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North America
Consumption of pipe tobacco in North America declined by an estimated 8 percent during 2007*. Swedish Match’s market share in terms of volume is approximately 16 percent. Half and Half and Borkum Riff are two of the Company’s best selling brands. Pipe tobacco is sold mainly through drugstores, supermarkets, convenience stores, low-price outlets and specialty tobacco stores in the US.
South Africa
Swedish Match is the largest manufacturer and distributor in South Africa, and brands sold by the Group include Boxer,
Best Blend, Nineteen O’Four, Black and White, and Giraffe. Consumption of pipe tobacco in South Africa declined by approximately 4 percent in volume terms during 2007. Some consumers use pipe tobacco as a traditional product and others as roll your own.
Other markets
Swedish Match has only a marginal presence in pipe tobacco outside its main markets, for instance in Australia and parts of Asia. In Australia, Borkum Riff is the leading pipe tobacco brand.
Competitors
Eight producers account for about three-fourths of global pipe tobacco production. Most manufacturers also produce other tobacco products for the local or international markets. Competitors include MacBaren, Middleton, Lane (Reynolds American) and Imperial/Altadis.
Product development
Consumer trends in pipe tobacco show that the consumers like to vary their choice of tobacco; to try new varieties, new flavors, and that they are interested in new experiences. A specific trend is the request for natural tobacco flavors. To meet this demand, Swedish Match launched a new Borkum Riff product in 2007. The previously purely aromatic portfolio was complemented with Borkum Riff Genuine, a product with the genuine flavor and aroma of high quality tobacco.
Production and distribution
In South Africa the production takes place in Boksburg. During 2007 the Rustenburg facilities production was moved to and integrated in the more modern Boksburg facility, with the purpose of efficiency and product enhancement.
Production of Borkum Riff and some other brands are outsourced to MacBaren in Denmark. In the US, Borkum Riff is imported from Europe. These products are distributed in both Europe and other markets. Production of pipe tobacco for the US market takes place in Owensboro, Kentucky.
* Source: ACNielsen
Outlook
The market for pipe tobacco is expected to continue declining at rates near levels in recent years. Profitability for the product area is good, however, and cash flow from pipe tobacco operations is expected to remain strong in the years ahead.
The market
Swedish Match main brands
Borkum Riff, half and half, Best Blend, Boxer, Black & White, Nineteen O’Four, Greve Gilbert hamiltons Blandning
Main markets
South Africa, the UK, Australia, the US, Sweden
REGIONAL MARKET DYNAMICS* Trend
US volume declining 8–12% per year
Europe volume declining 8–12% per year
South Africa volume declining 3–6% per year
* Source: AC Nielsen and Swedish Match volume estimate, 2003–2007 for US. Swedish Match estimates 2003–2007 for Europe and South Africa.
During 2008, Borkum Riff
will turn 40 years old. This brand maintains a very strong position as the world’s third largest in the market for pipe tobacco.
The classic half and half
brand and Borkum Riff
are the Swedish Match pipe tobaccos that sell the most in the US.
Lights
Quality products around the world
Swedish Match is the market leader in a number of markets for matches and fire related products. Whether for a barbeque, or lighting a fire in the fireplace, or for lighting up a cigar, Swedish Match has a product for any lighting need. For matches, the brands are mostly local, and have leading positions in their home markets. More well-known match related brands include Solstickan, Three Stars, Fiat Lux, and Redheads. The main Swedish Match brand for lighters is Cricket, recognized as one of the leading quality disposable lighters throughout Russia and Europe and other parts of the world.
  • Sales declined by 2 percent
  • Operating profit increased by 1 percent
  • Operating margin reached 17.1 percent for the year
    • Operational highlights
    Financial development
    Sales for the year declined by 2 percent to 1,473 MSEK (1,503). Operating profit increased to 252 MSEK (249). The operating margin rose to 17.1 percent (16.6).
    OPERATING PROFIT
    252 MSEK
    KEY DATA, MSEK 2007 2006 2005*
    Sales 1,473 1,503 1,936
    Operating profit 252 249 58
    Operating margin, % 17 17 3
    Investments in      
    property, plant and      
    equipment 92 38 47
    Average operating      
    capital 826 840 963
    Average number of      
    employees 1,440 1,565 3,770
    * Operating capital for 2005 has not been restated in accordance with the new definition of net debt and includes net pension liabilities.