Market for Snus and moist snuff
Markets for smokeless alternatives, including snus and moist snuff, as well as innovative products, such as nicotine pouches without tobacco, have been growing in volume in both Scandinavia and the US. As the market leader in Scandinavia and a significant participant in the US, Swedish Match participates in this growth and is well positioned for further growth.
Scandinavia
Swedish Match is the leading snus producer in Scandinavia and enjoys strong market positions in both Sweden and Norway. In Sweden, General is the largest brand in the premium priced segment, while Kronan and Kaliber are among the leading brands in the value priced segment.1) In Norway, General is the largest Swedish Match brand on the market, including its G.3 and G.4 assortment. In addition to its traditional snus products, Swedish Match offers its nicotine pouch product, ZYN, in Sweden. Swedish Match also offers Onico in both Sweden and Norway, the number one brand in the segment for products with neither nicotine nor tobacco.
Market
The Scandinavian snus market is estimated to have amounted to more than 430 million cans in 2018, up by approximately 6 percent from the previous year.1) Over the past several years, consumption has been moving from traditional loose products to pouch products, which at the end of 2018 accounted for more than 85 percent of volumes in Scandinavia.1) Swedish Match’s Scandinavian shipment volumes measured in number of cans grew by more than 6 percent, while underlying organic volumes (excluding hoarding and year-end calendar effects as well as acquisition effects) are estimated to have increased by approximately 3 percent.
Sweden has approximately one million consumers, and growing.2) It is estimated that more than 20 percent of Swedish men and more than 5 percent of Swedish women use snus on a regular basis. The overall percentage of women using snus has been growing in recent years, while their use of cigarettes has declined.2)
The Swedish snus market is estimated by Swedish Match to have grown by approximately 6 percent in volume terms in 2018 versus the prior year. The growth of the Swedish snus market in 2018 was mainly attributable to growth in the premium segment, which for the full year increased its share of total market to 54 percent in terms of volume.1) This is a change in dynamic, as for many years the value segment has been growing its share of market. Within the premium segment, there has been a continued shift away from the more traditional higher-priced pouch and loose products toward pouch products with somewhat lower consumer price points. While volumes grew within the value segment, the pace of growth was more modest than for the premium segment.1)
In Sweden, Swedish Match’s market position is strongest in the premium segment, and the Company’s volumes grew during the year. The Company however lost market share in this segment. Within the value segment, competition remained intense during the year, and Swedish Match’s volumes and market share declined.
In Norway, the snus market volume has grown by approximately 20 percent over the past three years. During 2018, as in 2017, growth moderated slightly compared to recent years’ levels and was around 6 percent versus the prior year.1) Swedish Match’s market share in volume terms in this market is estimated to have declined by less than 1 percentage point.1) Unlike the Swedish snus market, the Norwegian market is an all premium market. In Norway, there has been a rapid growth for all-white nicotine pouch products which in Norway contains a small amount of tobacco. The all-white nicotine pouch segment now accounts for more than 11 percent of the total Norwegian snus market, which makes this segment larger than the segment for loose snus.1)
1) Source: Swedish Match estimates of can volume using Nielsen data (excluding tobacconists in Sweden), full year 2018.
2) Ipsos Sweden, Market Report, 2017.
Highlights in Scandinavia
In Sweden, Swedish Match held its strong position in the premium segment, despite efforts by competition with new products. The One series of attractively priced premium snus, based on innovative technology, has continued to complement XR in the popular priced premium segment. XR and One have drawn consumers from both higher and lower priced products, and have supported volume growth for premium brands of pouch products. Swedish Match has during the year increased the distribution of the nicotine pouch product ZYN in Sweden and has also expanded the assortment with the addition of ZYN Slim. ZYN Slim has a somewhat softer and fuller mouth feel than ZYN Mini Dry. ZYN was first launched on the US market prior to being offered in Sweden, and the reception from the trade and consumers has been positive also in Sweden. The all-white nicotine pouch segment which in Sweden includes products with little or no tobacco (while in Norway includes only products that contain tobacco) is smaller than in Norway but the segment has experienced growth and accounted for more than 3 percent of the Swedish market by the end of 2018.1) In the value segment in Sweden, Swedish Match has a strong position. During the year, the Company implemented a packaging and product upgrade for the Kaliber brand.
In Norway, modern snus products continued to show positive trends. To address a challenging competitive situation, Swedish Match introduced line extensions under the G.3 range, with functional properties such as a soft fit, minimal drip and a long-lasting snus experience. G.3 Load and G.3 T.N.T were launched during the year, which are both stronger products in the slim white dry format. In the rapidly growing all-white nicotine pouch segment, the Company launched new products under the G.4 brand, including G.4 CRYO, an all-white extra strong product. The G.4 range, first launched in 2017, was developed utilizing state of the art technology and provides a soft mouth feel. While modern snus products supported market growth in Norway, volumes continued to decline for loose snus and for the more traditional pouch products, which contributed negatively to Swedish Match’s share performance in this market as Swedish Match has particularly strong positions in these segments. As of July 1, 2018, all snus products sold in Norway have to be in plain packaging.
