacco companies compete in real time against the illicit brands that had filled the void. The majority of US vape products on the market are illicit imports, primarily sourced from China, filling the void left by regulatory restrictions.
The same month, the FDA announced it would allow some Zyn products to be marketed as lower-risk than cigarettes for certain cancers and diseases.
Robert F. Kennedy Jr., the US health secretary, has publicly called pouches "probably the safest way to consume nicotine." The Trump administration is broadly friendlier to the tobacco industry than its predecessors, which has eased regulatory risk that has weighed on tobacco stocks since 2017.
Nicotine pouch sales are projected to grow from $6.9B in 2025 to more than $40B worldwide by 2033, according to Grand View Research. Companies have already invested more than $1B in new manufacturing capacity to keep up.
Philip Morris International built a $600M plant in Aurora, Colo., and spent $232M expanding a facility in Owensboro.
Reynolds American, a subsidiary of British American Tobacco, added ~1K US jobs over the past two years, mostly through pouch production.
Zyn, made by Swedish Match, a subsidiary, holds 61% of the US nicotine pouch market by dollar share and 56% by volume. That dominance has helped nearly double its stock price over two years.
Noncombustible products accounted for 41% of the company's 2025 revenue, and the stock now trades at 21x forward earnings, roughly a 70% premium to both and Altria Group.
's premium started forming when its smokeless revenue crossed 19% of total sales in 2019. just crossed that same threshold; smokeless revenue reached 18.2% of total revenue in 2025, up from the prior year.
Based on's own trajectory, that's the level where institutional investors start reassigning a growth multiple.
added 4.7M smokeless consumers last year, bringing its total to 34.1M. Its new-category revenue grew 5.5% year-over-year, and the company targets 50% of revenue from smokeless products by 2035.
also recently cut 5.5K jobs as part of an AI-driven cost restructuring. The cuts don't affect its US operations. On a forward earnings basis, trades at 12.51 times, below the industry average of 15.10 times, and carries a 5.34% dividend yield.
is further behind on the smokeless transition but benefits from Marlboro's pricing power and a growing oral pouch brand called on!. The company won FDA approval in December for additional pouch products under a streamlined program. Its shares are up more than 50% over two years.
"They are now viewed as growth companies, and there is a lot of optimism surrounding products like Zyn and IQOS."
Garrett Nelson, CFRA
The share of institutional investors excluding tobacco stocks from portfolios dropped from 66% to 60% between 2024 and 2025, per the US Sustainable Investing Forum.
The counterweight is real. Health experts warn that nicotine pouches carry addiction risks, that companies are raising nicotine concentrations in their products, and that flavored formats could attract younger users. The World Health Organization urged stricter regulation in May. Independent long-term safety data on pouches remains limited, with much existing research coming from industry sources.
