Growth drivers
Swedish Match’s strategic focus is to continue its efforts toward organic growth, primarily within the snuff/snus and cigars product areas.
The Company’s overall strategy comprises of four components that are aimed at generating growth and building a solid and sustainably profitable business. Focus is on factors that generate growth within the snuff/snus and cigar product areas.
Organic growth
Organic growth over time for Swedish Match occurs primarily within:
- Snuff in North America
- Snus in Scandinavia
- Cigars in the US
Snuff/snus North America
The world’s largest moist snuff market is the US, and has experienced rapid growth over the past several years, up more than 6 percent in volume terms per year. Swedish Match's goal is to grow at least as rapidly as the market. Growth drivers are:
- Volume growth for the existing brand portfolio, which includes Timber Wolf, Longhorn, and, from 2007, Red Man snuff.
- Line extensions and new product variants, which includes for example, new flavors and formats.
The US market could also be a potential market for Swedish snus. During 2007, Swedish Match expanded its test sales of Swedish snus produced in Sweden in metropolitan areas in the US. The General brand increased its presence in outlets in New York, California and Texas. The product is merchandised in custom coolers at premium cigar outlets. Growth drivers for Swedish snus:
- Simple to use.
- Unlike traditional American snuff and chewing tobacco, spitting is not necessary.
- A potentially large assortment of flavors and varieties.
- A product that is suitable for cigarette smokers who wish to decrease consumption.
Snus Scandinavia
The snus market in Scandinavia comprises mainly of Sweden and Norway, and growing tax-free sales. In Sweden, there are snus products for the entire demographic target group: different products, segments, prices and flavors. One important growth driver in Scandinavia lies in the transition from cigarettes to snus. Growth drivers include:
- Product development, for example, the development of products using White portion-packed snus technology.
- New brands, for example the new snus for women, Vertigo.
- Line extensions within existing brands.
- New flavors.
- New product varieties, for example General Sterk.
- New product segments, for example tobacco and nicotine free products, such as Onico.
Cigars USA
The market for cigars in the US has grown over the past several years, both for hand-rolled cigars and machine made cigars. Within machine made cigars, Swedish Match's goal is to increase its market share in terms of value. Within hand-rolled cigars, the goal is to continue supplying products that contribute to the growth of the hand-rolled cigar segment. Growth drivers for cigars in the US market are:
- New brands.
- Development of existing brands, for example the recent introduction of the Game line of products, part of the Garcia y Vega brand portfolio.
- New designs and sizes.
- New product varieties, for example, Hoyo de Tradicion, Don Tomas Sun Grown and several varieties of Macanudo.
- Flavors and aromas.
Acquisitions/divestments
Swedish Match continues to investigate suitable acquisitions primarily within the cigars, where many of the businesses are family-owned. Acquisitions are interesting primarily in the following markets:
- Hand-rolled cigars, USA
- Machine-made cigars, USA
- Machine-made cigars, Europe
The objective of the acquisitions is to increase Swedish Match's presence in both stable and growing markets. Acquisitions create the possibility for synergies in production, sales and distribution. Acquisitions also make it possible to offer a wider assortment of products.
Examples of acquisitions in 2007 are Bogaert Cigars in Europe, through which Swedish Match strengthened its position in Benelux, Germany and France as well as Cigars International in the US, which was acquired in order to supplement Swedish Match’s traditional US distribution channels for cigars.