On August 22, 2018, Swedish Match acquired 95 percent of the shareholding in Gotlandssnus AB. Gotlandssnus develops, produces, and sells both snus and pouch products with neither nicotine nor tobacco, with sales in Sweden, the US, Asia, and parts of Europe. Well-known brands are Jakobsson’s (snus) and Qvitt (pouch products with neither nicotine nor tobacco). The production facility is located in Romakloster, on the island of Gotland, Sweden.
The Swedish Match snus stores provide a unique consumer experience, where snus users can learn more about snus and the Swedish Match range of products. Snus stores are also an ideal venue to present new products. Starting with a store in downtown Stockholm at the end of 2012, the concept now includes locations in Gothenburg and Lund, as well as in locations close to the Norwegian border – Strömstad, Åre, and Charlottenberg. Swedish Match also provides the snus store experience online through its e-commerce service.
1) Source: Swedish Match estimates of can volume using Nielsen data (excluding tobacconists in Sweden), full year 2018.
Snus and moist snuff in the US
The Swedish Match brand portfolio for moist snuff is positioned in the value priced segment, with traditional loose products as well as pouch products. Longhorn is Swedish Match’s largest brand in the US market.
Swedish Match sells snus in the US mainly under the General brand, priced in line with premium priced moist snuff products. ZYN is Swedish Match’s brand for its nicotine pouches in this market.
Market
Moist snuff is sold throughout the US and volumes are particularly strong in the southern and mid-Atlantic states. The vast majority of moist snuff users in the US are men. The moist snuff market is highly price competitive. In 2018, the US moist snuff market is estimated by Swedish Match to have declined 1 percent in volume terms compared to the previous year, and amounted to more than 1.5 billion cans, with the pouch segment accounting for approximately 17 percent of this market. Swedish Match’s moist snuff volume measured in number of can equivalents was lower compared to last year. For the full year 2018, Swedish Match estimates its market share by volume of the moist snuff market to be approximately 8 percent.
The US snus market amounted to approximately 60 million cans in 2018.1) A relatively new category on the US market is nicotine pouches. The market growth potential for snus and nicotine pouches combined is strong, appealing to a wide segment of the adult tobacco consuming population who desire discrete, spitless alternatives with or without tobacco.
1) Source: Swedish Match estimates.
Highlights in the US
The premium segment of the moist snuff market declined in 2018, while the value segment grew.1) There was continued intensive competitive activity among large competitors, especially in the value segment. While Swedish Match’s volume and market share declined for its higher priced brands in the value segment, the Company has maintained its position with its Longhorn brand, as well as strengthened its position with pouch products in that rapidly growing segment.
Approximately 83 percent of moist snuff in the US is sold in the traditional loose format1), but over the past several years, the percentage of moist snuff sold in pouches has increased. Swedish Match estimates the growth in the pouch segment to have been approximately 6 percent in volume terms in 2018. While volumes declined for loose products, the Company experienced solid volume growth for its pouch assortment, reaching an all time high market share of approximately 7 percent in the pouch segment.
Swedish Match continued its efforts behind snus and nicotine pouches in the US market. The trends are encouraging and in 2018, as a result of both higher volumes and improved pricing, the Company experienced its first profitable year in the US with these products.
In the US, the Company markets the General snus brand – an authentic Swedish snus, available in tobacconists, convenience, and other select stores. The brand’s visual identity was updated during the year through the roll-out of a new can design. The Company also launched Thunder Xtreme, the first strong snus product, in a limited scale on the US market.
During the year, Swedish Match expanded the availability of ZYN, a range of nicotine pouch products, in the western US. By the end of 2018, ZYN was available in approximately 13,500 stores. While distribution increased compared to the prior year, growing volumes for ZYN were mainly attributable to increased sales volume per store. The Group has invested significant resources into US production capacity of ZYN – a project that was initiated in 2017 with this capacity to increase during 2019. A national launch of ZYN in the US is planned during the second quarter of 2019.
1) Source: Swedish Match estimates.
Snus and nicotine pouches outside Scandinavia and the US
Outside the Group’s home markets, Swedish Match continues its efforts to establish Swedish snus in selected markets. Swedish Match sees good opportunities for its snus and nicotine pouch products over the longer term. In 2018, Swedish Match was present for example with snus in Canada and Malaysia as well as with nicotine pouches in the Czech Republic.
