No material impact. We didn’t have a large position in oral nicotine before, so it doesn’t alter the category dynamics much. We hope it will accelerate harm-reduced product growth and oral nicotine expansion in new geographies.

23/05/2023 How has Philip Morris’s acquisition of Swedish Match affected your business?

The acquisition reduced media interest in the category within Sweden, but internationally it raised awareness. For example, many London institutions began covering us after Philip Morris paid $17 billion for Swedish Match, signaling the category’s value.

11/08/2023 What investments are being made to support new markets and categories, and how will this affect costs?

We are ramping up backend infrastructure, including ERP systems, transport administration, APIs connecting systems, and warehouse management, to improve scalability. Over the medium term, this will make the business more scalable and efficient across multiple categories and markets, positively impacting operating margins. Regarding capital expenditures (CapEx), we remain committed to 1.5% to 2% of sales over the long term, though quarterly CapEx will vary, with some quarters above and some below this range.

11/08/2023 Will these investments negatively impact the P&L in the short term?

We do not expect a negative impact on the P&L in the short to medium term; rather, we believe these investments will benefit the P&L over the medium to long term.

08/11/2013 Does your guidance that growth markets will be net contributors to profitability from 2024 include investments in vaping?

We will provide more detail on this at the Capital Markets Day. What we can say now is that our existing geographies will be included, and we gave similar guidance at the end of Q2. We expect to offer clearer guidance in the first quarter.

28/11/2023 What scale is required to move from 3PL to own warehouse to automated warehouse?

Multiple factors influence this decision, not just a single KPI. Scale is important, but even more critical is the pace of change and anticipated growth. For example, in the UK, as growth accelerates, the need to have warehouse operations ready in advance increases. Another factor is the time saved compared to alternatives, and the third is consumer convenience expectations. In developed markets like the U.S. and UK, consumers expect delivery within 48 hours. Overall, as the category establishes in each market, it justifies having a warehouse setup in every geography over the medium term.

28/11/2023 What is the current consumer base and sales growth, and how has profitability evolved?

We currently have just over 900,000 consumers, with more than 200,000 outside our core markets, showing growth potential in those areas. Over the last four years, we achieved a 39% average sales growth driven by category growth and investments in growth markets. Gross margin improved from 9.7% in 2019 to 12.8% in the last 12 months. Adjusted EBIT also grew, though not all margin improvements translated to EBIT due to heavy investments in infrastructure and people. We have built a structure capable of managing further growth with the right people and processes.

28/11/2023 How do core and growth markets differ in sales growth and profitability?

Core markets showed stable sales growth, with adjusted EBIT around 8%, providing steady revenue and profit that we partly reinvest in growth markets. Growth markets achieved 57% sales growth but operated at a loss, with adjusted EBIT at minus 9% over the last 12 months, improving to minus 6% in recent quarters. We expect to reach breakeven and profitability in growth markets next year, driven by scale economies, infrastructure improvements, and growing value from insights and supplier relationships.

28/11/2023 What opportunities exist within the current consumer base?

Order frequency is higher in core markets than growth markets, indicating potential to increase engagement and capitalize on this opportunity by driving more orders per consumer.

28/11/2023 What are the recent sales growth trends and future targets?

Over the last 12 months, group net sales grew 21%, with slower growth in core markets but accelerating growth in growth markets. We believe the €5 billion sales target for 2025 is realistic, supported by favorable category dynamics in nicotine pouches across markets. Profitability is also expected to improve.

28/11/2023 How do core and growth markets contribute to future profitability?

Core markets will see further growth without significant new investment, improving media and insights value and profitability. Growth markets are early in profit generation but expected to become profitable early next year. Further growth, warehouse automation, and media and insights enhancements will reduce costs and improve profitability for the whole business.

28/11/2023 What are the expected cost dynamics and profitability drivers?

Product sales, media, and insights contributions are expected to improve. Warehouse costs should decrease with scale and efficiency, but last-mile delivery costs may rise due to consumer convenience demands. Marketing expenses are low due to reliance on search optimization. Overhead costs will scale favorably, supporting an adjusted EBITDA target of 7% to 9% in the near term.

28/11/2023 What are the company’s long-term growth ambitions and investment plans?

The €5 billion sales target for 2025 is not the end goal; the company plans to expand beyond 2025 with more ambitious targets. To support this, 5% to 7% adjusted EBIT is expected in current business, with 1% to 2% of profits reinvested into new territories and categories. These investments are necessary to capture growth opportunities and will contribute to medium-term profitability.

28/11/2023 How do market margins influence strategic focus?

Sweden is one of the toughest markets with the lowest retail margins in risk-reduced product categories. In contrast, markets like the U.K. offer higher margins in nicotine pouches and vape, explaining the strategic focus on expanding into these more profitable segments and establishing a strong footprint in new categories.

28/11/2023 What is the company’s capital structure and investment approach?

Our business has low working capital needs, mainly financing inventory, with an inventory turnover of 15x. We do not expect significant capital requirements to grow the business. Our balance sheet is healthy, with debt roughly equal to one times last year’s adjusted EBITDA, providing a strong foundation for growth. Capital investments are expected to remain in the 1% to 2% range of EBITDA, with some quarterly variation. M&A is important but will be pursued only if it offers unique value, new markets, categories, or capabilities that cannot be built organically. Capital allocation priorities are: first, invest in our infrastructure and current business; second, pursue emerging opportunities; third, consider strategic M&A. Surplus cash after these priorities will be returned to shareholders.

28/11/2023 What are the company’s 2025 targets and long-term outlook?

We are on track to achieve €5 billion revenue in 2025, with a high single-digit adjusted EBIT margin across core and growth divisions, reinvesting about 1-2% of EBITDA into emerging opportunities. However, 2025 is a milestone, not an endpoint. We expect continued substantial growth and margin expansion beyond 2025. We will remain prudent with cash, either reinvesting at attractive returns or returning it to investors.

28/11/2023 What underpins the company’s success and future confidence?

Our robust market performance is supported by a scalable operating model built on technology and processes that enable expansion across categories and geographies. Crucially, our ability to attract and retain top talent, fostered by a strong culture and clear purpose, to inspire healthier enjoyment for 1,000,000 consumers, is fundamental. This purpose motivates our team daily and sustains the quality of talent needed to scale the business. While the business will evolve, this core purpose will remain constant.

15/02/2024 Can you clarify the P&L outlook: core markets growing high single to low double digits with stable 8% margins, growth markets improving EBITDA margins to zero, and emerging markets having a 2 percentage point loss on total revenue?

Yes, to clarify, the key drivers for reaching mid to high single-digit adjusted EBIT in 2025 include continued significant EBITDA improvement in growth markets due to scale benefits. These markets have grown substantially over the last 24 months and continue to do so. Of the 5% to 7% adjusted EBIT guidance for core and growth markets combined, we plan to reinvest 1 to 2 percentage points into emerging opportunities like vape and new geographies over the next 24 months.

15/02/2024 What infrastructure investment costs and CapEx remain for 2024 after the 2023 expenses?

We expect CapEx for 2024 to remain in line with 2023 levels. While there will be quarterly fluctuations, overall investment in infrastructure development will be stable compared to last year.

15/02/2024 What about the pure P&L costs related to these infrastructure investments?

The P&L impact is not purely a cost because these systems unlock efficiency. We will see a slight increase in depreciation, but the scaling benefits depend mainly on improved ways of working enabled by the right tools for the team.

09/08/2024 The balance sheet is deleveraging quickly. Do you expect this to continue, and what are your plans for the business balance sheet as it approaches net cash?

As discussed at our Capital Markets Day in late 2023, with growing profitability and strong cash conversion, our balance sheet is moving robustly. We maintain our 2023 position of no capital redistribution during 2024 or 2025. Our capital allocation principles remain focused on prioritizing growth within our organic business, provided we see a robust return on capital employed. If capital generation exceeds efficient reinvestment opportunities, we will consider returning capital to shareholders, but no returns are expected during the remainder of 2024 or 2025.

07/11/2024 Your margin has risen about 110 basis points year-over-year for the last three quarters. How likely is it that you will see a similar margin increase next year, considering scale benefits and supplier negotiations?

We have seen a material uptick in margins moving from one calendar year to the next, with scale benefits manifesting in steps rather than gradually. There is no fundamental reason for this to stop as the group grows. However, we are not providing guidance for 2025 margins yet due to external factors and decisions on reinvestment opportunities, which seem greater than previously expected. Still, the scale benefits you mentioned are expected to continue into next year.

20/11/2024 How do excise taxes affect the nicotine pouch market, and what are your pricing strategies?

Excise taxes help governments engage economically with the category. Taxes on nicotine pouches are generally much lower than on cigarettes, reflecting their substantially lower harm, often less than 1-2% of cigarette harm. For example, in Sweden, nicotine pouches carry about 10% of the tax of a cigarette pack. Recent Swedish policy reduced snus taxes and increased cigarette taxes, reinforcing economic incentives to switch.
We expect taxes on these products to rise gradually but remain a fraction of cigarette taxes, marginally increasing consumer prices while benefiting public health and government revenues.

Regarding pricing, we maintain significant discounts versus brick-and-mortar to accelerate migration online during this “land grab” phase. We don’t plan to narrow this price gap soon, as gaining market share now will pay dividends later. The industry still enjoys very high margins, but increasing competition may limit manufacturer-driven price increases. Affordability remains strong, with US nicotine pouches typically priced around $5 and $6 per can versus $12 and $15 for cigarette packs.

21/11/2024 What are the benefits and risks of having direct relationships with manufacturers?

Direct relationships augment our Median Insights capabilities and create a positive feedback loop, tying suppliers closer to us and potentially improving pricing. However, it also creates dependency on those suppliers. For example, we faced some sourcing challenges with Zyn in the US, but I view this as a market-wide supply-demand gap rather than a direct sourcing issue. Our direct relationship actually protected us for a couple of quarters, though there are limits to that protection.

13/02/2025 Do you expect similar profitability boosts in 2025 from media and insight revenue as seen in 2024 due to revised supplier negotiations? How do these negotiations compare to last year?

In 2024, we developed our insights and media offerings, providing more services to suppliers. Demand for these services has increased substantially, which positively impacts our gross margin. We expect a material uptick in 2025. At our Capital Markets Day on April 3, we will provide more guidance on what this means for 2025 and the coming years.

13/02/2025 Given increased losses in your emerging business from $7 million in Q1 to over $10 million in Q4, do you expect losses to increase further in 2025 or is $10 million a reasonable run rate?

We are very happy with the progress and return on investment in the emerging market space. I do not expect a material increase in investment or losses through 2025. However, if a significant opportunity arises to rapidly gain market share, investment could increase, but that is not my base case assumption.

13/02/2025 What investments are you planning to support growth in media and insights given the substantial increase in demand?

We have been investing heavily in infrastructure to service different communication styles throughout the consumer journey. We have a robust data set used for insights, which we are now leveraging to refine messages to specific consumer cohorts. This ensures messages are appropriate and positively received, increasing the value of our media offerings.

03/04/2025 Where do you see the greatest M&A opportunities and which markets are you most interested in?

