When it comes to tobacco, it’s oft been said “the more things change, the more they stay the same.” Cigarette sales decline, prices go up and regulations wreak havoc at every level of government.

Yet the nicotine category as a whole has changed, especially in the past year. Data from Management Science Associates (MSA) paints the picture of a meaningful shift: Between 2023 and 2024, non-tobacco products (vapor and modern oral) grew from 12.7% to 17.6% of all nicotine sales.

“A certain percentage of consumers who want nicotine are looking for alternative products that don’t contain tobacco,” said MSA Senior Vice President Don Burke. “Meaning there will likely continue to be a market for nicotine, regardless of what may happen with tobacco.”

It’s a shift that even the most seasoned of tobacco vets didn’t predict.

“Who thought 10 years ago that modern oral would be taking off like it has,” said Rick Staley, merchandising manager for Tri Star Energy. “I think there are going to be new products coming that will help offset the cigarette sales. … I just don’t know what they are.”

We may not know what the game-changing products available 10 years from now will be, but when it comes to 2025, there are plenty of products, trends and regulations that leaders like Burke, Staley and more are anticipating. Here’s a look at six of the most-pressing issues facing the nicotine category this year.

The Brightest of the Bright: Modern Oral

No surprise here: When asked what they were most excited about for nicotine in the new year, virtually everyone listed the continued, seemingly unstoppable growth of modern oral nicotine.

Staley noted that cigarettes, MST and vapor are all down … but that the leading nicotine pouch has now overtaken longstanding OTP leaders in terms of sales in his stores. “The only bright spot is really the new modern oral category,” he said.

“From a product standpoint, we’re very, very excited about the customer migration to new modern oral,” echoed Robert Wade, category and supply chain manager at ExtraMile Convenience Stores.

The data supports such enthusiasm.

You see large participation in the pouch business in major cities—it’s something that really bridges the gap between gender and income disparities.

“Modern oral is now the third-best selling item in OTP,” Burke said, adding that sales were up 55% year over year. “It is far stronger than vapor, tubes, pipes or little filtered cigars—and is catching up to moist.”

And it’s not the typical smokeless consumer driving the growth. Staley and Wade both cited expanding demographics as a major plus of modern oral: There are more female, higher income, and urban customers.

“In the past, you wouldn’t see high MST sales in Los Angeles,” said Wade. “But you do see large participation in the pouch business in major cities. It’s something that really bridges the gap between gender and income disparities.”

The question facing retailers in 2025 isn’t if modern oral will continue to grow … but by how much?

As Inflation Has Eased, Are Consumers Still Downtrading?

Another reason modern oral has seen such a boost is because it’s perhaps the only segment not suffering from the downtrading phenomenon.

“Premium cigarettes are what’s really killing us, but the fourth tier is growing—it’s really taken off,” said Staley, adding that lower-tier options have also seen sales growth in his stores. “There is a lot of trading down to a lower tier, that’s for sure.”

MSA data shows downtrading is happening across the country: As of Q3 2024, fourth-tier cigarettes were up 0.6% vs. Q4 2023, while premium cigarettes were down 12.2%. Similarly, while deep discount MST was down 1.7% year over year, that’s a much smaller decline than premium MST (-7.6%) or branded discount (-10.8%).

That downtrading continued despite inflationary pressures easing. According to Trading Economics, the United States’ annual inflation rate hit 2.4% in September 2024—the sixth consecutive month of declines and the lowest inflation rate since February 2021.

We will continue to see strong movement to the deep discount categories across almost all tobacco categories.

“While inflation may be coming down a little bit, it’s likely that consumers are still realizing [price] increases in the tobacco category,” Burke said. “So we will continue to see strong movement to the deep discount categories across almost all tobacco categories.”

This may signal that while those in the industry are monitoring the downtrading trends, few believe relief is in sight.

“Will it continue?” Staley said. “Yeah, I think so.”

Will a New Administration Mean Better Nicotine Policies?

With the White House changing hands, a massive federal policy change remains up in the air: the FDA bans on menthol cigarettes and flavored cigars nationwide. These bans were finalized and set to be signed into law until the Biden Administration put them on hold in April 2024.

While it’s highly unlikely that President-elect Trump would encourage the FDA to move forward with these bans, NACS Director of Government Relations Anna Ready Blom warned at the time of this article writing: “I think there is a possibility that President Biden could finalize the menthol rule before he leaves office on January 20th.”

A federal menthol and flavor ban is of great concern to retailers in every state.

“There’s not much really happening [in terms of bans] at the state and local level in Tennessee, Kentucky and Alabama,” said Staley, who operates in these states. “But a national flavor ban on menthol and cigars? That would really kill the industry.”

David Spross, executive director of the National Association of Tobacco Outlets (NATO), said moving forward with such drastic action in a lame duck session is not common when there’s a change in party.

If you look at this loophole where all of these illicit vapor products started flooding the market, this problem has been created by FDA’s process.

“Even if something happens before former President Trump takes office, I could see scenarios where the new Administration takes steps to delay implementation of the rules, declines to enforce them or initiates rulemaking to rescind them,” he said.

