22nd Century to Re-Launch and Expand VLN(R) Presence in South Korea

Rhea-AI Summary

22nd Century Group (NASDAQ: XXII) announced an agreement with Nico-Tech Korea for a full-scale commercial rollout of its VLN® reduced nicotine content cigarettes in South Korea.

The decision follows a 2022 pilot test that led to product adjustments to match local preferences. CEO Larry Firestone highlighted South Korea's unique market with high smoking rates and governmental efforts to reduce smoking harms.

VLN® export shipments are expected to begin later this year, with a full launch event planned for Fall 2024. Nico-Tech will handle local marketing and meet minimum order quantities for distribution. South Korea's tobacco market is valued at an estimated $1.6 billion annually, with high smoking prevalence among adult men and a smaller percentage among adult women.

Positive

• Agreement for full-scale commercial rollout of VLN® in South Korea.
• Product adjustments based on 2022 pilot test to match local preferences.
• VLN® export shipments to begin later this year.
• Full launch event planned for Fall 2024 in collaboration with Nico-Tech.
• South Korea's tobacco market is valued at approximately $1.6 billion annually.

Negative

• None.

Insights

Financial Analyst

22nd Century Group's new agreement for a full-scale commercial rollout of its VLN® reduced nicotine content cigarettes in South Korea signifies a potentially lucrative expansion into a sizable market. With an estimated $1.6 billion tobacco market in South Korea, this move reflects strategic international growth. Investors should note that the initial test launch in 2022 revealed necessary product modifications to cater to South Korean preferences, suggesting a well-informed market entry this time around.

The company's commitment to addressing local consumer needs could enhance product acceptance and market penetration. However, the success of this venture will depend on the efficacy of local marketing efforts spearheaded by Nico-Tech and the continued support from the South Korean government in its anti-smoking initiatives.

Short-term, the anticipated export shipments later this year could positively impact 22nd Century Group’s financials, potentially boosting revenue and market share. Long-term, sustained demand and consumer adoption will hinge on Nico-Tech’s marketing effectiveness and the government's regulatory environment. Investors should watch for quarterly reports and sales data post-launch to gauge ongoing performance and market response.

Market Research Analyst

South Korea's high smoking rates and the government's commitment to reducing smoking harm present a dual-edged sword for 22nd Century Group. The prevalence of smoking — with 33% of adult men and 6% of adult women as smokers — indicates a significant target audience for VLN® products. However, the market's regulatory landscape, influenced by the 1995 National Health Promotion Act, might pose challenges in terms of compliance and marketing restrictions.

Nico-Tech’s role in managing local marketing activities is crucial. Their understanding of South Korean consumer behavior and distribution channels could drive product adoption. The inclusion of minimum order quantities in the agreement ensures initial market presence, but the critical factor will be maintaining momentum through effective marketing and consumer education on reduced nicotine products.

Investors should consider the potential risks and rewards of entering such a market. A successful rollout could not only boost sales but also improve 22nd Century Group's market positioning as a pioneer in nicotine harm reduction. Conversely, any delays or regulatory hurdles could affect the rollout timeline and financial projections.

Mocksville, North Carolina--(Newsfile Corp. - July 9, 2024) - 22nd Century Group, Inc. (NASDAQ: XXII), a tobacco products company focused on nicotine harm reduction and contract manufacturing, today announced a new agreement for full-scale commercial rollout of its VLN® reduced nicotine content cigarettes in South Korea. The new agreement with 22nd Century's local partner, Nico-Tech Korea, Inc., follows an initial test launch conducted in 2022 that identified product updates needed to align with local South Korean cigarette characteristics and appeal to the specific preferences of adult smokers in Korea.

Said Larry Firestone, Chairman and CEO: "South Korea is a unique market characterized by high smoking rates and a corresponding high commitment from its government to reduce the harms of smoking. Based on the pilot launch in 2022, we made key product modifications to better align with specific characteristics of combusted cigarettes preferred by South Korea's adult smokers. We have made those changes and are now ready to fully enter the market with VLN® export shipments to South Korea anticipated to begin later this year."

"This re-launch with our original partner, Nico-Tech, demonstrates their commitment to smoking harm reduction and making VLN® products a key part of the South Korean market through the diverse array of local retail channels they serve. We are working with Nico-Tech to plan a full launch event for the Fall of 2024, including on-site support."

South Korea represents an estimated $1.6 billion¹ tobacco market and was the first international market to commence sales of VLN® reduced nicotine content cigarettes. While tobacco products use has declined since signing into law the 1995 National Health Promotion Act and subsequent government actions, the prevalence of smoking remains high in certain segments of the South Korean population.³ It is estimated that one in three adult men in South Korea² are smokers, and an estimated 6% of adult women smoke.

Nico-Tech will be responsible for all local marketing activities to generate consumer demand and awareness in South Korea. The new agreement includes minimum order quantities to support the initial stocking and re-stocking needs of the planned South Korean distribution.

1 https://www.statista.com/outlook/cmo/tobacco-products/south-korea
2 https://www.statista.com/statistics/645282/south-korea-smoking-rate-by-gender/
3 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4371385/

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. The Company is a subsequent participating manufacturer under the Master Settlement Agreement ("MSA") and vertically integrated for the production of its both own products and contract manufacturing operations ("CMO"), which consist primarily of branded filtered cigars and conventional cigarettes.

Learn more at xxiicentury.com, on Twitter, on LinkedIn, and on YouTube.

Learn more about VLN^® at tryvln.com.

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 and Quarterly Report on Form 10-Q filed on May 15, 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/215925

FAQ

What is the new agreement announced by 22nd Century Group for South Korea?

22nd Century Group announced an agreement with Nico-Tech Korea for a full-scale commercial rollout of its VLN® reduced nicotine content cigarettes in South Korea.

When did 22nd Century Group plan to start VLN® export shipments to South Korea?

22nd Century Group plans to start VLN® export shipments to South Korea later this year.

What changes were made to VLN® cigarettes for the South Korean market?

Changes were made to align with local South Korean cigarette characteristics and appeal to the specific preferences of adult smokers, based on a 2022 pilot test.

How significant is the South Korean tobacco market for 22nd Century Group?

The South Korean tobacco market is significant for 22nd Century Group, with an estimated value of $1.6 billion annually.

Who will handle local marketing for VLN® cigarettes in South Korea?

Nico-Tech Korea will handle all local marketing activities for VLN® cigarettes in South Korea.