We are open to various M&A options that can bolt onto our business and create significant value immediately. One type is businesses similar to ours but in markets we don’t currently serve; however, such assets are rare and often less efficient than building ourselves. The other type is less orthodox, assets that support convenience or youth access prevention, which could create barriers to entry and support industry growth. We are open to solutions but will only invest if we believe in long-term returns.Regarding markets, it depends on where the right opportunity arises.

06/05/2025 What is the status of SIM supply and discussions with PMI? When might supply be restored?

We have an excellent relationship with Philip Morris International (PMI) globally, including Europe and the US, where we are the largest retailer of ZYN. We are working through specifics of the US situation but cannot provide a precise timeline yet. We will update as we learn more.

29/05/2025 What US investments will your online company make and what will they entail?

The category originated in Scandinavia, where the market is more advanced. Unlike the usual pattern where the US innovates and Europe regulates, here most innovation comes from Scandinavia, but FDA regulation in the US has slowed new product introductions. The largest US brand, ZYN, is effectively unused in Scandinavia due to newer generations of products. We have maintained a minimum US presence, waiting for "day zero" when new products start entering the market. With the first products approved in January and more credible global players entering in 2024, conditions are now ripe for US expansion. We will invest in three areas: building a local, agile organization; enhancing logistics and convenience infrastructure, including a fully automated warehouse in Houston and piloting same-day deliveries in key urban areas; and accelerating customer awareness through referral programs and similar initiatives to educate consumers that these products can be bought online.

Competitive Advantage

15/02/2023 What is the initial market feedback on your e-cigarette launch in the UK, and how do you ensure issues like the recent ELF BART problem don’t affect your platform?

Our objective is to inspire healthy enjoyment in the harm-reduced nicotine space. Product standards and epidemiology around e-cigarettes have improved, meeting our sub-five percent harm threshold compared to cigarettes. We launched a test in the UK to learn about consumer behavior in this category. We don’t expect material sales share soon; it’s a test market. We independently test all nicotine pouch products and refuse those not meeting standards. UK vaping products are government-regulated and permitted. There is some noise around certain products like ELF BART, and we are monitoring how the market stabilizes.

23/05/2023 What percentage of your customers are smokers or snus users converted to nicotine pouches, and how many are non-users who started using nicotine pouches?

Absolutely. The vast majority, over 90%, of consumers entering this category in markets like the U.S., U.K., and non-Scandinavian or German-speaking Europe are ex-smokers. Our average consumer is in their mid-30s; nobody in their mid-30s wakes up and decides to start nicotine. These are often long-term smokers making lifestyle changes, such as expecting a baby, deciding to quit cigarettes for health reasons, and turning to nicotine pouches. I’m an example myself, I used snus and more recently nicotine pouches to quit cigarettes. To clarify, we’re not moving snus users to nicotine pouches; that happens naturally. Snus itself is substantially safer than cigarettes, and our focus is on moving cigarette smokers to safer alternatives.

In Sweden and Norway, the situation is more complex. Sweden has the lowest smoking rates in the OECD and is on track to be the first smoke-free country, defined by the World Health Organization as having less than 5% adult smokers. Interestingly, Sweden and Norway have had more female smokers than male smokers for about 25 years, since the rise of snus, which was traditionally male-centric. Nicotine pouches are now significantly reducing smoking among females in Sweden. While some consumers inevitably start using nicotine pouches without prior smoking, especially in the 18 to 22 age group, the percentage of nicotine users in Sweden is almost identical to Germany’s. The difference is that most Germans smoke cigarettes, while most Swedes use harm-reduced products. Our platform does not encourage people to start nicotine use; nobody wakes up and decides to try nicotine online for the first time. I hope this answers your question.

23/05/2023 How do nicotine pouches compare to e-cigarettes in the harm reduction space?

E-cigarettes are also harm-reduced but lack the 200 years of epidemiological data that snus has. The World Health Organization believes e-cigarettes have helped reduce smoking rates, such as 4 million fewer smokers in the U.K. over the past decade. Consumers have different preferences for quitting aids, and we hope they continue moving toward zero-harm products. Nicotine pouches are currently the closest to zero harm available, and we will engage with any future lower-harm products.

23/05/2023 How do you view competition between nicotine pouches and e-cigarettes?

We view e-cigarettes positively because they help people reduce harm. Our role is to educate consumers that nicotine pouches are an even safer option, once you’ve started with e-cigarettes, maybe it’s time to go all the way to nicotine pouches.

11/08/2023 What is the estimated online penetration of nicotine pouches in the U.S.?

The definition of online sales in the U.S. is somewhat skewed due to cross-border gray market sales. Focusing on the domestic market, online sales currently represent about 3% to 4% of the market. We are by far the largest player in the domestic U.S. market, and we see strong growth potential in this channel.

08/11/2013 Can you give examples of recent regulatory developments favoring regulation over bans?

Good morning, Nicholas. Recently, we've seen some proposals or leaks from the EU, followed by strong opposition from many countries, including some where nicotine pouches aren't yet a major part of the market. At the same time, several EU countries have shown strong support for the category through local regulation, helping people move away from cigarettes. Countries like Austria, Slovenia, the Czech Republic, and the Scandinavian markets, Sweden, Denmark, Finland, are taking a strong, supportive stance. This emerging unified position among many EU members supports not only the continuation of the category but also the introduction of appropriate regulation, similar to what Sweden has experienced in recent years.

28/11/2023 How has the attitude of top brand owners changed over the last 4-5 years?

Over the last 5-6 years, especially the last 3-4, brand owners have increasingly recognized the rapid changes in the category. We have evolved our platforms to help them through insights, now the largest insights provider, and new product introductions. Unlike cigarettes or Snus, where brand life cycles were longer, this category requires constant innovation and staying close to consumer trends. The relationship with brand owners has strengthened significantly as they see the value we bring.

28/11/2023 Does Haypp plan to enter private label or bring its own brands into the market?

We have a clear principle of not moving into private label. We maintain close relationships with all our partners and share insights extensively. Entering private label would create a conflict of interest. We are very happy with our position in the value chain and will not pursue private label.

28/11/2023 How does Haypp navigate the regulatory environment and what is the outlook beyond 2028?

We navigate regulation by being a credible player with a history of responsible behavior, representing consumers and suppliers to drive sustainable change. Youth access prevention is our top priority, with a 100% compliance record in Norway after 800,000 checks and 3,000 declined purchases reported to the Norwegian Parliament. Our global leadership in setting product standards for nicotine pouches enhances credibility with consumers, brand owners, and regulators. We have independent testing via Eurofins and scientific operations supporting data on age use, flavor preferences, and the role of nicotine pouches in transitioning smokers to safer alternatives. This credibility secures us a seat at the regulatory decision-making table.

Regulation will continue evolving in the reduced-risk category, and Haypp has historically benefited and will continue to benefit from regulatory changes. We monitor developments daily, forecast future regulations, and adapt rapidly. Nicotine pouches and online sales of reduced-risk products will grow, and we expect a stable regulatory environment for nicotine pouches beyond 2028 when the 3rd Tobacco Product Directive comes into force in Europe. However, EU countries may still choose to regulate or ban nicotine pouches individually.

28/11/2023 How does the product landscape and innovation vary across markets?

Core markets like Sweden and Norway are dominated by traditional oral products, but vape is growing rapidly (75% in 2023). The U.S. has a large illicit vaping market, with legal vaping declining, while nicotine pouches grow 55% year-to-date. The U.K. remains vape-dominated but sees 20% growth in 2023. Heat-not-burn products are evolving from tobacco-based to tobacco-free variants. Large tobacco manufacturers and emerging suppliers compete across categories, driving innovation.

28/11/2023 How is Haypp positioned to capitalize on these adjacent categories?

Haypp’s experience with nicotine pouches, regulatory knowledge, and infrastructure position it well to expand into adjacent categories. Regulatory frameworks and youth access prevention imperatives are similar across RRPs. Online channels will be key to educating consumers on product trade-offs. Price, assortment, and convenience are critical factors driving consumer adoption. Our existing partnerships and backend systems support scaling to larger assortments and categories.

28/11/2023 What is the competitive landscape for online risk-reduced products?

The online market is fragmented with no clear global leader. Haypp’s experience and knowledge provide an opportunity to consolidate the market organically or inorganically. Our existing business and infrastructure serve as a platform to expand into new categories and markets, planting seeds for long-term growth.

28/11/2023 What are Haypp’s expansion plans for new markets and categories?

We plan to grow new risk-reduced product categories in existing European markets and expand nicotine pouches into new European markets. We do not foresee entering the U.S. vape market soon due to regulatory uncertainty. After exhausting these opportunities, we may explore new categories in new European markets. Our recent U.K. vape pilot, using existing infrastructure, achieved nearly 5x volume in nine months compared to initial nicotine pouch launches, demonstrating the power of leveraging our platform.

15/02/2024 You mentioned snus is declining in Sweden, which you highlighted as a challenge. Is this hampering total growth, or is it mainly migration to nicotine pouches? Does total category growth continue?

No, the total category continues to grow across Scandinavia, including Sweden. The strong growth in nicotine pouches contrasts with only low double-digit growth in total sales due to a mix shift. This is a positive trend, and we have positioned ourselves for it over the last five years.

15/02/2024 Can you quantify the profitability difference between snus and nicotine pouches?

Yes, without specifics, we can say nicotine pouches have always been more profitable for multiple reasons. Taxes on nicotine pouches are slightly lower than on snus, resulting in a higher value pool distributed among players in the value chain.

09/08/2024 You mentioned Mediate Insights as a significant contributor to earnings improvement. Can you quantify its impact on profitability?

Much of the uptick in our overall group profitability comes from improvements in our growth division. This division has reached sufficient critical mass in market share and importance, leading to broader utilization of our media and insights capabilities by industry players. This is creating a material uptick and is a key driver of the profitability increase seen between Q4 and Q1 in this area, indicating the scale of impact we're experiencing.

07/11/2024 How might the change in U.S. administration affect the regulatory environment, especially considering Republicans have been more relaxed on regulation in the past?

It is still early to say, not only because of the Republican administration in the White House but also due to their control of both Congress and the Senate. Historically, Republican administrations have been more supportive of our category, and there have been statements from the incoming administration about risk-reduced products. However, it is premature to know the specifics, and we will monitor developments closely, expecting more clarity around the Q1 results when policies should be clearer.

20/11/2024 What makes your business different from a standard e-commerce vendor?

Our sites consistently rank at the top of organic search results due to our strong focus on search engine optimization (SEO). We build all our platforms in-house with SEO as a primary focus, which is essential for operating successfully in this space, unlike other e-commerce businesses that can simply buy traffic.

20/11/2024 What makes your business different from a standard e-commerce vendor?

Our business operates in a complex category with many nuances. One key difference is that advertising restrictions are significant in many markets, and global media platforms like Google and Facebook often restrict advertising for nicotine products. Unlike most e-commerce businesses, we do not buy traffic. Over 99% of our new customers come organically through search engines, primarily Google, by ranking highly in organic search results for relevant keywords. This high-converting organic traffic is critical for us.
Our sites consistently rank at the top of organic search results due to our strong focus on search engine optimization (SEO). We build all our platforms in-house with SEO as a primary focus, which is essential for operating successfully in this space, unlike other e-commerce businesses that can simply buy traffic.

