STG Purchases XQS, a Swedish Nicotine Pouch Company

Scandinavian Tobacco Group (STG) has announced that it has agreed to purchase XQS International AB, a Swedish maker of tobacco-free nicotine pouches, in a deal that could be worth as much as DKK 150 million ($22.11 million).

While the deal does not directly affect the cigar business, STG is one of the most important cigar businesses thanks to its massive portfolio of cigar companies and brands. Last year, STG generated $1.24 billion in revenue, at least half of which was through the sales of handmade cigars.

Tobacco-free nicotine pouches are a growing segment as tobacco companies look to next-generation products to overcome regulations and outright bans on certain tobacco products as well as declining consumer interest in legacy tobacco products. The most obvious example of these next-gen products is e-cigarettes, which contain many of the same aspects as a cigarette without tobacco. While tobacco-free products generally face fewer regulations than ones with tobacco, that gap is closing. Just last week, the Netherlands announced that it would ban all nicotine pouches.

STG already has a tobacco-free nicotine pouch brand, STRÖM, which it introduced last year. XQS says it launched its first product in 2006. According to STG’s announcement, XQS did around DKK 50 million ($7.37 million) in sales last year, or roughly 3 million cans.

As for the deal, STG says it will make upfront payments and there is an earn-out agreement—a stipulation that says STG will pay additional money if specific targets are reached—that could make the deal worth up to DKK 150 million. STG says it will finance the deal with cash on hand and debt.

Earlier this year, STG surprised most of the cigar world when it purchased Alec Bradley for DKK 500 million, roughly $72.5 million at the time. This deal is the seventh STG acquisition in roughly five years:

• January 2018 — Thompson Cigar
• July 2018 — Peterson Pipe Group
• January 2020 — Agio
• November 2021 — Moderno Opificio del Sigaro Italiano
• June 2022 — Room101
• February 2023 — Alec Bradley
• April 2023 — XQS

STG has a diverse portfolio of cigar businesses. That includes retailers such as Cigars International, Cigar.com, Cigarbid.com, Thompson Cigar, PipesandCigars.com and Cigora. It also owns General Cigar Co. and Forged Cigar Co., which sell Cohiba, La Gloria Cubana, Partagas and other brands in the U.S. In both the U.S. and international markets, it sells Agio, Alec Bradley, CAO, Macanudo, Room101, and Toraño.

It is publicly traded on the NASDAQ Copenhagen.