partially offset by market growth in Spain, Italy, and Finland. Sales of machine-made cigars in Europe accounted for 30 percent of the Group’s total cigar sales during 2007.
Swedish Match estimates that its market share grew in most European markets during the year, driven largely by the acquisitions of the Oud Kampen and Hajenius brands as well as the Bogart and Hollandia brands. Countries in Europe where Swedish Match sells the most cigars include the Benelux countries, France, Finland, Spain, and Germany which are also the largest markets in Europe for machine-made cigars. In some of these markets, restrictions on smoking have led to market declines during 2007.
Swedish Match owns 40 percent of Arnold André, a German company with production units in Bünde and Königslutter, Germany.
Point of sales
Cigars are sold in Europe mainly through tobacconists but also through supermarkets, gasoline stations, convenience stores and specialty stores.
Competitors
The European market for machine-made cigars is fragmented. The Group’s largest competitors are Winterman’s/STK and Imperial/Altadis, and there are a number of privately held cigar companies that are strong in their respective home markets.
Other markets
Swedish Match has a small presence in various markets outside the US and Europe. Swedish Match is the market leader in the Australian market with its best selling cigar brand Willem II. Swedish Match estimates its market share in Australia to amount to approximately 40 percent. Swedish Match also sells cigars in parts of Asia. Cigar volumes are small in Asia and Eastern Europe but there is growth potential in countries with increasing purchasing power in these regions.
Product development
Swedish Match is working intensely with product development. Within the premium cigar segment the interest in full-bodied cigar blends, smaller cigars that can be enjoyed in a shorter time and cigars in special packaging, such as tubes are increasing. During 2007, a number of premium cigars were launched in the US to meet consumer demands and new trends. Most of these launches were introduced as varieties under well known brands, making use of the existing strong brand recognition. Examples of such launches are Hoyo de Tradicion, Don Tomas Sun Grown and several varieties of Macanudo. Swedish Match also launched a completely new premium brand, Stradivarius, an exclusive cigar created with craftsmanship and exquisite tobacco.
For the European market, Swedish Match produces a full range of machine-made cigars covering all established and growing segments. The most important consumer trends are a continued interest in aromatic cigars, a growing interest in shorter cigarillos and cigarillos with filters as well as smaller packs. During 2007 a number of new launches were made with varieties under strong existing brands. Examples of new launches are La Paz Poker Cigars, Willem II Moments, Salsa Puritos and Hajenius Tuitknak. Launches were also made in the cigar series “Op reis met de Heeren”, the limited edition of the cigar brand Heeren van Ruysdael, with different wrappers from all over the world.
Production and distribution
For the US market, premium hand-rolled cigars are crafted in Santiago in the Dominican Republic and in Danli and Cofradia in Honduras, using the finest quality tobacco from around the world. Machine-made cigars for the US mass market are produced both in Santiago in the Dominican Republic and Dothan, Alabama, in the US.
For the European market, cigars are manufactured in Houthalen in Belgium as well as Pandaan and Pasuruan in Indonesia. Some hand-rolled and machine-made cigars from the American production units are also sold in Europe.
In the US, premium cigars are mainly shipped directly on a daily basis to individual retailers as well as distributors, internet/catalog, and wholesalers across the country from the Company’s New Jersey distribution facility. Outside of the US, products are shipped from the factory in the Dominican Republic.
In the US, Swedish Match ships machine-made cigars daily to wholesaler and selected retailer locations throughout the country direct from its production facilities and through both owned and third party warehouses.
In Europe and other markets, cigars are delivered from Houthalen in Belgium and various facilities to local warehouse units in the different countries.
Swedish Match also has a limited number of stand alone retail locations, including the exclusive Hajenius Cigar Store in Amsterdam and stores operated by Cigars International Inc. in Pennsylvania, as well as the Macanudo Club in New York. There are also exclusive Club Macanudo stores in South Africa, Washington DC, Miami, London and Jakarta.
* Source: ACNielsen
| Outlook |
| Swedish Match will work to improve its market position, with particular focus on existing markets in the US and Europe. The Company will strengthen its market presence from the continued development of new products, supplemented by acquisitions. |
| The market |
Swedish Match main brands
Premium US: Macanudo, Partagas, Punch, hoyo de Monterey, La Gloria Cubana, Cohiba, helix, don Tomas (all produced in the Dominican Republic or Honduras) |
Machine-made US: White Owl, Garcia y Vega,
Game by Garcia y Vega |
Machine-made Europe: La Paz, Willem ii,
Bellman, Oud Kampen, Justus van Maurik,
hajenius, hofnar
|
| MARKET FACTS 2007 |
Premium
|
Machine-made US |
Machine-
made Europe |
| Market size, |
|
|
|
| no. of cigars |
320 million |
7 billion |
6 billion |
| Swedish Match |
|
|
|
| market share |
35% |
7% |
13% |
Consolidated Income Statement
