Turning Point Brands (TPB) Q2 2025: Modern Oral Revenue Jumps 8x, Driving Strategic Repositioning
Turning Point Brands’ Q2 marked a pivotal acceleration in its modern oral nicotine business, as white pouch revenue soared and now comprises over a quarter of total sales. Management is doubling down on sales force expansion and brand investment to capture share in a category projected to hit $10B by decade’s end. Guidance was raised across EBITDA and nicotine pouch sales, reflecting conviction in the category’s trajectory and TPB’s evolving role within it.
Summary
- Modern Oral Momentum: White pouch nicotine products now account for over a quarter of revenue, redefining TPB’s growth engine.
- Sales Force Expansion: Aggressive investment to double field sales by 2026 signals a long-term commitment to category leadership.
- Guidance Lift: Upward revisions to EBITDA and pouch sales underscore management’s confidence in sustained outperformance.
Performance Analysis
TPB delivered a standout quarter, with revenue up 25% year-over-year to $116.6 million, propelled by the modern oral segment’s surge. Modern oral, which includes both the “free” and “out” brands, generated $30.1 million, up nearly 8x from the prior year and now represents 26% of total company revenue. Adjusted EBITDA rose 15% to $30.5 million, even as the company leaned into sales and marketing investments to accelerate growth.
The Stoker’s segment was a bright spot, with revenue up 63% to $70 million, benefiting from continued strength in moist snuff tobacco (MST) and consumer trade-down from premium loose leaf. In contrast, the Zig-Zag segment saw a modest 0.9% decline, reflecting the deliberate wind-down of the Clipper business and a strategic pivot away from lower-margin cigars. Gross margin expanded 310 basis points year-over-year to 57.1%, driven by favorable mix and efficiency gains. Free cash flow for the quarter was $11.2 million, supporting ongoing brand and distribution investments.
- Modern Oral Surge: White pouch sales increased nearly eightfold, now anchoring TPB’s growth thesis.
- Heritage Resilience: Stoker’s MST and chewing tobacco continue to gain share, supporting cash flow stability.
- Margin Expansion: Mix-driven improvement, despite heavier investment in sales and marketing and temporary freight inflation.
TPB’s results reflect a rapidly shifting business mix, with modern oral now moving from the periphery to the core of the company’s strategy.
Executive Commentary
"We are particularly pleased with the growth of our white nicotine pouch brands. Their long lasting, vibrant flavor options, comfortable mouthfeel, and flexible nicotine levels have resonated with consumers, and we continue building free presence in bricks and mortar."
Graham Pardee, Chief Executive Officer
"Gross margin was 57.1%, which was up 310 basis points year-over-year and 110 basis points sequentially. The change in margin is mix-driven... The increase [in SG&A] is driven by continued investments in sales and marketing, as well as temporarily elevated outbound freight charges."
Andrew Flynn, Chief Financial Officer
Strategic Positioning
1. Modern Oral Category Acceleration
TPB is aggressively repositioning itself as a modern oral leader, with white pouch products (free and out) now comprising 26% of revenue. Management sees the U.S. nicotine pouch market consolidating around five to six brands and is targeting double-digit share. The company’s rapid DTC growth for “out” has paved the way for an earlier-than-expected brick-and-mortar rollout, signaling confidence in omnichannel scaling.
2. Sales Force and Distribution Buildout
Doubling the sales force by 2026 is a central pillar, aiming to drive deeper retail penetration and frequency of store visits. Early success in onboarding new talent and expanding into chain accounts is already contributing to distribution breadth. The sales team expansion is matched with strategic investments in merchandising and marketing, including a high-visibility partnership with Professional Bull Riders (PBR) to build brand equity for “free.”
3. Heritage Brand Optimization
Legacy brands, particularly Stoker’s MST and chewing tobacco, remain cash flow engines, with continued share gains and strong in-store performance. TPB is leveraging cross-sell opportunities between heritage and modern oral products, especially in overlapping retail channels, and continues to benefit from consumer trade-down in a pressured macro environment.
