Philip Morris Sets its Sights on Acquiring Swedish Smokeless Tobacco Company

Cigarette king Philip Morris International (PMI) wants to see its business burning at both ends — but not literally.

In the latest move to reshape its business so that 50% of revenue originates from smoke-free products, PMI has homed in on acquiring Swedish Match, a Stockholm-based tobacco multinational with rip-roaring recent success in the smoke-free sector. On Monday, both companies confirmed to The Wall Street Journal that negotiations have entered advanced talks — and a deal could be reached as soon as Friday.

Where There’s No Smoke, There’s Fire

PMI — the split-off international tobacco business that sells Marlboros, Chesterfields, Phillip Morris, and other branded cigarettes in non-US markets — has faced the same crisis as every other major competitor in the space: all those anti-smoking PSAs have worked. Really, really well. Consumers have been burning through fewer and fewer cigarettes every year for nearly two decades (aside from a brief, certainly stress-induced uptick in 2020), pushing PMI to aggressively pivot into e-cigarettes, vapes, and other forms of smokeless tobacco. The company’s stated goal is to generate more than 50% of net revenue from smoke-free products by 2025. Last year, with earnings of over $30 billion, its smoke-free pillar accounted for nearly 30% of its total revenue.

Enter Swedish Match, which has made a killing in recent years on products that, well, aren’t nearly as likely to kill customers (in 2019, Swedish Match earned FDA approval to advertise its smokeless-tobacco offerings as products with a lower risk of causing mouth cancer, lung cancer, and heart disease than traditional cigarettes). For PMI, acquiring Swedish Match presents the perfect opportunity to further pursue its five-year plan — and boost business in the process:

• Smoke-free products represented over 65% of Swedish Match’s total revenue last year, amid double-digit sales growth. Leading the pack was Zyn, its lozenge-like “nicotine pouch” that sold nearly 174 million cans in the US last year, which the company’s website says translates to a 64% market share of the nicotine-pouch sector.
• Overall, the deal could be worth more than $15 billion, according to WSJ sources familiar with the negotiations.

One variable that could send any possible deal up in smoke remains: on Wednesday, Swedish Match will report its first-quarter earnings for the year. Should the acquisition go through, it would mark PMI’s fifth, and largest, deal since the beginning of 2021.