Chit Chat Stocks — Is Turning Point Brands the Best Pure Play Bet on Nicotine Pouches?

Host: Brett Schaefer (with Ryan Henderson)
Guest: Fabio (Capital Mindset & Fraxinus Capital Management)
Date: January 7, 2026
Ticker Focus: $TPB

Episode Overview

In this in-depth episode, Brett Schaefer welcomes recurring guest Fabio (from Capital Mindset and Fraxinus Capital) to dissect Turning Point Brands (TPB), a lesser-known name that's become a pure play on fast-growing nicotine pouches. The discussion explores the investment thesis, market trends, brand strategies, competitive dynamics, and risks surrounding TPB, with Fabio drawing on research, portfolio experience, and broader sector insight.

The Investment Thesis for Turning Point Brands

• A "Pure Play" on Nicotine Pouches
  TPB is positioned as the top way to invest directly in the U.S. nicotine pouch trend, a category showing extraordinary growth driven both by smokers switching and new, younger nicotine users.
  • “It’s not just cannibalizing the smoker cohort. It’s a growing category in itself... that’s why we’re seeing... growth trajectory of pouches at a 30% CAGR at least through 2030.” — Fabio (10:00)
• High Margins, Expanding TAM
  Nicotine pouches are highly profitable (even more so than cigarettes), cheap to produce, enjoy significant pricing power, and are gaining traction among groups not historically associated with nicotine use—including women and younger adults.
  • “You’re going to have crazy software-like margins, maybe not as good but comparable within the same realm as Visa, which is crazy for a consumer product.” — Fabio (23:30)
• Under-the-Radar Potential
  Unlike giants like Philip Morris (whose pouch brands are a small part of their revenue), TPB’s bottom line is becoming dominated by pouches, offering outsized leverage to the category’s continued surge in the U.S.

Company Background & Brand Portfolio (04:00–09:00)

• Legacy Business: Zig-Zag & Chewing Tobacco
  • Zig-Zag is operated under a licensing agreement, not owned outright. It’s a stable cash cow but not the growth engine.
  • Vaping was once a highlight post-IPO, but is now being divested as management pivots to focus on high-P/E, high-margin products.
  • “[Management is] continuously looking at their portfolio... to look at what are distractions vs. what is the focus... thankfully the management is focused on... the pouches.” — Fabio (08:22)

Understanding the Pouch Brands: FRE & ALP (14:05–17:28)

• FRE

  • Traditional retail: “Find it in the store.”
  • High consumer rankings, S-tier reviews.

• ALP

  • 50-50 JV with Tucker Carlson; leverages his brand and media presence for sales.
  • DTC focus with growing retail footprint, particularly after summer 2024.
  • “People watch [Tucker Carlson] and he tells them, ‘Hey, this is the best product.’” — Fabio (15:10)

• Why Two Brands?

  • Different marketing and distribution strategies, targeting varied audiences.

Near-Shoring & Manufacturing Tailwinds (16:44–18:22, 18:22–22:03)

• Production Shifting to the U.S.:

  • Currently, manufacturing is in India. Plans underway to shift to the U.S. for those products aimed at U.S. customers (improvement in margins, less exposure to tariffs, stronger “Made in USA” branding, especially for a more conservative-leaning customer base).
  • “Margins, gross margins risen closer to 60%. We think they’re going to increase well past 60% after [U.S. production ramps].” — Fabio (18:22)

• India Plant Will Serve International Expansion:

  • Expansion capacity will serve as a lever for future international sales.

• Key Point:

  • Unlike competitors, TPB has NOT resorted to margin-destroying discounting to drive growth.

Margin Profile & Profitable Growth (22:03–25:33)

• Impressive Current Margins:

  • 61% gross margin, 24% operating margin (blended across business).
  • Forecast: software-level margins as pouches overwhelm the revenue mix.

• Contribution Margin Estimates:

  • Pouch business likely to drive even higher profitability as it expands.
  • At just 30% of revenue today, but poised to become a majority.

Explosive Growth Drivers (25:33–29:41)

• Market Inflection in 2025:

  • 2024/2025 saw meaningful launches of FRE and ALP, with ALP especially growing after November 2024.
  • “This is a really new business for them... If you were buying this at $20 [in 2024], you were rewarded heavily for taking on this risk.” — Fabio (27:22)

• Brand Loyalty—How Sticky Are Customers?

  • Older cohorts show more brand loyalty; younger users (“statistically significant”) are more price-sensitive.
  • FRE & ALP are highly ranked for taste/duration; company only needs a small slice of the market to justify today’s price.