4. Operational Flexibility Amid Tariffs
Tariff management is a near-term focus, with TPB building inventory buffers and negotiating cost-downs with suppliers. The company is investing in U.S. manufacturing capacity for modern oral to reduce long-term exposure, while also selectively taking price increases to offset cost pressure.
5. Brand Investment and Promotional Discipline
Despite a highly promotional category backdrop, TPB is positioning its modern oral brands as premium offerings, participating in select promotions but avoiding margin-destructive discounting. The company is investing in consumer awareness and loyalty, betting that differentiated product experience will sustain pricing power as the category matures.
Key Considerations
TPB’s Q2 signals a business in transition, with management making bold moves to capture outsized share in a high-growth category while maintaining the cash generation of legacy brands. Investors should weigh the following:
Key Considerations:
- Modern Oral Scaling: The pace and profitability of brick-and-mortar expansion for “free” and “out” will determine long-term margin trajectory.
- Sales Force Leverage: Execution on doubling the sales team is critical for both distribution and competitive positioning.
- Tariff and Cost Inflation: Ongoing exposure to tariffs and freight costs may introduce near-term volatility, despite mitigation efforts.
- Promotional Intensity: The ability to maintain premium positioning in a discount-heavy environment will be tested as category competition intensifies.
Risks
TPB faces execution risk as it rapidly scales its modern oral business, including distribution buildout, sales force integration, and brand investment ROI. Persistent tariff exposure and a highly promotional competitive landscape could pressure margins or slow progress. Regulatory shifts in nicotine products remain an ever-present overhang, with no immediate plans to pursue MRTP (Modified Risk Tobacco Product) designation, leaving the company reliant on the current PMTA (Premarket Tobacco Product Application) pathway.
Forward Outlook
For Q3, TPB expects continued momentum in modern oral, with incremental gains in retail distribution and ongoing investment in sales and marketing.
- Raised full-year adjusted EBITDA guidance to $110 million to $114 million (from $108 million to $113 million).
- Increased full-year modern oral sales guidance to $100 million to $110 million (from $80 million to $95 million).
Management remains focused on scaling the sales force, expanding chain accounts, and managing cost headwinds from tariffs and freight.
- Expect further brick-and-mortar rollout of “out” brand to accelerate in the back half.
- Guidance embeds higher sales and marketing spend, with some margin lumpiness as investments ramp.
Takeaways
TPB’s Q2 confirms a decisive pivot toward modern oral, with execution against sales force expansion, brand investment, and operational agility setting the stage for sustained growth.
- Category Leadership Ambition: Management’s willingness to front-load investment in sales, marketing, and manufacturing signals a bid for long-term relevance in a consolidating market.
- Cash Flow from Heritage Brands: Stoker’s MST and chewing tobacco remain reliable profit centers, providing ballast as the company invests in new growth engines.
- Watch for Distribution and Margin Trends: The pace of retail rollout, gross margin resilience, and consumer uptake of modern oral products will be key investment signals in coming quarters.
Conclusion
Turning Point Brands enters the second half of 2025 with modern oral as its clear growth driver, supported by disciplined investments and legacy brand stability. The company’s ability to scale distribution, manage cost pressures, and maintain premium positioning will define its trajectory in a rapidly evolving nicotine market.
Industry Read-Through
TPB’s results reinforce the rapid mainstreaming of nicotine pouches in the U.S., with category growth outpacing legacy tobacco and attracting significant investment from both incumbents and challengers. The shift toward omnichannel distribution, sales force expansion, and premium branding is likely to be echoed across the sector as companies jockey for share ahead of expected category consolidation. Tariff volatility and regulatory uncertainty remain sector-wide themes, pressuring supply chains and capital allocation. Investors in nicotine and adjacent consumer categories should monitor how promotional intensity and brand differentiation play out as new entrants scale and legacy players defend share.