20/11/2024 What makes your website content unique and how does it contribute to your business?

Our content is unique and highly engaging, covering various aspects like when and how to use the category, down to product and brand details. Because of our scale, we are about 14 times larger than the second-largest global online player, the quality and quantity of content we create are unmatched. Brand owners also provide us with unique content to showcase their products to over a million consumers and a couple of million visitors monthly. This rich content helps users interact and consume information, which boosts our site’s organic search rankings and conversion rates, both of which are exceptionally high. Our customer return rates are also off the charts, reinforcing strong engagement.

20/11/2024 How does your business model create a competitive moat?

Firstly, while competitors can set up sites and logistics, they cannot buy their way to significant organic traffic like we do. Our percentage of paid traffic is less than 1% of revenue and has been decreasing for four years, making our organic reach a robust moat. Secondly, our scale gives us superior buying power and operational efficiency. We manage variable costs like picking, packing, and shipping more efficiently and scale fixed costs like warehousing, teams, and technology better than smaller players. This allows us to offer great prices and convenience profitably, forcing competitors to burn cash for years to match us.

20/11/2024 How significant is the media and insights revenue to your business?

Media and insights represent a high single-digit percentage of our revenue, with very low variable costs, making it an extremely profitable segment. Combined with our scale-driven profitability, this gives us a robust economic advantage and ongoing investment capacity in these areas, fueling growth and competitive strength.

20/11/2024 Why do consumers choose your website over local stores, and why do manufacturers prefer working with you?

Consumers primarily choose us for price and assortment. We offer 20 to 30% discounts versus offline in core markets and 30 to 40% in growth markets, which encourages switching online. For heavy users, these savings add up significantly. Our assortment is also much broader; for example, in Sweden, a good store might carry 20-25 SKUs, while we offer around 800, including many new products unavailable offline for six to twelve months. This makes us the go-to place for the latest and greatest products.

Manufacturers benefit from our media and insights services, which help them generate awareness, trial, and deep consumer understanding, making us a valuable partner beyond traditional retail distribution.

20/11/2024 What are your customer retention rates and how do they impact your business?

We measure retention over a 70-day period and see that about 67-68% of customers return for a second purchase. The second purchase is critical; once customers buy again, they tend to stay for life. Around 88-89% of daily sales come from existing customers, and loyalty continues to increase as we refine our systems. This strong retention underpins our growth and profitability.

20/11/2024 How is the nicotine pouch market evolving with new brands and supply dynamics?

The market continues to grow rapidly despite supply-demand imbalances from the leading brand, Zin. Other brands are gaining strong traction and developing good switching patterns with consumers, creating more natural market dynamics. In Q3, all our growth came from these other brands due to Zin’s supply constraints. We expect a potentially choppy Q4 but believe that when Zin supply normalizes, likely early next year, the market will be more fragmented, benefiting both consumers and Haypp Group over the medium term.

20/11/2024 How is your international distribution, especially regarding Zin supply?

We are by far the largest retailer of Zin and other brands in Europe, where supply constraints seen in the US do not exist. Philip Morris, Zin’s owner, has a strong interest in ensuring all online players, including us, are fully stocked to maintain consumer access and gather data on consumer behavior. We also lead in youth access prevention, using digital records to guarantee buyers are over 21, which strengthens our compliance reputation and industry standing.

20/11/2024 Who are your main online competitors, and why don’t manufacturers expand their direct-to-consumer (DTC) offerings?

Manufacturers do have DTC platforms in many markets, including Sweden, the UK, and the US, but consumers come to us primarily for broader assortment and better pricing. DTC platforms typically cannot offer the wide range of SKUs or the price discounts we provide without antagonizing their brick-and-mortar retail partners. This dilemma limits their strategic focus on DTC. Our assortment includes multiple brands and SKUs per order, giving us a significant advantage.

Our competitors are mostly local and fragmented, such as Min Prilla in Sweden, Snus365 in Norway, and PR in the US. We hold about 80-85% of the online market share in these countries, excluding illegal online players. These smaller competitors lack the scale and infrastructure we have across multiple markets.

20/11/2024 What is the status of the PMTA process and its impact on competition?

The Premarket Tobacco Product Application (PMTA) process requires products not on the market by 2016 to obtain FDA approval before sale. Synthetic nicotine products, which emerged later, had a 2022 deadline. The FDA has been slow in processing applications, especially for nicotine pouches, due to a backlog of vaping product applications. However, approvals began to pick up in 2024, setting important precedents.

The principle of risk reduction was embraced by the previous administration, which started approving products. The new administration’s policies are not yet clear, but industry views suggest Republicans may favor consumer choice and harm reduction. We are monitoring developments closely.

20/11/2024 What makes your business different from a standard e-commerce vendor?

20/11/2024 What makes your website content unique and how does it contribute to your business?

20/11/2024 How does your business model create a competitive moat?

20/11/2024 How do media and insights services contribute to your business and relationships with manufacturers?

We provide two key services to brand owners: media and insights. For media, our platform is the best for generating product awareness and trust. We offer banner ads, promoted products in search, shopper experience, and checkout upsells. Brand owners support this heavily, and although we may only have 32% of Sweden’s nicotine pouch market, we generate about 65% of new product trials there, punching well above our weight.

For insights, we launched Haypp Insights in 2020, offering quantitative and qualitative data. Quantitatively, brand owners see consumer segment behavior, awareness, consideration, trial, loyalty, and switching patterns, plus price elasticity and brand strength. This is a subscription model generating significant revenue. Qualitatively, we survey consumers who switch brands to understand why, down to granular details like flavor preferences. We then help brand owners test product modifications with consumers before nationwide launches. This benefits consumers by giving early access to new products and strengthens our relationship with both consumers and brand owners.

20/11/2024 How significant is the media and insights revenue to your business?

20/11/2024 Why do consumers choose your website over local stores, and why do manufacturers prefer working with you?

20/11/2024 What are your customer retention rates and how do they impact your business?

20/11/2024 How is the nicotine pouch market evolving with new brands and supply dynamics?

20/11/2024 How is your international distribution, especially regarding Zin supply?

20/11/2024 Who are your main online competitors, and why don’t manufacturers expand their direct-to-consumer (DTC) offerings?

13/02/2025 What have you heard from suppliers about how data from media and insights might be used in future regulatory filings or processes?

I see this as tailwinds rather than headwinds. Nicotine is an adult-only product and should only be available to adults. Media services that guarantee communication with adult nicotine consumers differentiate us from others. The industry generally accepts that regulatory restrictions will increase, reducing available media space, which will increase the value of the remaining space.

03/04/2025 Is your loyalty program focused only on the U.S., and are there regulatory concerns about rewarding nicotine consumption?

Yes, as Markus mentioned earlier, regulatory philosophies differ greatly between the U.S. and Europe. The U.S. has more product restrictions, while Europe restricts how you can display and interact with consumers regarding loyalty. Loyalty programs are difficult to enhance in Europe, so we focus mainly on the U.S., where we’ve been very impressed with early results.

23/04/25 How do you position your company in the risk-reduced nicotine market?

We position ourselves firmly in the risk-reduced nicotine space. The number of people using nicotine today is about the same as it was ten or twenty years ago, and it is actually starting to grow again. People use nicotine for various reasons, but what is becoming clearer is that people generally do not want cancer. There is a broad consensus that no one wants to return to smoking cigarettes. Whether nicotine consumption happens through pouches or other forms, the underlying growth in risk-reduced nicotine is expected to continue. Our platform is designed to provide services to consumers regardless of how these products evolve over time.

23/04/25 How significant is the issue of illicit products in your market compared to vaping?

Illicit products are a much bigger concern in the vaping space than in the pouch space, which is why we avoid vaping in the US. The reason illicit vaping is such a big issue is that nearly every vape device worldwide is made in Shenzhen, Southern China, giving them a huge technological advantage in creating counterfeit and illicit vapes. In contrast, all the technology for nicotine pouches originated in Scandinavia, with brands like ZYN, ON, and Nordic Spirit. This means there is no similar systemic advantage for illicit products in the pouch category. Additionally, the FDA approved all flavored nicotine pouches in late January during the last days of the Biden administration, recognizing them as substantially better for public health. This approval reduces the need for illicit products since consumers can legally access world-class products.

06/05/2025 Are there any quantifiable efficiencies or revenue uplifts from the ERP and V3 platform rollouts?

We are still completing the store rollout, which will take more time. On the revenue side, we are seeing a notable increase in our share of traffic in stores where the platforms have been live for a few months. Regarding efficiencies, the main benefit is a significant increase in the return on every development hour invested in the platform, encouraging more development. This may not translate immediately into material bottom-line savings but is expected to accelerate growth over time.

Operations

15/02/2023 Can you elaborate on the excise tax hike and whether the stock build positively impacted Q4 sales or mainly boosted profitability?

Yes, we built a lot of inventory as discussed. We did not see much hoarding effect on sales from the tax increase, except a bit in the last days of the year. So, the excise increase had very limited impact on quarterly sales figures. The main effect was inventory build, with limited impact on sales.

15/02/2023 Are you using this inventory to boost profitability or gain market share by pricing lower than store-based competitors?

We built this inventory to have flexibility. As we are in the middle of Q1 now, we won’t go into detail yet. Pricing depends on competitive activity, so we won’t say much at this point.

15/02/2023 Have you seen any impact from PMI’s acquisition of SwitchMatch on your operations?
No material impact. We didn’t have a large position in oral nicotine before, so it doesn’t alter the category dynamics much. We hope it will accelerate harm-reduced product growth and oral nicotine expansion in new geographies.

03/05/2023 Was the pressure on product margin in Sweden due to early-year campaigns temporary? Have you seen easing during the quarter?

Yes, it was temporary. We had stocked up to gain a competitive advantage ahead of an excise increase, which also affected market dynamics during the quarter. The first half of the quarter was slightly more competitive, but we expect the market to return to normal from mid-quarter onward.

23/05/2023 Do producers sell directly online, and how does that affect your business as a reseller?

Many large players have been online for 5 to 6 years, but consumers tend to switch brands frequently and buy multiple brands in one order. This behavior has limited the success of direct-to-consumer (D2C) platforms, which remain minuscule compared to our market size despite heavy investment.

11/08/2023 What investments are being made to support new markets and categories, and how will this affect costs?

08/11/2013 Can you share initial learnings from your vape presence in the UK and Sweden, and plans for market rollout?

Our experience so far has given us a much deeper understanding of the vape category, the products, and how consumers interact with both vape and nicotine pouches together. We've made good progress in search engine optimization and guiding consumers through our assortment. We have been present in the UK since the start of the year and in Sweden since mid-year. Regarding further rollout, we will provide more detailed plans on November 28th at our Capital Markets Day.

15/02/2024 Will you select suppliers or limit flavor ranges based on regulatory concerns or supplier practices?

Yes, both the flavor range and product descriptors, as well as how each SKU is positioned in the market, will be key considerations in deciding which products we list and offer consumers.

