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BAT Buys Dryft Sciences’ Pouches Business in Oral Nicotine Push

British American Tobacco Plc is acquiring Dryft Sciences LLC’s nicotine-pouch business as it seeks to compete in the fast-growing category of smokeless products that are catching on in the midst of a respiratory pandemic.

The deal, made by BAT’s U.S. subsidiary Reynolds American Inc., will boost its U.S. portfolio of these products from four to 28, pitting it against Swedish Match AB’s snus and Altria Group Inc.’s On! brand. BAT declined to disclose the value of the Dryft acquisition.

The new generation of oral nicotine products are essentially modern versions of chewing tobacco that don’t require spitting, and tobacco companies are positioning the Instagram-friendly offerings as a replacement for cigarettes. Known as dip, snuff, pouches or snus, they don’t contain tobacco and come in flavors like cinnamon, spearmint and black cherry.

The U.S. Food and Drug Administration has allowed some of these products to be marketed as safer than cigarettes, a distinction it has not permitted for vaporizers and heat-not-burn devices.

The Dryft products will be sold under BAT’s existing brand Velo, said the company in a statement Tuesday. Their combined U.S. market share in tobacco leaf-free nicotine pouches will be around 10%.

The London-based company’s modern oral category saw revenue rise 273% last year to 129 million pounds ($167 million), outpacing that of heated tobacco and vapor products.

Traditional smokes are a more than $700 billion-a-year global business that for decades has been dogged by health concerns and changing social norms that have led to a slow, steady decline of users. Though cigarette companies have been trying to diversify, their efforts to push vaping as the main alternative to smoking hit a snag after a spate of mysterious lung illness linked to the practice raised concern over the prevalence of vaping among teenagers.

Smokeless oral nicotine products are gaining popularity. In 2020, global retail sales of the moist snuffs are estimated to reach $12.7 billion, up 4.8% from 2019, according to Euromonitor International — even though snus isn’t sold in most of the European Union. There’s about $1 billion in annual sales for chewing tobacco. Vaping products are expected to log $22.6 billion in sales this year.

The new products don’t require spitting because tobacco or other solids are enclosed inside single-serving pouches that are lodged between the gums and lips, sucked on discreetly, and easily discarded like chewing gum, making them more appealing to young or female consumers who’ve been averse to traditional snuff products.

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