22nd Century Group Expands CMO Business with New Pinnacle Brand Cigarillo Products
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Insights
The expansion of 22nd Century Group's Pinnacle brand into cigarillo products at a leading U.S. convenience store chain signifies a strategic move to capitalize on the existing market presence. The sustained growth of re-order volumes for Pinnacle cigarette products indicates a successful penetration in the private label tobacco space, which is often characterized by higher margins compared to branded products. This move could potentially enhance the company's revenue streams and improve its competitive positioning within the tobacco industry.
Furthermore, the announcement of the new CMO customer contract, which is projected to increase production volumes by at least 20%, suggests an aggressive push to scale operations. If successful, this could lead to improved economies of scale and a stronger bargaining position with suppliers, ultimately contributing to the company's goal of achieving breakeven operations by the first quarter of 2025.
The introduction of the Pinnacle cigarillo products and the new CMO contract is likely to have a positive impact on 22nd Century Group's financials. The top-5 U.S. convenience store chain's network of 1,700 stores across 26 states provides a substantial distribution channel for these products. The growth in tobacco sales and market share captured by this chain could translate into increased sales volumes for 22nd Century Group.
An important aspect for investors to consider is the timing of the shipments, scheduled for the second quarter, which could lead to a near-term increase in revenue. However, the long-term success of these initiatives will depend on consumer acceptance of the new cigarillo products and the company's ability to maintain and grow its private label contracts. The commitment to breakeven by the first quarter of 2025 sets a clear financial target for the company, which should be monitored closely by stakeholders for progress updates.
The tobacco industry is highly regulated and subject to changing consumer preferences, with an increasing focus on harm reduction. 22nd Century Group's emphasis on nicotine harm reduction could resonate with current trends towards healthier alternatives and could potentially open up new customer segments. The expansion into cigarillos, a category that has seen varied regulatory scrutiny compared to cigarettes, could be a tactical approach to diversify product offerings and mitigate risk.
It is also noteworthy that the company is leveraging private label partnerships to grow its brand. This strategy can be beneficial as it allows for faster market penetration without the significant marketing costs associated with building a consumer brand. However, the dependency on a limited number of large contracts for distribution could pose a risk if those partnerships are disrupted. Continuous innovation and adaptation to regulatory changes will be key for the company to maintain its growth trajectory within the tobacco sector.
Pinnacle Branded Products Growing At Over
Mocksville, North Carolina--(Newsfile Corp. - April 11, 2024) - 22nd Century Group, Inc. (NASDAQ: XXII), a tobacco products company focused on nicotine harm reduction, today announced that it has expanded its Pinnacle private label brand to add distribution of cigarillo products to its existing Pinnacle cigarette products. Pinnacle products are currently sold as a private label brand in a top-5 U.S. gas station convenience store chain comprising approximately 1,700 stores in 26 states.
Pinnacle cigarette product re-order volumes are now achieving sustained sequential growth as the private label contract enters its second year with this top retail customer, which is itself seeing notable growth in its tobacco sales and gaining market share by offering value to its customers. The Pinnacle cigarillo will provide a new alternative to this c-store chain's customers, as well as help to further the number of Pinnacle branded product offerings available to customers. Stocking shipments of the new Pinnacle products are scheduled in the second quarter.
Said Larry Firestone, Chairman and CEO: "We are excited to expand our Pinnacle brand with new cigarillo products based on the successful sales growth of these private label cigarette products sold at one of the top U.S. c-store chains. Agreements like this help us to further enhance revenue and profitability in our business as we work toward breakeven operations by the first quarter 2025."
The cigarillo expansion agreement is in addition to a recently announced new CMO customer contract that is expected to increase the Company's CMO production volumes by at least
About 22nd Century Group, Inc.
22nd Century Group, Inc. (NASDAQ: XXII) is an agricultural biotechnology company focused on tobacco harm reduction, reduced nicotine tobacco and improving health and wellness through plant science. With dozens of patents allowing it to control nicotine biosynthesis in the tobacco plant, the Company has developed proprietary reduced nicotine content (RNC) tobacco plants and cigarettes, which have become the cornerstone of the FDA's Comprehensive Plan to address the widespread death and disease caused by smoking. The Company received the first and only FDA Modified Risk Tobacco Product (MRTP) authorization for a combustible cigarette in December 2021. 22nd Century uses modern plant breeding technologies, including genetic engineering, gene-editing, and molecular breeding to deliver solutions for the life science and consumer products industries by creating new, proprietary plants with optimized alkaloid and flavonoid profiles as well as improved yields and valuable agronomic traits.
Learn more at xxiicentury.com, on Twitter, on LinkedIn, and on YouTube.
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Cautionary Note Regarding Forward-Looking Statements
Except for historical information, all of the statements, expectations, and assumptions contained in this press release are forward-looking statements, including but not limited to our full year business outlook. Forward-looking statements typically contain terms such as "anticipate," "believe," "consider," "continue," "could," "estimate," "expect," "explore," "foresee," "goal," "guidance," "intend," "likely," "may," "plan," "potential," "predict," "preliminary," "probable," "project," "promising," "seek," "should," "will," "would," and similar expressions. Forward-looking statements include, but are not limited to, statements regarding (i) our strategic alternatives and cost reduction initiatives, (ii) our expectations regarding regulatory enforcement, including our ability to receive an exemption from new regulations, (iii) our financial and operating performance and (iv) our expectations for our business interruption insurance claim. Actual results might differ materially from those explicit or implicit in forward-looking statements. Important factors that could cause actual results to differ materially are set forth in "Risk Factors" in the Company's Annual Report on Form 10-K filed on March 28, 2024. All information provided in this release is as of the date hereof, and the Company assumes no obligation to and does not intend to update these forward-looking statements, except as required by law.
Investor Relations & Media Contact
Matt Kreps
Investor Relations
22nd Century Group
mkreps@xxiicentury.com
214-597-8200
To view the source version of this press release, please visit https://www.newsfilecorp.com/release/205104
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