While the FDA was close to finalizing the menthol and flavor ban—making it a possibility to finalize in the lame duck session—it’s much further off on the other major nicotine initiative under the Biden Administration: lowering the level of nicotine in cigarettes. The plans to do so were announced in the summer of 2022 but the agency has yet to announce its proposed rule on nicotine levels, much less review comments on said rule or issue a final rule.

“That’s something that has been on their radar that they have been working on, but we just haven’t seen a formal proposal,” Ready Blom said.

As for what the FDA will look like under a second Trump Administration, there’s even more uncertainty due to the nomination of a cabinet head who has been very outspoken on taking on food production and Big Pharma … but is something of a mystery when it comes to tobacco.

“The Trump administration has nominated Robert F. Kennedy Jr. for Secretary of HHS,” Ready Blom said. “He’ll have authority over FDA and these types of issues. It’s unclear what his position on them will be.”

Will Anything Ever Be Done About Illegal Vapes?

Among retailers, analysts and legal experts, the increasingly infuriating problem of the illegal vapor market is a top concern going into 2025.

“A lot of our competition carries them,” Staley said of flavored disposable vapor products, most of which are considered illegal by the FDA but are still very much on the market. “We don’t and it hurts our sales.”

“This problem of a loophole that allowed all of these illicit products to flood the market has been created by FDA’s process,” Ready Blom said, adding that the FDA has not provided a list of products that have had a premarket tobacco product application (PMTA) accepted for review and are therefore allowable to sell. “You have bad players taking advantage of the lack of clarity in this system.”

You see large participation in the pouch business in major cities—it’s something that really bridges the gap between gender and income disparities.

Though the FDA has made some strides—issuing warning letters, fines and confiscating product coming into the United States illegally—NACS is working on legislation that would require FDA to provide that list of compliant and non-compliant products.

Admittedly it’s just a first step in solving the problem.

“NACS has been trying to get lawmakers to focus on FDA’s responsibility of providing clarity and transparency to retailers, and from there enforcing,” said Ready Blom. “Specifically, FDA having to produce an enforcement plan and then take action.”

Three Things to Watch at the State and Local Level

Though federal regulations have the potential to impact the largest number of retailers, the state and local level is often where the most troubling regulations are first passed.

“I call it the legislative laboratory for tobacco control,” Spross said, pointing to the fact that the tobacco flavor ban started in cities and municipalities primarily in California and Massachusetts, then those states followed by enacting them into statewide laws.

There are three main issues Spross and others are watching at the state and local level in 2025:

1. Taxes—especially for pouches: “Depending on the economy, there will be some states that will try to increase taxes,” Spross said, adding that there are around 20 states that don’t currently tax vapor products and another 35 that don’t tax modern oral nicotine pouches. “Pouches are starting to get attention from lawmakers. I think there will be some states that attempt to capture additional revenue from these emerging categories.”

2. Continued flavor bans: “When California passed its flavor ban in 2020, I thought that it was going to be an inflection point in the industry—however, other states haven’t followed California’s lead, perhaps due to the unintended consequences of California’s flavor ban, such as an increase in black market sales,” said Spross. He further noted that there have been several proposals in other states. “Those proposals will be reintroduced and considered again on the state and local levels.”

3. “Nicotine-free generation” laws: In 2021, Brookline, Massachusetts became the first city to enact a generational tobacco ban (banning the sale of tobacco products to anyone born after Jan. 1, 2000). Since then, a number of other cities and localities have followed suit. “Right now, we are primarily dealing with it in Massachusetts, and we are actively engaged to prevent it from going to other cities,” Spross said.

What Innovations Are Coming?

With the success of modern oral nicotine, retailers are eager for more innovations in the nicotine category.

While many manufacturers are coming out with new and improved products, one long-promised innovation is heat-not-burn products, which create a smokeless experience by heating tobacco instead of burning it. Philip Morris International is poised to release the first major heat-not-burn option in the United States: Its IQOS device, which has gained popularity in Europe and Asia.

The question is when.

IQOS started a pilot program in Austin, Texas, in October of 2023, with the attention on research and focus groups as opposed to a full launch. Philip Morris had stated it won’t do an at-scale launch of IQOS until the FDA approves its latest model (IQOS Iluma)—expected in the second half of 2025.

Retailers are still not clear when or how IQOS will be made available at their stores. In other countries, Philip Morris has created IQOS Stores to sell the IQOS device (though other retail outlets sell HEETS—the tobacco sticks heated in the device).

“It’s really more of a wait and see approach,” Wade said of IQOS, expressing concerns about a potential high price point of the IQOS device when compared to vapor products on the market.

Staley said Tri Star was initially in talks to be a test market for IQOS. Whether that comes to fruition or not, Staley said innovations like IQOS, along with all of the other new and exciting products in development from suppliers, are what will keep the backbar strong in 2025 and beyond.

“I think it’s very important,” he explained. “With the decline in cigarettes and moist snuff, you have to have something to pick up those extra sales. Innovation is what really drives all the categories, tobacco included.”