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Chewing tobacco
Red Man – a flagship brand
Fishing, hunting, the great outdoors, and Red Man chewing tobacco. For over one hundred years this typically American product has been enjoyed as part of an outdoor and country lifestyle. Chewing tobacco is particularly popular in the southern US, where Red Man is one of the best known and enjoyed brands. The category is significant, but declining, as consumers choose to leave the segment, some moving to moist snuff.
  • Continued market share gains in the US
  • Sales down 2 percent in local currency
  • Operating profit up 1 percent in local currency
    • Operational highlights
    Financial development
    Sales for the year declined by 10 percent to 956 MSEK (1,063), and operating profit declined by 8 percent to 312 MSEK (338). In local currency terms sales declined by 2 percent. Higher average prices offset volume declines, while a weaker USD had a negative impact on reported operating profit. The operating margin was 32.7 percent (31.8).
    Market
    The US market for chewing tobacco is in a long term state of decline in volume terms. Consumption declines annually in the range of 5–8 percent. Volume declines in the category occur as consumers leave the market, some moving to moist snuff. With declining consumption, manufacturers continuously strive to reduce their costs and adjust pricing in order to maintain profitability.
    Swedish Match is the largest producer of chewing tobacco in the US, with a market share of approximately 46 percent*.
    The market is segmented by brand, flavour and price point, with the value priced segment growing as a percentage of the overall mix. Approximately 70 percent of sales are in the premium segment, with Red Man being the leading brand.
    North America
    Main brands
    The Company’s best known brands include Red Man, Red Man Golden Blend, Red Man Silver Blend, Granger Select, and Southern Pride. The Red Man brand family is by far the largest in the US, with more than 35 percent of all volumes sold.
    Point of sales
    Chewing tobacco is sold in the same stores as other tobacco products, where convenience stores and low-price tobacco outlets account for the majority of sales.
    * Source: ACNielsen
    OPERATING PROFIT
    312 MSEK
    KEY DATA, MSEK 2007 2006 2005*
    Sales 956 1,063 1,079
    Operating profit 312 338 347
    Operating margin, % 33 32 32
    Investments in      
    property, plant and      
    equipment 25 17 9
    Average operating      
    capital 312 359 184
    Average number of      
    employees 369 357 340
    * Operating capital for 2005 has not been restated in accordance with the new definition of net debt and includes net pension liabilities.
    Competitors
    Competitors in the North American market include Conwood (Reynolds American), National and Swisher. Conwood is the largest competitor.
    Other markets
    Swedish Match has very limited sales of chewing tobacco outside the US. However, there are some sales in other markets. For example, the Piccanell
    brand in Sweden.
    Product development
    Red Man is the flagship brand within chewing tobacco and the brand’s leading market position has been defended through periodic innovation and product development. New product development is more limited than, for example snuff and cigars, owing to the declining nature of the category. One example of a recent introduction was the successful launch in 2005 of
    Red Man Silver Blend, the first sugar-free chewing tobacco product. Since its introduction, the brand has established a strong position in the US market and has continued to expand its distribution over the years.
    In Sweden, the classic brand Piccanell, a Swedish smokefree chewing tobacco, was renewed with new design, new packaging and two new flavours in 2007.
    Production and distribution
    Production takes place in the combined facility in Owensboro, Kentucky in the US. Swedish Match ships products daily to wholesaler and selected retailer locations throughout the country direct from its production facilities and through both owned and third party warehouses.
    Outlook Consumption is expected to continue declining in the US near the historical level of 5–8 percent. Swedish Match will focus on high product quality and effective market communication. The product area is expected to generate a continued strong cash flow.
    The market
    Swedish Match main brands (US only)
    Red Man, Southern Pride, Granger Select
    MARKET FACTS 2007 US
    Market size, no. of pounds  
    (million) 29
    Swedish Match market share 46%
    Red Man chewing tobacco is by far the best-known Swedish Match brand in the US, and the principal reason for the Group’s leading position in the US market for chewing tobacco.