15/02/2024 Why was there a high inventory buildup recently?

We have been opportunistic, using available financial resources to load inventory at year-end to optimize benefits.

15/02/2024 How does excise-based pricing relate to inflation in Sweden?

Excise-based pricing was abnormally high due to a slightly higher inflationary period, which influenced government calculations. This contributed to the stock build.

15/02/2024 Why are employee costs higher in Q4? Is this a recurring pattern?

We strengthened teams across the organization, increasing Q4 employee costs. Additionally, accruals were created to reflect expected employment-related expenses. This pattern is not unique to 2023; similar dynamics occurred in 2022.

15/02/2024 Should we expect higher employee costs in Q4 going forward?

It appears that higher employee costs near year-end are a recurring trend.

03/05/2024 What is the pricing environment like? Can you maintain cost efficiencies without closing price gaps, or do you expect price competition?

We plan to generate bottom-line growth without closing price gaps. We like the current price gaps as they encourage migration from offline to online. The category is competitive and growing rapidly, so we want to maintain and grow share. Increased margin mainly comes from economies of scale in operations and support from business partners, not price increases.

03/05/2024 How do you define emerging markets? Are these vaping operations in the UK, Sweden, Germany, or do they include new nicotine pouch markets?

Emerging markets cover expansion into adjacent categories in existing geographies like vaping in the UK, Sweden, and Germany, and later expansion into new geographies with both vape and nicotine pouches. This grouping reflects developments expected through the end of 2025.

03/05/2024 What new markets have you launched nicotine pouches in over the past 12 months, and how do you see this progressing over the next 12 to 18 months? Is expansion into new markets gradual or rapid?

We have not expanded into new geographies with nicotine pouches yet. Our focus until late 2025 is first expanding vape in existing markets like Sweden, Norway, and the UK. Once traction is gained, we will expand into new geographies with both vape and nicotine pouches. This approach leverages existing warehouse and store infrastructure and new ERP and storefront systems, making future rollouts easier. So far, no new markets have been entered recently; expansion is gradual and staged.

09/08/2024 How significant is the shortage of ZYN in the U.S. market, and has it been positive or negative for you? Can you quantify the impact?

I don't think there is a severe shortage; rather, there has been consistent and perhaps increasing supply in the category. The issue is that demand has been much higher than initially anticipated. We took a conservative approach managing our business through this turbulent period, especially in the first month to six weeks in the U.S. We've adapted accordingly and seen strong performance. Overall, it has been marginally positive in the short to medium term. The real benefit is increased awareness in our channel, encouraging consumers to look for alternatives, which was not as prevalent before. We expect some long-term benefits but so far, it hasn't materially impacted our performance.

09/08/2024 Has there been any recent development in ZYN supply, especially regarding increased volumes for key customers?

Q2 was somewhat turbulent, and we took a conservative approach. While the environment remains a bit choppy, it is more stable than at the start of the quarter. We have adapted accordingly and increased the volumes consumers can purchase monthly. There is now somewhat more clarity in the environment compared to earlier in the quarter.

20/11/2024 What are your compliance costs, especially regarding age verification at delivery?

Compliance is a significant investment but also a competitive advantage and a license to operate. Brand owners prefer partners with strong compliance, especially on youth access prevention.

Age verification at delivery often incurs minimal incremental cost. For example, in Sweden, many consumers pick up products from secure boxes at transit points. We use a digital solution involving BankID and biometric facial recognition to verify identity before box access. This system scales well and provides robust digital records.

For home deliveries, which are a minority, incremental costs are not material. Overall, digital compliance solutions are cost-effective and enhance operational robustness.

20/11/2024 How do you approach entering new markets, and what regulatory factors influence this?

We focus on the largest and most valuable nicotine pouch markets: the US, UK, Germany, and Scandinavia. These markets have depth and growth potential. We are overhauling infrastructure to scale efficiently in existing markets and prepare for rapid entry into new ones.

In Europe, regulatory frameworks are set at the EU level, which will likely override local regulations once finalized. The EU has progressively regulated tobacco and vaping products through directives like TPD1 and TPD2, setting the stage for harmonized rules on nicotine pouches. We monitor these developments closely to time market entries appropriately.

20/11/2024 What regulatory developments do you expect in the EU, and how will they impact the category?

We expect the EU to introduce a new Tobacco Products Directive (TPD3) later this decade, which should positively impact the category. It will likely include restrictions such as maximum nicotine strengths and measures to ensure flavors are not particularly attractive to youth. Many countries are already supportive of the category, and we feel optimistic about the regulatory trajectory.

20/11/2024 Can you explain the emerging segment you started reporting on last year and its development?

The emerging segment includes everything beyond our core and growth markets. After achieving profitability in Sweden and Norway, and then growth markets, we began investing in expansion. The first phase is entering the vape category in European markets where we already operate. We started in the UK about a year and a half ago, the most competitive vape market, to learn and master the category. We then expanded into Germany and Sweden. The dynamics are similar: consumers want broad assortments, guidance, and price gaps versus offline stores. We have integrated this category into our stores and logistics, reporting it separately since early 2024. It has grown rapidly, over 60% quarter-on-quarter between Q2 and Q3, requiring investment but fitting well with our business.

21/11/2024 How does automation in your Houston warehouse impact unit economics if Zyn volumes remain low?

We have automation suites running in Stockholm and Norway, and expect to have it in Houston by year-end. For example, in Stockholm, pick-and-pack costs are about 3.5% of revenue, while in the US they are about 9.5%. Automation will reduce costs noticeably, though not immediately to the same level. If Zyn volumes remain low, the benefits of scale will come more slowly, but there won’t be a negative impact on the P&L, just slower cost improvements.

13/02/2025 What caused the lack of thin sales in the U.S. business? Is it due to the new MGO regulation or PMI's decision? When did the MGO regulation start impacting sales?

The MGO regulation came into effect in late January 2025, around the second week. We were able to source some ZYN products leading up to that and even resumed some ZYN sales in January. Currently, I could age gate the entire website to sell ZYN, but I need a sustained volume commitment from ZYNDA weekly and monthly, which I do not have yet. I expect that as supply and demand issues resolve, we will reach that point soon, but I cannot give an exact date today.

13/02/2025 What is the tone of your discussions with PMI about online sales? Could sales resume before summer or is it uncertain?

We have an extremely close relationship with all our suppliers and are the largest retailer of ZYN products in Europe. This strong relationship extends globally and across many markets. The U.S. market has many moving parts, including category growth, brand mix, and supply issues. PMI recently stated they expect supply and demand to balance by the second half of 2025, but we expect to be back in stock with enough sales to justify age gating our retail site well before then.

03/04/2025 What percentage of sales was spent on marketing last year, and how will your strategy to increase online awareness affect future marketing spend?

Our digital marketing spend last year was about 0.5% of sales, excluding the internal marketing team. Going forward, we are testing concepts in the U.S., focusing on Texas due to its advantages as a test market. We don’t set fixed budgets but evaluate returns on capital invested. We will continue to fund concepts that generate healthy returns and provide regular updates. We are entering a new era with significant opportunity in the U.S. and want to remain flexible in our approach.

03/04/2025 What marketing efforts has Haypp undertaken in the U.S., and what events can consumers expect to see?

We have much more flexibility in the U.S. and are starting out-of-store marketing, including billboard advertising and digital ads such as podcasts. We are testing seven or eight different concepts with a test-and-learn approach. Before deciding which concepts to scale, we want to see initial results. The U.S. market offers us significant flexibility to experiment and adapt.

03/04/2025 Is there value in communicating Haypp’s advocacy efforts to consumers, and how is Haypp currently doing this despite constraints?

We are free to advocate for our consumers, who are engaged and proud to use nicotine pouches. We communicate through blogs on our sites and customer service channels, guiding consumers on how to advocate by contacting members of parliament and governments in the EU and U.S. They actively make their voices heard, standing up for the products they value.

03/04/2025 Why do the new UK regulations support more sustainable market conditions, and why is the disposable vapor ban a net positive for the group?

Regarding the disposable vapor ban, disposables are typically used once and discarded, not favoring bulk purchases. The ban encourages consumers to commit to products with multiple refill capsules, which suits online sales well and drives migration to online channels. With UK marketing conditions, digital search restrictions, like those already imposed by Google AdWords, are expected to tighten further, enhancing the regulatory environment. Markus agrees with this assessment.

23/04/25 How are you focusing your resources in the US and Europe markets?

We are dedicating our energy and resources to the core markets. There are 36 million smokers in the US and 48 million in Europe, with most of the European smokers located in countries like Germany and the UK. Our strategy is to focus on these core markets where we can reach millions of consumers, rather than trying to pick off smaller segments like the pouch market back in Sweden.

06/05/2025 What is the expected impact of your planned OpEx ramp-up in H2 on the adjusted EBIT margin?

Our guidance aligns with what we shared at our Capital Markets Day. We will be investing significantly in building up capabilities within the US team. While we will provide more detailed quarterly guidance as we move into the second half, it is fair to assume a substantial ramp-up in investment in the US market given the opportunities we see there.

06/05/2025 Are the investments mainly OpEx or also gross margin related? Is it price investment or increased staffing?

dThere will definitely be increased staffing as we build a standalone senior team in the US, focusing on legal, external affairs, and commercial expertise. Regarding gross margin, we won’t focus much on pricing but will ramp up investments in convenience during the second half of the year, which could impact gross margin.

Competition

15/02/2023 How have you acted on the Swedish market pricing and inventory build following the excise increase?

We are reluctant to comment on pricing as it’s commercially sensitive. The inventory build gave us flexibility to invest in customers or retain benefits. We continue to see strong performance in core markets into Q1, broadly in line with earlier trends.

03/05/2023 How much of the recent 40% to 70% growth in your markets is due to the California ban? Is that the main driver or is there something else?

I think there is some foreign exchange tailwind benefiting us, though we had some of that in prior quarters. We are seeing strong growth across the U.S. Specifically, in California, we had a disproportionately low share going into this environment. Early in 2022, both our U.S. warehouses were on the East Coast, so our convenience into California had room for improvement. Anticipating the regulation in late 2022, we launched a West Coast warehouse based in Colorado to handle this dynamic. We saw improvement in California before the ban and an uptick after, but most of the growth from 50% to 70% in local currency terms is not from California. California accounts for maybe a high single-digit portion of that growth.

23/05/2023 What are the most common investor questions about your business?

A few years ago, investors often asked if the Scandinavian concept of nicotine pouches could succeed outside Scandinavia. That question is now settled, with more nicotine pouches sold in California than Sweden and growth in the U.K. and Switzerland. Another common question concerns future regulation, which aligns well with global health ministers’ focus on harm reduction, fitting perfectly with our vision.

28/11/2023 How does Haypp view the online competitive environment and the difference in stated market share in Sweden?

Our biggest competition is offline stores, which make up about 97% of competition in any market. Online, many competitors try to enter, but despite claims to take significant market share, few succeed long term. While others can establish sites, reduce prices, and invest in convenience, they cannot sustain traffic because we dominate SEO. Our ancillary business with insights and media creates a pricing advantage that others cannot match profitably. Competitors often burn money for years and then exit. Waves of entrants and exits continue, but we are confident in our business model and its defensibility.

