Organic growth
The major challenge currently facing Swedish Match is its focus on organic growth. This is the foundation for Swedish Match’s strategy and we see favorable potential for strengthening our market positions in smokefree products and cigars, both in Europe and the US.
In the last five years, snuff and cigar sales have increased and operating margins have improved. Sales of cigars have increased from 3,008 MSEK to 3,411 MSEK, with operating profit rising from 393 MSEK to 737 MSEK with a similarly significant improvement in the operating margin.
These successes are the result of investments in active product development, new launches and relaunches, new flavors, innovative formats and various forms of brand extensions. They are also the result of adaptation to changes in consumption patterns, market positioning and the right product/price mix in our broad product portfolio.
Despite the general decline in tobacco consumption in North America and Scandinavia, these markets include growth areas in which Swedish Match has a presence. The US snuff market is the largest and most rapidly growing market worldwide, expanding rapidly in volume annually in recent years. The US is also a potential market for Swedish snus. Since 2007, Swedish Match has conducted trial sales of Swedish snus in more than 100 stores in the major metropolitan regions of the US.
Scandinavia, another strategically important market for snus, primarily comprises Sweden, along with a growing market in Norway and rising tax-free sales. One factor influencing growth in Scandinavia has been the switch from cigarettes to snus.
A third area is the growing market for premium cigars and machine-made cigars, notably in the US. The Asian and Eastern European markets offer growth potential but the size of these markets is still small.