The Tobacco Industry’s Smokeless Pivot: Heated Tobacco and Nicotine Pouches Reshape the Market
As cigarette smoking continues its decades-long decline in many Western societies, the tobacco industry is undergoing a profound transformation, pivoting its strategy towards “smokeless” or “smoke-free” products. The core of this shift lies in a simple but powerful premise: “Nicotine causes the addiction, the combustion of tobacco kills.” By dissociating nicotine delivery from the harmful process of burning tobacco, companies are investing heavily in next-generation products like heated tobacco and oral nicotine pouches, aiming to retain adult nicotine consumers in an era of tightening regulations and social stigma against smoking.
Two major trends are defining this new market. First is the more mature heated tobacco product (HTP) segment, which is projected to reach a market size of $207 billion by 2033 with a compound annual growth rate of 21.4%. The second, and perhaps more rapidly growing, is the oral nicotine pouch category. These discreet, tobacco-leaf-free pouches that deliver nicotine through the gums are socially accommodating as they are neither visible nor odorous. This market is expected to hit $25.4 billion by 2030, with a compound annual growth rate of 29.6%, largely driven by adoption among young Americans.
Philip Morris International (PMI) has been a leader in this transition, famously committing to eventually convert all its revenue to smoke-free products. Currently, about 40% of its revenue comes from this segment, led by its flagship HTP, IQOS, and its popular nicotine pouch brand, Zyn. In comparison, British American Tobacco (BAT) derives about 18% of its revenue from smoke-free products, driven by its rechargeable e-cigarette, Vuse, which faces stiff competition from illegal disposable vapes. However, BAT’s nicotine pouch brand, Velo, shows significant potential, leading in Europe with over 60% market share and rapidly gaining ground in the U.S., where its market share grew from 7% in late 2024 to over 15% by mid-2025, challenging Zyn’s dominance. Altria, owner of Marlboro, is also competing with its “On!” brand of nicotine pouches, which holds nearly 10% of the U.S. market, though the company, along with Imperial Brands, is seen as less advanced in the smoke-free segment.
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This industry pivot is occurring amidst a complex and evolving regulatory environment. In January 2025, the U.S. FDA’s authorization of Zyn products created a positive narrative for the sector. Heated tobacco, being closer to traditional cigarettes, has been relatively well-received by some regulators. Nicotine pouches, however, remain a subject of intense debate, viewed by some as a valuable harm reduction tool and by others as a disguised public health threat.
In Europe, the precautionary principle often prevails, with nicotine frequently framed as a problem rather than part of a solution. Brussels is preparing significant legislation as two opposing visions clash: one advocating for a harm reduction model that encourages smokers to switch to less harmful alternatives, and another fearing that normalizing any form of nicotine use could undermine decades of anti-smoking progress. All eyes are on countries like Japan, where HTPs now account for half of all tobacco consumption, and Sweden, a historical user of oral nicotine, which boasts a cigarette-related mortality rate 44% lower than the EU average, to see the long-term public health outcomes of these shifts.
- Reference: L’industrie du tabac se refait une santé
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