• ZYN Supply Shortage (2025):

  • Offered a real-life stress test for the category’s brand loyalty and customer retention dynamics.

Valuation & Future Outlook (35:03–38:54)

• Current Valuation:
  • ~$2B market cap, last 12 months revenue ~$400M, trailing ~20x EBITDA.
  • “Sell-side has them growing under 20% for 2026, but that’s lowballing it.... $250M in pouch sales is very possible” — Fabio (35:59)
  • Conservative modeling: Just “low single digit” market share needed for a multibagger outcome.
• Market Share Needed to Win:
  • “If they are the clear number three... this would definitely be a multibagger... But even just a tiny sliver of the market justifies the current price.” — Fabio (33:10–34:00)

Risks & Bear Cases (39:57–44:09)

• Flavor Regulation:
  • Regulatory clampdowns on pouch flavors (mirroring vaping crackdowns due to concerns of marketing to minors) could dampen growth, especially via perception and headline risk.
  • “If crackdowns on flavors happen, it doesn’t destroy the business but could severely harm perception.” — Fabio (40:20)
• Regulatory Approval (PMTA risk):
  • FDA’s Premarket Tobacco Application (PMTA) process introduces real risk of product delays or formula changes, with the potential for approval denials affecting sales.
• Public Health Concerns:
  • Long-term cardiovascular risks of nicotine remain, even if pouches are perceived as safer than inhaled products.

Why Pouches Aren’t Like Vaping (45:45–49:52)

• Discreetness:
  • Less social stigma, easier for adults to use without public attention (“If I’m doing a pouch, you wouldn’t know”).
• Vaping Backlash Rooted in:
  • Social stigma of visible use.
  • Bad associations with "illegal" or unregulated products (“popcorn lung”).
• Pouches Expanding Demographic Reach:
  • Notably higher female adoption vs. traditional chewing tobacco.

Expansion & Strategy Updates (51:16–53:17)

• Distribution:
  • Sales channels expanding, with key relationships in 220,000+ stores and recent pushes into California and with 7-Eleven.
  • “As far as like a secular growth trend, this company has it. You do not need a number one market share contender.” — Fabio (52:00)
• Position Sizing:
  • For Fraxius Capital, TPB is a medium-sized position, not a bet-the-farm play.

Fraxinus Capital Management Investment Style (Full segment from 53:17 onward)

• Long–Short Focus:
  • Focus on misunderstood/undiscovered growth names and shorting “structurally suspicious” companies.
  • Not too crowded, looking for upside in underfollowed names, exemplified by TPB.

Memorable Quotes

• On the secular trend:
  “Turning Point Brands is by far the best way and a pure play to play pouches.” — Fabio (12:48)

• On potential market share:
  “For this investment to actually play out... they only have to capture just a tiny sliver... single-digit market share... and it looks cheap.” — Fabio (32:45–34:00)

• On the risk/reward:
  “If those risks dematerialize, I view [TPB] as something I can consistently buy into... I do view this as a multi-bagger opportunity.” — Fabio (53:00)

Key Timestamps

| Timestamp | Topic/Segment | |-----------|-----------------------------------------------| | 04:00 | Intro to TPB brands; legacy vs. growth focus | | 09:28 | High-level investment thesis | | 14:05 | FRE & ALP pouch brands and market strategy | | 16:44 | Near-shoring manufacturing, margin impact | | 22:03 | Margin discussion, operating leverage | | 25:33 | Market growth inflection, brand loyalty | | 35:03 | Valuation and fundamental growth projections | | 39:57 | Risks: regulation, approval, health | | 45:45 | Vaping versus pouches dynamics | | 49:52 | Addressable market breadth (incl. female use) | | 51:16 | Distribution expansion and final thoughts | | 53:17 | Fraxius strategy, position sizing |

Final Takeaway

Turning Point Brands is a high-risk, high-reward "pure play" levered to the secular shift in U.S. nicotine consumption, benefiting from category-inflecting trends, high-margin products, and untapped demographic/retail potential. The investment hinges on TPB efficiently scaling its pouch brands amidst regulatory, production, and execution risks while capturing even modest market share. For those willing to underwrite the unknowns, Fabio and the hosts see a credible path to multi-bagger results.

For more:

• Reach Fabio via Capital Mindset (YouTube) or inquire through the podcast show notes.
• Follow Fraxinus Capital for more emerging, undiscovered investment ideas.