09/08/2024 Can you elaborate on the Chevron Act and its potential impact on FDA regulation of nicotine pouches in the U.S.? How soon might we see effects, and could it lead to more relaxed regulation?

The Chevron Act, originating from a 1980s case, set a precedent giving government agencies more power to interpret legislation. The reversal of this act changes that dynamic in the U.S. regulatory space. Regarding this category, it's too early to provide guidance on the future impact. Some believe it could enable new products to enter the market faster, but the environment is complex. I prefer to remain cautious and wait to see how it unfolds over the next three to six quarters.

21/11/2024 Do you expect a solution for competing with illicit products entering your markets, or do you rely on favorable regulation?

There will be an answer for this; there always has been. While it’s new in the US for vapor products and emerging for nicotine pouches, illicit products have infiltrated tobacco markets for the last 70 years. The darkest hour is always before dawn, and eventually governments clamp down. The current dynamics are easier to control than in the 60s, 70s, or 80s because these products usually come from outside the country. It just takes the will to stop them, and it’s generally accepted this should have been resolved years ago. I believe it will be resolved soon. For example, Customs has been stopping some orders from Swedish retailers into the US. One competitor, Snus Daddy, has temporarily stopped shipping to the US, likely due to Customs delays. These issues tend to get resolved after a period of disruption.

21/11/2024 Why can your competitors not source directly from manufacturers like Haypp does?

This varies by market, but generally, we source directly across all markets. We are one of the few retailers to store products directly in the US, not just online. Typically, wholesalers or distributors sit between brand owners and retailers. Our relationship with brand owners is deeper than a standard retailer’s. We are the largest global retailer in the category, and our media and insights help brands sharpen their messaging and position products effectively. Our data is also used for regulatory engagement, such as with the FDA, to show consumer age profiles and smoking history. Brands use our insights to identify smaller brands for acquisition. About three to four years ago, we requested special treatment to get direct sourcing in all markets. Historically, media and insights have been a larger part of your core markets business because of new innovation, especially in the US.

21/11/2024 Do manufacturers like Swedish Match and BAT sell directly online, and how competitive are those platforms?

Yes, they have done so for seven or eight years. However, their direct-to-consumer (D2C) sales represent only a fraction of the market compared to us, even after many years. Consumers want a broad assortment, on average, 2.6 SKUs and 2.4 brands per basket, making single-brand platforms less attractive. Also, our pricing is more competitive than offline, which brand owners struggle with because it conflicts with brick-and-mortar retailers. Most D2C platforms are viewed as brand-building rather than major sales channels.

21/11/2024 Are there pre-existing nicotine pouch products being acquired and rebranded in the US due to PMTA delays, and how many such products might enter the market?

In 2019, the FDA required products not on the market by 2016 to be removed unless they submitted applications, which have been slow to process. This applied to tobacco-derived nicotine products. Synthetic nicotine, chemically identical but lab-made, emerged around 2020-2021 with many improved products from smaller players lacking brand or distribution muscle. In mid-2022, the FDA allowed synthetic nicotine products to remain if applications were submitted by June 30. Larger players are now acquiring and rebranding these second-generation products, like Imperial’s acquisition of Licks and rebranding it as Zyn, which is growing fast. BAT is also launching a new product, V Plus, likely following a similar path. This opens the US market to higher-quality products similar to those in Europe, which faced fewer regulatory constraints.

06/05/2025 Why has the number of active customers dropped over 40% since Q3, and how quickly could it be restored if ZYN returns?

The drop is mainly due to the US market. Three factors contribute: we turned off tobacco products in the US, which had a small sales share but a disproportionately large consumer base; we exited some states, notably California, which will not return; and the bulk of the drop is due to ZYN supply issues. We expect to regain many of those consumers relatively quickly if ZYN supply is restored, but we need to wait and see.

29/05/2025 How do your market share goals for the US compare to Sweden’s mature market by 2028?

Our current market share in Sweden is 32%, while in the US it is 2.5%. Our target for 2028 is to reach 4 to 5% in the US. Some products growing quickly in the US are already at that 4 to 5% range. We are not satisfied with just meeting these targets; they serve as clear guidance to avoid unrealistic expectations like 10 or 15%. These targets provide a baseline for analysis, but we believe there is significant room for growth beyond them.

Growth

15/02/2023 What is the underlying growth in Norway after adjusting for COVID impact and border trade shifts?

Before COVID, Norway was growing robustly quarter on quarter. During COVID, business nearly tripled, then unwound in early 2022. In Q3 and Q4 2022, Norway showed robust quarter on quarter growth, especially in nicotine patches with substantial year-on-year growth. Despite lockdowns in late 2021 and early 2023, we continue to show strong performance and material growth consistently over several quarters.

15/02/2023 Is growth in Norway stronger than in Sweden or growth markets? What is the magnitude of underlying growth?

Norway’s growth is not at the magnitude of growth markets, as it is a core market with significant market share. We are seeing healthy, robust mid-single-digit quarter on quarter growth in Norway, which is strong but smaller compared to growth markets.

15/02/2023 Will the growth gap between core and growth markets widen next year, with growth markets growing two to three times faster?

Growth markets grew 56% in Q4 and continue solid performance. Core markets like Norway are growing around 1%, which is flatter. Norway’s comparables are still inflated due to extended COVID lockdowns. Overall, current trends are continuing similarly.

15/02/2023 How confident are you in achieving the 2025 target requiring 25% sales CAGR? Will you need to adjust it?

We remain committed to the €5 billion target. Nicotine pouches are growing 42%, and nicotine patches now represent 44% of sales. We view growth by category rather than total group level. Achieving the target requires strong focus and commitment, which we maintain.

15/02/2023 Do you expect EBIT to improve in absolute terms in growth markets, and when might losses reverse?

We expect to continue investing in growth markets, which are large consumer markets requiring investment to scale. We will keep investing for the foreseeable future. Margin expansion from here will be somewhat close, but no immediate reversal expected.

15/02/2023 Do you have concrete growth initiatives for 2023 and their financial implications?

We are not prepared to share growth initiatives for 2023 yet. Over the longer term, we expect broader geographic expansion and are preparing for it, but no specific comments now.

15/02/2023 Can you elaborate on the markets you are targeting for future expansion enabled by your warehouse expansion?

The warehouse expansion phase was completed mid-last year. We are now focusing on backend infrastructure like warehouse management, transport administration, and ERP to prepare for launching in more markets. These markets will likely remain within Europe and North America; we don’t expect much outside those regions.

15/02/2023 Are you targeting several new markets in Europe within the next 1-2 years or is expansion further down the line?

We are looking at a range of new markets within that 1-2 year timeline.

03/05/2023 You mentioned vaping in the UK with satisfactory initial evidence and ongoing evaluation. What are you evaluating, and what are your potential next steps? Are you considering expansion to other markets?

This is our first move into a category not sold in cans, so we launched a pilot to learn where to adapt our infrastructure and model. We have gathered most of the learnings and are happy with progress in the UK. We are now evaluating how to tweak things to accelerate growth both in the UK and to prepare for expansion into other geographies.

03/05/2023 Any news on which geographies might be relevant for expansion, or is it too early?

We expect to provide more details on that in future quarters.

23/05/2023 How do you target the Chinese market, given its large revenue contribution?

We don’t target China directly. We currently focus on the 48 million smokers in the EU and U.K. and the 37 million smokers in the U.S., starting with a target of SEK 76 million. Once we reach that, we will consider other geographies. We have enough to focus on for the foreseeable future.

11/08/2023 What was the growth rate difference between Sweden and Norway this quarter?

Both Sweden and Norway showed very strong performance this quarter. Norway is returning to normalized growth after some difficult periods in late 2021 and early 2022. While we don’t break out market specifics, there is no fundamental difference in growth rates between the two markets. Nicotine patches have declined across both markets entirely.

11/08/2023 Is it feasible to sustain or accelerate a 25% growth rate to reach SEK 5 billion in sales by 2025?

To provide context, the nicotine pouch category is gaining a substantial share of the overall oral category in Scandinavia. Nicotine patches are accelerating growth in key markets, especially in the U.S., where the category showed robust growth after slowing in 2021 and 2022. The last two to three quarters have seen strong market-wide performance that continues to accelerate. We see a strong tailwind for the overall category, and online sales continue to grow as a share of the market in all regions, supporting robust growth prospects going forward.

11/08/2023 How does growth in the overall category affect online sales growth?

As the category grows, there is often a delay between people adopting the category and moving to online sales. The positive progress seen in the category over the last two to three quarters is expected to spill over into online sales as people become more familiar with the category and alternative purchasing methods.

11/08/2023 What adjacent categories are you considering for expansion?

We remain committed to harm reduction and will only work with products confirmed to have less than 5% of the harm of cigarettes. This commitment led to piloting the vape category in the UK earlier this year and extending the pilot to Sweden in one store at the beginning of summer.

28/11/2023 How much bigger is the vaping market compared to the nicotine pouch market?

There are just over 100 million consumers of harm-reduced products globally. About 60 million of those are vapers, and around 2.7 to 2.8 billion are nicotine pouch users, so the nicotine pouch market is more than 20 times larger globally. The vaping market is highly skewed towards the U.S. and North America, which is why the bubble shown reflects the size of the category in the seven geographies where we currently operate.

28/11/2023 How has the online share of the U.S. market changed over the last 2-3 years, and why is it still low?

When we entered the U.S. market almost four years ago, we sold about 20,000 to 25,000 cans of nicotine pouches per month. Now, we have crossed 1 million, about 40 times larger. We initially focused on scaling by investing heavily, knowing profitability would come with scale. We have improved gross margin from minus 20% EBITDA to near profitability while growing market share and reducing investment. Our growth strategy involved three stages: establishing critical mass, achieving profitability, and then profitable long-term growth. Since we hold 85% of online sales in the U.S., we effectively represent the market. Our focus on profitability slowed market share acceleration but positions us well for profitable scaling.

28/11/2023 Do consumers behave differently offline versus online in the U.S. compared to other markets?

No, consumer behavior is largely the same. U.S. online assortments are narrower than in Sweden, but we offer over 100 SKUs online in the U.S., which is more than 10 times what an average convenience or petrol store offers. Pricing differences also drive online growth, as consumers notice retailers taking higher margins offline and seek better prices online. Convenience has been improving steadily over the last 15 to 17 months. We expect our U.S. online performance to substantially outperform the market going forward. We see two types of consumers: a minority who buy their first product with us to learn about harm reduction, and a majority who first migrate to nicotine pouches and then seek broader assortments and better pricing online. There is a delay between overall market growth and our performance growth.

28/11/2023 How has the online market share in the U.S. grown recently?

About a year ago, the offline market share in the U.S. was around 30 percentage points. Over the last 50 weeks, it has grown by almost 1 percentage point per week, with year-on-year growth now exceeding 70%. The pace of growth is accelerating rapidly, and although there is a delay before our own growth takes off, we are already growing faster than the market at this point.

28/11/2023 What are the adjacent growth opportunities beyond nicotine pouches?

