Nicotine Pouches Reshape the Tobacco Company Landscape: Can Altria Keep Up?

The U.S. oral tobacco market is experiencing a seismic shift. Nicotine pouches have captured 55.7% of the category in Q3 2025, jumping 11.1 percentage points year-over-year—a growth trajectory that’s forcing every major tobacco company to recalibrate its strategy.

The Altria Dilemma: Growth vs. Market Share Erosion

Altria Group, Inc. (MO) finds itself in a precarious position. While its on! brand commands 8.7% of the total U.S. oral tobacco market, its slice of the booming nicotine pouch segment has contracted to 15.6%, down 4.1 points from the prior year. What went wrong? Aggressive competitor promotions. During Q3, rivals slashed nicotine pouch prices an average of 7% nationally—with some major retail chains seeing discounts exceeding 70%. Meanwhile, Altria opted for a different playbook, raising on!'s retail prices by approximately 1.5%.

This pricing divergence reflects a contrarian bet by the tobacco company: maintain margin over volume. Remarkably, on! achieved “steady” retail takeaway despite the promotional onslaught, suggesting underlying consumer loyalty hasn’t evaporated. Still, losing 4.1 market share points in a hypercompetitive environment is difficult to overlook.

Altria isn’t sitting idle. The company launched on! PLUS—a next-generation nicotine pouch engineered for enhanced comfort, nicotine delivery, and flavor. Early market research indicates stronger purchase intent versus competing products. Rollouts have begun in Florida, Texas, and North Carolina. Whether this innovation can reverse market share erosion remains the critical question as the category evolves.

The Competition Heats Up: Philip Morris and Turning Point Surge

Philip Morris International (PM), a dominant player in the modern oral space, posted impressive Q3 2025 results. Global pouch shipments jumped 16.9%, while U.S. ZYN offtake—its flagship nicotine pouch—surged 39% according to Nielsen data. Following earlier supply constraints, ZYN returned to full retail availability backed by comprehensive commercial support. Philip Morris has also signaled continued capital investments in production capacity and commercialization to capture rising demand.

Turning Point Brands (TPB) delivered the quarter’s most eye-catching performance. Modern oral segment net sales skyrocketed 627.6% year-over-year to $36.7 million, now representing 28.8% of total company revenues. The trajectory is accelerating: sequential growth hit 22% in Q3, prompting management to raise full-year modern oral guidance to $125-$130 million. The tobacco company is also ramping toward its first domestic white-pouch production lines in 2026—a move that signals ambitions to scale aggressively.

Altria’s Valuation Puzzle

Altria’s stock has stumbled 9.8% over the past month, underperforming the broader industry’s 1.8% decline. Yet the valuation tells a contrarian story. MO trades at a forward P/E of 10.47X, sitting well below the industry average of 14.12X. The Zacks Consensus Estimate projects earnings growth of 6.1% in 2025 and 2.5% in 2026—modest but steady.

The central tension: Is Altria’s valuation discount justified by weakening competitive positioning, or does it present an opportunity for value investors betting on on! PLUS to reignite growth? The answer lies in whether the tobacco company can stabilize its nicotine pouch market share while maintaining pricing discipline. The next two quarters will be pivotal.

Altria carries a Zacks Rank #3 (Hold) rating, reflecting the uncertainty ahead.