DJ Khaled has invested in nicotine pouch startup Sesh, the company announced, adding his name to a growing list of celebrity backers. Sesh is positioning itself to compete with established brands like Zyn, particularly within corporate America where nicotine pouches are gaining traction as a productivity aid. The startup has raised $40 million from investors including venture firm 8VC and Jack Link’s CEO Troy Link.
Sesh touts itself as one of the few pouch manufacturers not backed by major tobacco companies. DJ Khaled, known for his music collaborations and entrepreneurial ventures, is promoting Sesh's new raspberry lemon flavor. He joins other notable investors such as Ashton Kutcher, Post Malone, Lance Armstrong, Zach Bryan, Diplo, the Jonas Brothers, and The Chainsmokers.
Avoiding Past Pitfalls
Sesh acknowledges the cautionary tale of Juul, the e-cigarette company that faced widespread criticism and legal challenges for allegedly marketing to teenagers. A Sesh spokesperson stated that the company is actively working to avoid similar mistakes, emphasizing age verification at all points of sale and a marketing strategy that avoids underage-skewing imagery or platforms like TikTok. The company noted that its celebrity partners are all over 30 and are investors who believe in the company's mission, rather than hired influencers targeting a young demographic.
Market Landscape and Growth
Nicotine pouches, which are tobacco-free and placed between the gum and cheek, are experiencing significant market growth. The global market is projected to expand from nearly $10 billion this year to $56.7 billion by 2035. As of the previous year, Zyn held a 26% market share. Sesh, while not yet listed among the top players, reported a 533% revenue growth in the first quarter compared to the same period last year.
Regulatory Environment
The burgeoning nicotine pouch industry faces increasing regulatory attention. New York State has implemented a "Bro Tax," applying a 75% tax to alternative nicotine products, including Sesh and Zyn, to deter underage use. Sesh CEO Max Cunningham expressed concern that such measures could hinder category growth.
The Food and Drug Administration (FDA) granted Zyn approval to sell its products and recently indicated it would allow Zyn to market its products as less harmful than cigarettes. The FDA also stated it would not prioritize enforcement on marketing by pouch companies with pending applications. Sesh has received permission to sell its products but is still awaiting FDA approval for marketing, a process Cunningham noted has cost $15 million of the company's raised capital.
Product Differentiation
Sesh aims to differentiate itself by offering a steadier nicotine release compared to the upfront spike associated with Zyn. Cunningham believes this approach, alongside responsible commercialization, can be beneficial for public health. However, experts like Dr. Michael Fiore of the University of Wisconsin's Center for Tobacco Research and Intervention caution that nicotine pouches could lead to addiction in populations that do not currently use nicotine products. Major tobacco companies, including Philip Morris International (owner of Zyn), British American Tobacco, and Imperial Brands, also operate in the nicotine pouch market.