There is substantial opportunity beyond our current footprint. Globally, about 1 billion smokers seek healthier alternatives, with 100 million having switched to risk-reduced products (RRPs) like heat-not-burn, vapor, snus, and nicotine pouches. Nicotine pouches are the fastest-growing RRP but only represent about 19% of RRP sales in our markets. Other categories like vape and heat-not-burn are also growing strongly, with consumers often dual-using products.

15/02/2024 Can you clarify if the growth markets turning profitable from 2024 excludes vaping and new markets? How much of these were included in 2023 growth markets?

Good morning, Nikolas. Yes, our growth markets are expected to become profitable from the start of 2024. In 2023, we made very limited investments in what we now call emerging markets. Initially, we piloted concepts in the UK, then briefly expanded to Sweden, and late in 2023, extended the pilot to Germany. We dedicated very few resources to the vape category in 2023. We are now confident in the progress within growth markets and plan to allocate substantial resources toward the next generation of opportunities ahead. So far, resource allocation to emerging opportunities has been minimal, but it will increase significantly going forward.

15/02/2024 Your sales growth was $3 billion last year and is expected to reach $5 billion in 2025, driven by faster growth markets. With Swedish snus excise tax cuts likely reducing prices, can you still hit the €5 billion revenue run rate?

We closed 2023 with SEK 3.2 billion, implying roughly 25% annual growth for 2024 and 2025. The excise reduction in Sweden is about SEK 2 per can, which is insignificant. The cut is more symbolic than materially impactful. Given the category's decline and less brand competition, strong brand owner price increases in snus could offset the tax reduction. We will monitor how this develops over time.

03/05/2024 How confident are you in reaching the SEK 5,000,000,000 growth target by 2025 given the current slowdown and required 28% sales CAGR over the next 7 quarters?

I see three layers in our sales: snus, nicotine pouches in core markets, and nicotine pouches in growth markets, each roughly one-third of sales. Nicotine pouches in growth markets are accelerating, and core markets are growing robustly above 25-28%. Snus is declining, as expected, but the decline ebbs and flows. We remain confident overall but recognize the need to navigate snus dynamics. Our primary focus is on nicotine pouches, which drive both growth and margin. Margin expansion in core markets partly reflects a mix shift from nicotine patches to snus, so we remain confident in these key factors.

09/08/2024 Can you provide early consumer responses to your online vape offering, and how does this fit with your emerging market and REIT ambitions?

We are seeing robust quarter-on-quarter growth in our vape offering, which operates on principles and a model similar to our nicotine pouches business. Performance has been in line with, or slightly ahead of, expectations. We plan to observe a few more quarters before providing deeper insights into the future trajectory in this space.

20/11/2024 How has the nicotine pouch market developed outside Scandinavia, and where do you see it going?

Almost every nicotine pouch brand I’ve encountered originated in Sweden. For example, one of the biggest US brands, Zyn, originated there, as did Velo. Since late 2016, these products gained traction in Sweden, which is considered the epicenter or "Silicon Valley" of nicotine pouches. Sweden has a sophisticated consumer base, expertise in product development, and significant capital investment. The market there is the most advanced globally.
Currently, about one-third of nicotine consumers in Sweden are smokers, though that is about to drop below one-third. Just over one-third are traditional snus users, and just under one-third are nicotine pouch users, which is the fastest-growing category, expanding 20 to 25% annually despite already representing one-third of the base. Notably, virtually no one under 25 in Sweden smokes cigarettes anymore.

20/11/2024 How do you see the nicotine pouch market evolving in Sweden and globally over the next five years?

In Sweden, nicotine pouches are set to become the vast majority of the market within five years, with almost no one smoking cigarettes. Sweden is on track to be the first OECD country where less than 5% of adults smoke. Among 18- to 22-year-olds, less than 1% smoke, and it’s generally believed that if you’re not smoking by 22, you’re unlikely to start. This signals huge and continued growth in nicotine pouches and a rapid decline in cigarette consumption.
Comparing this to the US, nicotine pouches currently hold about a 2 to 2.5% share of the total nicotine market there. The US market is growing faster than Sweden’s, at about 45 to 50% annually, as it is still in earlier stages. Nicotine pouches are also gaining traction in Switzerland, the UK, and other European markets, as well as emerging markets like South Africa, East Africa, Pakistan, and Indonesia. However, the majority of the market remains in Europe and North America.

20/11/2024 What are the consumer dynamics and purchasing habits in the nicotine pouch market?

Unlike cigarette consumers who often stick to one brand for decades, nicotine pouch consumers tend to use an average of seven different SKUs per year and order about 2.1 to 2.2 SKUs per purchase. In Europe, about 30% of the products we sell today didn’t exist a year ago, reflecting rapid innovation. This dynamic is self-perpetuating: as consumers demand better products, more money flows into product development, accelerating quality improvements and encouraging consumers to try the latest offerings. We expect a similar pattern to emerge in the US, depending on regulatory developments.

20/11/2024 Can you update on your 2025 revenue and margin targets, and how growth markets compare to core markets?

We set a 2025 target of 5 billion in revenue with high single-digit adjusted EBIT margins, initially expecting some bolt-on acquisitions. In late 2023, we revised this to expect 5 billion solely from organic growth, requiring growth rates in 2025 roughly matching or exceeding Q3 2024 levels. Market turbulence may cause volatility in hitting top-line targets, but we remain committed to our margin goals. We plan to provide updated medium- to long-term targets in spring.

Growth markets have higher pick-and-pack costs currently, such as our US warehouse at about 9% of revenue versus 3.5% in Sweden. Automation, like the new system in Texas, will gradually reduce these costs over several quarters, improving profitability in growth markets.

20/11/2024 How do customers switch between brands, and why do you make better margins on non-Zin products?

Most growth recently comes from challenger brands entering the category via the leading brand and then attracting consumers seeking broader assortments. Brand switching has accelerated since late 2023.

We often earn higher margins on non-Zin products due to promotional activities by challenger brands aiming to build trial and loyalty. These promotions help get products into consumers’ repertoires. Despite Zin shortages causing some sales loss, we don’t expect a material profitability impact because of better margins on other products.

21/11/2024 How much did growth in Zyn volumes contribute to profitability improvements in growth markets?

In growth markets, non-Zyn products are the primary drivers of profitability. Challenger brands invest more in consumer offers and awareness, so profitability tends to come from those products. Even in core markets, we generally make more profit from nicotine pouches than from snus, which is a declining category with limited brand owner investment. Growth markets see more investment from emerging brands seeking to build equity.

21/11/2024 Do you expect the online market for nicotine pouches to grow in the next 5 to 10 years, and how are you preparing for potential changes in Google search traffic?

The online market for cigarettes is small, partly due to regulation, but nicotine pouches are different. When I joined, we had about 2% of the Swedish market online, and many thought it would cap at 3-4%. Now we have about 34% share in Sweden, nearly 10% in the UK, and rapid growth in the US. I see no fundamental reason this won’t continue as consumers appreciate the benefits of buying online, provided they understand the category. Regarding Google search, we expect disruption from large language models and other players, but whoever dominates will want to send traffic to stores offering the best consumer experience. So long as we focus on providing that experience rather than gaming algorithms, we expect to remain well positioned.

13/02/2025 Is your 2025 U.S. volume growth forecast dependent on ZYN volumes returning around summer?

Excluding ZYN, we expect volumes to continue growing in line with Q4 growth rates, with no reason to slow down. Regarding ZYN, we anticipate robust sales when it returns, but I cannot specify when that will happen.

03/04/2025 What are your expectations for growth and margin in 2025, especially regarding the ZYN shortage and margin improvements?

Thank you, Niklas. Regarding revenue, our like-for-like growth has been accelerating as nicotine pouches became a larger part of our business, growing through late 2023 into 2024 until we hit the shortage. We expect to resolve this shortage in the coming quarters and then resume growth, but in the meantime, growth rates will be below the 18% to 25% range. Over the longer term, we believe the compound annual growth rate (CAGR) between 2024 and 2028 will accumulate to that 18% to 25% range.

On profitability, the opportunity in the U.S. is immense, and the returns we expect on long-term shareholder capital are unprecedented. As Peter mentioned, we will invest heavily early on to accelerate our position and strengthen our market presence, confident that this will generate the long-term EBIT margins we target. We will provide updates as we progress, but we intend to invest where we see good potential.

03/04/2025 How much of your projected growth until 2028 will be driven by Media Insights?

The vast majority of our revenue growth will come from product sales. Media and Insights will have a much greater impact on the bottom line than on top-line revenue. Although Media and Insights have grown faster than the group, they still represent only a high single-digit share of total revenue, so their growth won’t radically change the revenue mix even as it outpaces other segments.

03/04/2025 Is there overlap between nicotine pouch users and vapers, and what does this mean for the U.S. market development?

Yes, there is significant overlap across all markets. Many nicotine pouch users are ex-vapers or dual users transitioning. Over 60% of nicotine pouch consumers have used multiple products before, often starting with cigarettes, then dip or snus products in the U.S., moving to vaping, and finally to nicotine pouches. This shows a clear risk continuum, with consumers moving to lower-risk products, a pattern seen especially outside Scandinavia in Europe.

03/04/2025 When will Asian markets be ready for a service like Haypp?

Asian markets are ready for Haypp today, but the question is when Haypp is ready for Asia. Currently, we have over 100 million users in Europe and North America, with 1 million on our platform. We need to reach critical mass here before considering expansion to Asia. For now, our focus remains on these two continents.

06/05/2025 How should we think about margin development in emerging markets given steep losses? What is the threshold for scale or volume to reach profitability?

We could reach profitability in the emerging markets segment today if we chose to. The key decision is the return on investment in these segments. As long as we see robust, sustained growth returns, we will continue investing and benefit from scale. We expect to maintain similar investment levels for the rest of this year and will provide further guidance later. Over time, as scale increases, the need for investment may lessen or become less impactful.

Financials

15/02/2023 What are your EBIT margin expectations for 2023, considering your medium-term target of mid- to high single-digit operating margin?

Our guidance hasn’t changed much. We see 2023 as a good year to grow market share and advance positions. We don’t expect material margin uplift in 2023 but continued focus on advancing market positions. So, margin expansion will be more gradual.

11/08/2023 What was the CHF 14 million one-time cost for the warrant program, and will there be more?

The CHF 14 million one-time cost was a cleanup related to the IPO, released at the AGM in Q2 2023. It addressed some historical factors and is not expected to recur.

28/11/2023 Are there opportunities for gross margin expansion in partnerships and various end markets?

We take a different approach than many retailers and are proud to be the most profitable partner for our business partners. Our operating model is built on generating more value that can be shared evenly, so it’s not a zero-sum game where we squeeze our partners. We aim to remain the most profitable partner for suppliers over the next 10 years, with value coming from incremental benefits of our model. For more detailed gross margin expansion opportunities in specific markets, Peter will cover that shortly.

15/02/2024 Can you explain the significant increase in net financials related to exchange of intercompany financial positions? Should we expect this in the coming quarters?

