Altria Group Inc. has entered into a non-binding global collaboration memorandum of understanding with KT&G Corp., with the focus on growth opportunities with modern oral nicotine products, non-nicotine products and in traditional tobacco.
The first steps include an Altria subsidiary acquiring from KT&G an ownership interest in Another Snus Factory Stockholm AB, which produces the Loop nicotine pouch. Terms were not disclosed.
“We believe the complementary market experience and capabilities of our two companies can accelerate the pursuit of our long-term adjacent growth goals across international regions and adjacent product categories,” Billy Gifford, Altria’s chief executive, said in a news release.
Another endeavor involves expanding the global reach of Altria’s On! and On! Plus product portfolio through KT&G’s distribution network, along with other strategic transactions in the modern oral space.
The latest four-week smokeless tobacco and nicotine product analysis by Goldman Sachs analyst Bonnie Herzog has Philip Morris International’s top-selling Zyn with a 66.8% market share for nicotine pouches as of Sept. 6.
Meanwhile, On! is at 11.9%. R.J. Reynolds Vapor Co.’s Velo Plus is third at at 10.7%, with all Velo-branded nicotine pouches at a combined 11.9%.
KT&G is best known for its Esse traditional cigarettes, which is the top-selling brand in South Korea and is sold in more than 140 countries. It also produces cigarette brands The One, Raison and Pine.
“Through our collaboration, we secured a path to growth in next-generation tobacco products by expanding our business from cigarettes to nicotine pouches and other areas,” KT&G chief executive Kyung-man Bang said.
Another element involves Altria assisting KT&G with entering the U.S. healthy foods marketplace with products such as ginseng.
Herzog said the planned partnership provides Altria with another global revenue source
The planned Altria-KT&G partnership follows a familiar path for Altria in choosing to acquire technology and production in new tobacco and nicotine products as it develops similar products in-house.
Mixed results
Altria has had mixed results with similar investments in electronic cigarettes.
In December 2018, Altria made an industry-shaking $12.8 billion investment into top-selling e-cigarette Juul Labs that gave it a 35% ownership stake.
However, by July 2023, Altria disclosed it had written down its investment value in Juul to an estimated fair value of just $450 million. At $450 million, the investment value is just 3.5% of the original Altria expenditure.
Altria completed on June 1, 2023, its $2.75 billion in cash purchase of full ownership of No. 3 e-cigarette manufacturer NJoy, which operates as an Altria wholly owned subsidiary.
Since the purchase, NJoy has hovered in the 2% to 3% market share range in the U.S.
The latest Goldman Sachs market-share analysis has NJoy with a 2.2% market share.
That’s compared with 41.9% for R.J. Reynolds Vapor Co.’s Vuse, 21.8% for Juul, 10.6% for Geek Bar, 4.9% for Breeze Pro and 2.8% for Raze.
rcraver@wsjournal.com
336-727-7376
@rcraverWSJ
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