Big tobacco may be scrambling to grab a hold of the e-cigarettes market, but there's a little-known 700-year old tobacco product from Europe that's also seen as having big potential.
Snus (pronounced "snoose") is similar to U.S.-style dipping tobacco. It's a derivate of snuff with the history records showing its use dating back to the late 1400s. It's placed inside the upper lip and is either sold loose in tins or in tiny tea bag-style pouches.
Snus is primarily manufactured and consumed in Sweden but is banned across the rest of the European Union. Nonetheless, the Swedish market is growing amid fierce competition from rival brands, according to Citigroup analyst Adam Spielman, who told CNBC that demand is growing in the United States too.
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"We do recognize the U.S. snus business is an important investment consideration, and it could turn into quite a positive," Spielman said in a note on Tuesday.
Chad Jones, a U.S.-based snus user and blogger for Snubie.com, a website devoted to smokeless tobacco, told CNBC via email that he has witnessed growth in popularity with more retail outlets offering the product in his local area.
"I was looking for a way to quit smoking and discovered snus…what drew me in was how discreet snus was and the lack of dangerous health risks that other forms of tobacco carry. As a new parent, I also didn't want to expose my daughter to any of the second-hand effects of smoking, and I no longer wanted to subject myself to the effects and risks of cigarettes either," he wrote.
"Snus is a way that people who have been trying to quit smoking unsuccessfully can finally put down the cigarettes and move forward with their lives."
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Shares in Swedish Match, one of the major snus manufacturers, fell around 5 percent Tuesday as Citigroup cut its rating to a "sell" from "neutral" citing "competition pressures" and a "price war" in Sweden that will continue into 2014.
One ray of light will be the U.S., Spielman said. Currently snus in the U.S. is generating sales of roughly 60 million Swedish Krona ($9 million) a year for Swedish Match, he said. That's 4 million cans of snus a year at approximately $1.50 to $2 per can. Swedish Match are currently pumping about 8 percent of its trading profit into growing its U.S. business, he said.
'Modified or lower risk'
Statistics from research firm Euromonitor suggest that the U.S. will be snus' biggest growth area. Between 2013 and 2017 it expects retail volume to grow by 19.7 percent in the U.S., 11.1 percent in Sweden and 15.5 percent in the rest of the world.