Within the group, legal entities in different jurisdictions are financed through intercompany loans managed from a cash pool in Sweden. These loans are revalued quarterly, causing fluctuations like the significant increase in Q4 2024. We are working to reduce this translational exposure. Going forward, we hope this will not recur. Importantly, this is an accounting translation effect with no actual cash impact on the group.

03/05/2024 Can you elaborate on margin development and whether renegotiated contracts will yield a +1 percentage point margin improvement in 2024 and possibly more in 2025?

Directionally, yes. Annual negotiations have already delivered over 2 percentage points margin improvement in core and growth markets. We used some of this to invest 80 basis points into emerging opportunities. We expect this reinvestment to continue in 2024, but not the same Q4 to Q1 margin jump. Another step change in margin is anticipated in early 2025, which would not be a surprise.

09/08/2024 Your margins have risen over 100 basis points year to date in Q1 and Q2, with a significant uptick expected from early 2025. Can you comment on the expected magnitude of this increase?

We will likely provide more detailed guidance later in the year. Generally, we see material margin increases from Q4 to Q1 annually, partly due to our annual supplier negotiations, including with industry suppliers. While there are variables, we expect a material uptick in Q1 2025 and will offer more specifics closer to that time.

09/08/2024 There was a significant negative impact on net financials in Q2, with volatility over recent quarters. Can you explain the background and what to expect for upcoming quarters and the full year?

In Q2 2024, the net financial impact came from three main factors: interest expense on lease contracts for warehouse equipment, interest on our credit facility, and realized exchange rate effects. Previously, revaluation of intercompany loans also affected results, but we changed that structure so Q2's revaluation went directly to other comprehensive income, with no further impact expected. Interest costs, which make up over half of the net financials this quarter, are expected to remain stable. Realized exchange effects are harder to predict as they depend on working capital movements across group entities, but using this quarter as a base is conservative.

09/08/2024 Is the underlying net financial run rate roughly SEK 1,000,000 negative per quarter, mainly from interest costs?
It's actually more than that. The amount you mentioned roughly covers lease interest, but we also have credit facility costs. As we generate cash flow, these may decrease, but volatility will continue depending on inventory movements in coming quarters.

21/11/2024 Is the margin increase in core markets due to volume, mix, investments, or other factors?

The margin growth in the US core markets is mainly due to mix. We make higher margins on nicotine pouches than on snus. Nicotine pouches recently crossed 50% of sales in Sweden and Norway. As the mix shifts more toward nicotine pouches, overall margins improve. Benefits of scale also contribute, but many scale benefits have been passed back to consumers, which is why we continue to see robust growth.

06/05/2025 Are the gross margin improvements sustainable, or should we expect a negative mix effect once supply returns? Will you return some savings to consumers?

Regarding the gross margin, a small part of the improvement came from the year-end stock build, which is a relatively minor component. The rest of the gross margin improvement is sustainable. We do expect to return some of these savings to consumers, particularly in the latter part of the year. The US market conditions have changed compared to twelve months ago, so we will adjust our margins over time to find the best balance in the consumer offer.

Outlook & Guidance

15/02/2023 Are the favorable regulatory developments you mentioned referring to specific recent events or a general reflection of the year?

It’s a general reflection of the year. Earlier in 2022, we saw positive regulatory developments, especially in Germany. The sentiment is positive overall rather than tied to specific Q4 events.

23/05/2023 How is the Swedish experience influencing global regulation and acceptance of nicotine pouches?

I’m originally Irish, but in the U.S., people appreciate the Swedish experience greatly. Sweden’s success in reducing cigarette use is envied and many countries want to replicate it. For example, the U.K.’s National Health Service now offers nicotine pouches free to smokers to help them quit, recognizing the societal, individual health, and economic benefits. ESG is a complex space, but those closely involved appreciate the work we’re doing.

11/08/2023 Will you be EBITDA positive in growth markets even with accelerated rollout?
No, EBITDA positivity is focused on the existing markets we operate in. We plan to provide more details on our expansion plans at the Capital Markets Day in November.

11/08/2023 When will the next update and Capital Markets Day occur?
We look forward to providing an update at the end of Q3 results in early November, followed soon after by the Capital Markets Day.

08/11/2013 Any closing comments on the Q3 results and upcoming events?

Thank you very much for listening to our Q3 results. I want to thank the entire team for delivering another exceptionally strong quarter. I also want to remind everyone that our Capital Markets Day is on November 28th in Stockholm. Everyone is very welcome to attend, and we will be releasing our full-year results then.

28/11/2023 What is the future outlook for nicotine pouches and harm reduction products?

Harm reduction is gaining momentum globally, with countries like Sweden, Norway, the U.K., Switzerland, Germany, and the U.S. adopting or recommending favorable regulations. The EU’s beating cancer plan highlights harm reduction to reduce smoking-related illness. Youth access prevention remains a key priority, with ongoing development of robust age verification systems. Compliance and strong operational capabilities will be critical competitive advantages.

28/11/2023 What is the pace and focus of rollout into new categories and markets?

We began expanding into vaping earlier this year, first in the U.K. and then in Sweden, with plans to enter another European market soon. Our primary focus is on vaping because it is a well-established and stable category with a clear growth trajectory. While there are emerging opportunities in heat-not-burn products, we currently have a less defined position there. We will approach new markets in the order we can absorb and manage them effectively.

15/02/2024 Your margin progression has been stable with 20 to 40 basis points growth per year, which is too slow to meet 2025 targets. Will this pace pick up in 2024 and 2025, and will it be visible in Q1?

Yes, there are two dynamics here. Since our IPO in 2021, we expected margin uplift to be back-end loaded, prioritizing growth in the near term with scale benefits driving margin over time. While growth markets have shown material margin improvements, they also represent a larger share of sales, balancing the overall margin. As growth markets become EBITDA positive, they will no longer drag margins but contribute profitably. This shift, combined with sales growth, will drive greater margin acceleration through 2024 and 2025.

15/02/2024 EBITDA losses in growth markets have been stable around EUR 15 million per quarter but are expected to reverse to profitability from Q1. What is the lever for this improvement?

Our annual agreements with business partners and suppliers are based on calendar years, with terms set on the size entering the year. Given the growth in these markets last year, we enter 2024 with a substantially larger platform than in 2023. This results in greater support for these markets, causing a step change in profitability typically between Q4 and Q1, more so than in other quarters.

15/02/2024 You mentioned positive regulatory decisions in Q1. What are these?

Throughout 2023, we observed the emergence of cancer prevention policies at national, regional, and global levels. While some positions remain confidential, our intelligence gathered over the past month to six weeks gives us confidence about the regulatory dynamics expected to manifest in 2024 and beyond.

15/02/2024 Are there any concrete regulatory decisions to discuss now?

No, nothing concrete is currently available for public discussion.

15/02/2024 How have manufacturer price changes behaved in 2024 compared to prior years?

The nicotine industry typically experiences consistent pricing dynamics. We do not see 2024 as significantly different or abnormal compared to previous years regarding manufacturer-led pricing.

09/08/2024 What is the expected annual average growth in fully diluted shares over the next few years, considering the recent 4% increase and new warrants issued to management?

We generally issue roughly 3% of warrants to management each year, detailed in our AGM. These warrants are typically issued 30% out of the money and mature in three years, converting into shares subject to earnings. For example, if the share price grows about 30% over three years, there would be no dilution. If it grows by roughly 100%, dilution would be about 1% per annum. The key factor driving this is the underlying share price, which determines the dilution spectrum.

21/11/2024 Is the PMTA process a one-time investment for manufacturers, or do they need to submit ongoing data to maintain authorization?

Manufacturers need to continue submitting data regularly during the typical five-year window to keep their authorization fresh. It’s not a one-and-done process. If the product continues to perform as expected and data is properly collected and submitted, the authorization should be maintained unless something fundamentally changes.

21/11/2024 Can Median Insights be part of the recurring PMTA data submission process?

Yes, Median Insights can be part of that process. One key question regulators like the FDA ask is how beneficial the product is to society, specifically what percentage of users have switched from more harmful products versus new nicotine users. Our data shows that in the US, 92% of our consumers have switched from more harmful nicotine products. We collect detailed nicotine history from consumers, tracking their transitions between products over time, which brands use in their FDA submissions. This data is increasingly valuable in the US and is expanding into Europe.

06/05/2025 Will profits be lower sequentially from H1 to H2, or lower year over year due to investments?

At a minimum, profits will be sequentially lower in H2 compared to H1. Depending on opportunities in the US market and specific dynamics, we will continue investing where we see long-term returns. We want to maintain flexibility to capitalize on opportunities as they arise.

06/05/2025 Will Media and Insight continue to significantly support gross margin in H2 and future years?

Our media and insights contracts run on calendar years, so the benefits seen in Q1 and Q4 are expected to continue through the rest of this year. We will keep investing in media and insights to improve value for our partners and ourselves, and we expect these benefits to continue improving in 2026 and 2027.

Risks & Macro

03/05/2023 Can you elaborate on the likely timeline and outcome of regulatory risks in Norway, considering regulatory processes take a long time?

This relates to a strategic paper covering roughly the next four years, sometimes extending further. Not everything in this space leads to regulation; it’s more a broad list of wishes across nicotine and tobacco categories, including retail. We are confident that the online aspect has been taken somewhat out of context. Digital marketing and online sales are often lumped together, but we believe common sense will prevail regarding any online ban.

Online is the channel with the strongest age gating and verification in Norway, and it has a disproportionately low share of the 18 to 25-year-old market, as younger people with lower disposable income tend not to pre-purchase snus online. We have solid age verification to prevent under-18 sales. We believe the strategy paper is a bucket list unlikely to be enacted soon, and many aspects may take years and extend into the next parliamentary session after an election.

03/05/2023 Hypothetically, if there were an online ban in Norway, do you have a plan B? Could you continue selling there, or would you have to cease operations?

It’s very difficult to answer given the limited detail in the strategy paper. We would need more clarification to understand the potential impact on the business over the next three to five years.

23/05/2023 How does your business model align with ESG concerns, and how do you address related questions?

Absolutely. Perspectives on ESG vary greatly worldwide. Within Scandinavia, where our product has been very successful, ESG concerns are probably less recognized compared to other countries. When I speak to people in the U.

11/08/2023 What is the likely regulatory process and timeline in Norway regarding the proposed online ban?

The initial regulatory concern in Norway was broader than just online sales; it focused heavily on digital marketing platforms like TikTok and the sale of illegal products across borders online. Norwegian regulators are becoming more familiar with the real issues and are starting to differentiate the core problems within this category. This evolving understanding could affect the timeline for regulatory clarity. There are various legislative paths possible, making it difficult to predict the exact process, but we expect to have much more clarity in the latter part of this year.

08/11/2013 What is the status of discussions in Norway regarding a potential ban on online sales?

The position in Norway remains consistent with what we said at the end of Q2. We are confident that any online sales ban will focus only on cross-border sales, mainly targeting vape products, which are illegal in Norway. We strongly believe that online sales of snus and nicotine pouches will continue to be allowed in Norway. There has been no change in this stance.

28/11/2023 What recent regulatory changes have impacted the market?

Norway’s Public Health Strategy supports online sales, benefiting us. Sweden introduced a new excise tax structure taxing tobacco and nicotine products based on harm reduction, increasing excise on cigarettes and lowering it on snus and nicotine pouches. California’s flavor regulation favors online sales with better youth access prevention than offline. Germany’s nicotine pouch sales restrictions apply only to physical retail, not online sales from Sweden.

28/11/2023 How will regulation affect nicotine pouches and cross-border sales after 2028?

Countries are already choosing to regulate nicotine pouches rather than ban them. After 2028, cross-border online sales restrictions will come into effect, reinforcing our investments in warehouses across Europe. The U.S. market will improve as newer generations of nicotine pouches pass FDA PMTA requirements and receive marketing orders. Consumer demand in the U.S. is robust and growing, supported by an age profile well above 21 years.

28/11/2023 Why is there confidence that Norway will oppose an online ban on nicotine pouches?

The Norwegian Parliament discussion this spring showed the government lacks a majority to support an online ban. There are no indications that this situation has changed. Given the current government and parliament composition, it is unlikely an online ban will be proposed or passed in the near term, and if it is not supported this term, it will be even less likely in the next term, extending beyond 2028.

28/11/2023 How significant is the role of insights in the business, and how does it differ between core and growth markets?

Insights generate value in multiple ways, primarily through invoicing brand owners for consumer insights, new opportunity identification, brand tracking, and M&A dynamics. While we provide data to regulators and universities, this is not a major revenue source. More importantly, insights enable close manufacturer relationships, including exclusive pre-launches that expand our assortment advantage. Although difficult to quantify precisely, insights are a fundamental business driver. The core business is profitable even excluding insights revenue, and we maintain fair pricing to preserve strong partner relationships.

28/11/2023 Are markets outside North America and Europe being considered for expansion?

Currently, we focus on the seven markets in North America and Europe, which together represent about 80 million nicotine consumers. These regions account for less than 10% of the world’s smokers, but given the significant opportunities here, we believe focus is critical. We plan to maintain this focus for the next few years before reconsidering expansion beyond these boundaries.

28/11/2023 What margin targets are being discussed, and what is meant by excess cash?

We target high single-digit adjusted EBITDA margins, with a range of 5% to 7% based on current reporting. The business is not capital intensive, with capital expenditures around 1.5% to 2% of sales. As the business generates substantial free cash, some will be reinvested in emerging opportunities, but surplus cash beyond what can be efficiently deployed will be returned to shareholders.

28/11/2023 What capital investments are expected for new categories?

New category investments are expected to require limited capital expenditure since existing infrastructure can be shared. Most investments will be reflected in the P&L rather than as significant capital outlays.

28/11/2023 What return requirements guide new investments?

Historically, the business has operated with robust double-digit returns on capital employed, well above its weighted average cost of capital. Capital allocation remains disciplined, focusing on markets and opportunities where infrastructure is ready and risks of overextension are minimized.

28/11/2023 What lessons were learned from the U.K. nicotine vaping pilot?

The U.K. pilot was chosen for its competitive market to test infrastructure readiness for multi-category management. The pilot revealed gaps in handling different category dynamics, which were addressed early in the development of new systems. These learnings are incorporated into the operating model for rollout in 2024.

28/11/2023 What is the regulatory outlook for nicotine pouch legislation in Europe?

Regulatory perspectives vary across Europe. Many countries like Sweden, Denmark, Finland, Austria, and Slovakia have positive regulations supporting nicotine pouches and risk-reduced products. Belgium and the Netherlands are exceptions with more restrictive stances. Post-TPD3, countries may regulate or ban nicotine pouches, with cross-border online sales likely restricted, requiring local market presence. The European Commission’s Tobacco Excise Directive proposals have faced pushback for proposed high excise on nicotine pouches compared to vaping. A balance between EU and member states’ positions is expected.

28/11/2023 How will excess cash be returned to shareholders, and what is the timeline?

No capital returns are planned for the next two years as the business focuses on growth and capital generation. Afterward, the company will engage with shareholders to consider options such as dividends or share buybacks, depending on what is most attractive and appropriate at that time.

15/02/2024 As you expand into e-cigarettes, how do you ensure youth access issues and regulatory scrutiny on disposables do not cause business volatility?

There are two key factors. First, we have robust age verification processes across our platforms, aiming to lead in this area. Second, vaping is moving from a pilot phase to a strategic pillar. We will focus our portfolio on adults, especially former cigarette smokers, refining it through 2024 to prevent underage access and ensure the category is unattractive to younger adults and minors.

07/11/2024 Do you have any updates on the withdrawn Swedish license, including whether you have submitted an appeal and if the changes made might be sufficient to regain the license?

Yes, we have submitted our appeal, which moves the process into the legal system, so it is no longer primarily a dialogue with the municipality. Over the last six weeks, we have implemented all the municipality's recommendations, some as recently as last week, and they are now all completed. However, I do not expect the municipality's position to change, and we anticipate the matter will be resolved through the court system, where we expect a favorable conclusion.

07/11/2024 Was the EUR 11,000,000 one-off cost related to legal fees or a provision for expected fines in San Francisco?

The EUR 11,000,000 covers the expected settlement fee with the city and the city's legal costs. This reserve is based on initial estimates as we are still gathering data for the case.

07/11/2024 Is there a risk that the settlement fee could be significantly higher, such as $50 million to $100 million, or is EUR 11,000,000 your best estimate?

Our best estimate at this point is EUR 11,000,000; we do not currently see a risk of it being significantly higher.

03/04/2025 What is the main risk to achieving a 4% margin, and should we expect limited margin expansion due to investment phases?

I view this differently. Peter shared assumptions including a 4.5% U.S. market share by 2028. We wouldn’t be satisfied with just 4.5% market share then, but we shared this to provide a basis for understanding. If we reach 4.5% with strong traction, we will continue to focus on generating long-term shareholder value and be prudent with capital. We will keep investing if it accelerates market growth.

The risk to margin isn’t external factors consuming capital but rather our choice to invest aggressively if opportunities arise. We want flexibility to seize these opportunities because 2028 is a milestone, not a destination.

29/05/2025 Are you experiencing any issues with the FDA given recent personnel changes, and how do you view regulatory risk?

Historically, Republican administrations have been more supportive of nicotine products than Democratic ones. The approval of this category’s 10 flavors late in the previous administration was driven by public health benefits, as these products help people quit cigarettes. We do not see political risk to the category from the current or future administrations. The FDA may be experiencing operational turbulence affecting product approvals, but this should resolve quickly. Once the first product is approved, it sets a strong precedent, allowing subsequent products to move through the pipeline faster. Second-generation products are already entering the US market, and third-generation products are in the FDA pipeline, similar to those used in Europe for the past few years.

Personal Questions

23/05/2023 Do Swedish investors perceive your business differently than international investors?

Absolutely. International investors tend to focus more on the real societal impact and data rather than just the category label, showing a more positive outlook.

21/11/2024 What is your background and how did it lead you to join Haypp, especially given the rise of healthier alternatives to legacy products?

I spent nine years in the tobacco industry, working for British American Tobacco (BAT). In my last years there, I was general manager for Scandinavia, where I first got involved with snus and saw its potential. I also encountered the concept of nicotine pouches and acquired a company for BAT, now the European market leader for nicotine pouches, similar to what Zyn is in the US. I acquired that business in late 2016 or early 2017. I recognized the category’s potential and anticipated many new entrants. With 50 to 200 new SKUs entering the market annually, offline retail would struggle to educate consumers, but online was perfect for that. I was familiar with this company’s previous name, Snusbolaget, and approached the founders with a vision to build a global nicotine pouch business with valuable media and insights. That was about eight years ago, and we started the journey from there. I’ve always been passionate about risk reduction in tobacco, given it kills 8 million people a year, which creates an opportunity.

Other

20/11/2024 Can you explain the origins and early development of the business?

Thank you very much, Spencer and Bob, for having me today; it's greatly appreciated. We are an online retailer of nicotine pouches across seven European markets and the US. In the simplest terms, you could view us as an Amazon for nicotine pouches. We don't make any products ourselves; we buy them from brand owners, many of whom are global tobacco players. We hold the products in our warehouses and sell them online to consumers. That is the primary part of the business. The secondary part, which is less well known, is that we capture a lot of information from our consumers about what they like and dislike regarding the products. We process that data and deliver it back to the brand owners to help them adapt their products or marketing in the future. We operate in the risk-reduced nicotine products space.

20/11/2024 Can you describe the company's history and how it evolved into its current form?

The company has been around for just over 15 years. It was founded in 2009 by two 19-year-olds in Stockholm with the vision to bring snus online and start selling it as a product, which didn’t exist online in Sweden at the time. For context, snus is similar to dip products in the US but pasteurized rather than fire-cured; it’s a small pouch of tobacco placed under the upper lip to extract nicotine. The business started as a garage startup with just the two founders running it. Over time, they improved the website and customer acquisition. I came across the company in early 2016 while working in the tobacco industry and recognized the platform’s potential for generating awareness and trial for new products.At that time, the oral nicotine market in Scandinavia was still 100% traditional tobacco snus-based products.

From late 2016, nicotine pouches began to emerge. I acquired a business for British American Tobacco (BAT) that was the leading nicotine pouch brand in Europe, called V, which is quite different from US products. Nicotine pouches started migrating snus users and even cigarette smokers, despite rapid cigarette decline in Scandinavia, toward these products. We saw five global tobacco players and others entering the market. I joined the business in summer 2017 with a vision to dominate nicotine pouch retail in Sweden, then expand to Norway, the UK, German-speaking Europe, and the US, where we acquired a business selling traditional tobacco products, mostly dip. When I joined, we sold about 10,000 cans a month; now, we sell around 5 million cans monthly, showing strong exponential growth.

20/11/2024 How does the nicotine pouch category fit within the broader risk-reduced product market?

Globally, about 1.1 billion people use some form of nicotine, with roughly 1 billion smoking and about 100 million using risk-reduced products. Of those 100 million, 60 to 65 million use vapor products, nearly 5 million use nicotine pouches, and the rest use heated tobacco products like iQOS and Glo. Nicotine pouches, though the smallest segment, are the fastest-growing category and the biggest bet for the industry. All five global tobacco players have heavily invested in this space, both organically and through acquisitions, such as Philip Morris’s acquisition of British Match just over two years ago. Smaller companies are also making significant bets on nicotine pouches.

Sources

Haypp Group - The Market Leader in Nicotine Pouches Pt.1

Robotti Fireside Chat W/ Haypp Group

Haypp Group, Online Retailer for Nicotine Pouches, on Regulatory, Barriers to Entry + 2025 Goals

Haypp Group (ST: HAYPP) Webcast | Planet MicroCap Showcase: VEGAS 2025

Disclaimer:

The following transcript and Q&A have been generated with the assistance of Artificial Intelligence (AI). While we strive for accuracy, completeness, and clarity, the content may contain errors, inaccuracies, or misinterpretations. Neither the company featured in this document nor ValueBridge assumes any responsibility or liability for the accuracy, reliability, or completeness of the information presented.

This material is for informational purposes only and should not be construed as official company communication, financial advice, or a definitive representation of the company's views. Readers should independently verify any information before making decisions based on it.

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