ArticleMar 7, 2007
No. 2 worldwide in cigars
Swedish Match is the world's second largest cigar company in terms of
sales value. Strong sales, driven by successful launches and sensitivity
to trends and consumer preferences, are among the reasons.
SOME 15 BILLION CIGARS are consumed each year.
The largest and most important markets are
North America and Europe, which combined
account for more than 90 percent of the total
cigar market. The remaining sales are primarily
in Asia and Australia.
Swedish Match has operations within both
machine-made cigars and premium cigars.
Combined, the two segments had sales of
3,407 MSEK in 2006.
Cigars are produced at Swedish Match
plants in Houthalen (Belgium), Pandaan
(Indonesia), Santiago (Dominican Republic),
Danli and Confradia (Honduras) and Dothan,
Alabama (USA). The Group also has tobacco
plantations in the Dominican Republic and in
Connecticut, in the US. Cigar Operations have
approximately 8,500 employees.
But what is it that makes Swedish Match
so successful in the cigar segment? The answer
lies, among other factors, in the Group´s longterm
strategic work with brands. A further
success factor is Swedish Match´s ability to
rapidly predict trends and match consumer
needs and wishes with new products.
In the US, which is Swedish Match´s most
important cigar market, accounting for two
thirds of sales, the company has a leading
position in the premium-cigar segment. The
market share amounts to nearly 35 percent
and five of the ten most smoked premium
cigars in the US are Swedish Match brands.
The leading brand in the US is Macanudo,
while other well-known cigar brands include
Partagas, Punch, Hoyo de Monterrey, Cohiba,
La Gloria Cubana, Don Tomas and Helix.
The clearest current trend within premium
cigars is the continued interest in full-bodied
cigar blends and cigars that can be enjoyed in
a shorter time. There is also increased interest
in cigars in tubes.
US consumes approximately 7 billion machine-made cigars annually
Within machine-made cigars, known as the
mass-market segment, Swedish Match has also
been successful in foreseeing and satisfying market trends, in both the US and the rest of
the world. While more than 300 million premium
cigars are smoked in the US each year,
the corresponding figure for machine-made
cigars is a staggering 7 billion - a volume that
has grown by between 1 and 3 percent annually
over the past ten years. Swedish Match´s market share is around 7 percent, and the company’s
strongest brands in the US are White
Owl and Garcia y Vega.
Owl and Garcia y Vega.
In the US, a clear shift can be seen from simpler
products to cigars with natural wrappers.
"This was our motivation for launching
Game, within the Garcia y Vega brand, in the
middle of last year," says David Price, Vice
President Marketing at Swedish Match North
America Division. "It was an immediate success,
and during the first six months alone we
sold more than 30 million cigars."
Interest in flavored cigars continues.
Swedish Match has launched a number of
successful products in this segment, including
White Owl Peach, Grape and Pineapple. The
flavored cigars were the number one new cigar
item for three consecutive years, beginning in
2003. White Owl Pineapple won Convenience
Store Petroleum magazine´s Best New Product
award in 2005. However, David Price emphasizes
that the company’s future success will
be driven by continuing to identify consumer
trends, as well as developing strong brands
that hold up regardless of trends.
Benelux and France our top markets in Europe
In the European market, Swedish Match´s
sales are dominated by machine-made cigars,
for which the total market amounts to approximately 6 billion sold products per year. The
strongest Swedish Match brands in Europe,
whether they are regional or local, are La
Paz, Willem II, Hofnar, Bellman, Justus van
Maurik, Salsa and Cortéz. At the beginning of
2006, Hajenius and Oud Kampen, two wellknown
brands in the premium short fillers
segment, were acquired, as well as the flagship
Hajenius cigar store, the most exclusive
in Amsterdam.
Swedish Match markets and sells cigars and
cigarillos throughout Europe. The largest markets
for Swedish Match are the Benelux and
France, while sales volumes are also significant
in the Nordic region and Spain to name
a few. During the past year, the company has
used its aggressive and successful strategy to
capture market shares in a slightly declining
market characterized by tough competition
and increasingly stringent legal restrictions.
According to Jean-Louis Leppert, Vice
President Marketing, Swedish Match International
Division, the company´s success in cigar
sales is due to its active development of new
products in the different markets.
"We have launched an average of 25 new
products per year since 2004, and the results
have not been slow in coming. A full 12 percent
of sales volume for 2006 derived from
cigars and cigarillos that did not exist a mere
two years ago," says Jean-Louis Leppert.
Popularity of aromatic cigars continues
As in the premium cigar segment, one of the
clearest trends within machine-made cigars is
without doubt the aromatic products.
"Today, nearly every country has a vanilla
cigarillo," says Jean-Louis Leppert. "Some
smokers and those around them find that the
aroma of cigar smoke is not always appreciated,
but a scent of vanilla can break down
the barriers. It is mainly new recruits to cigar
smoking who take to the new flavors, while
long-time consumers still prefer the more traditional
cigars."
As a result of the increased restrictions
on smoking, there is also growing interest in
shorter cigarillos and cigarillos with filters, as
well as smaller packs containing only a few
products.
"The key to our success is our strong brands
and high launch rate of up-to-date new products
that meet market preferences," concludes
Jean-Louis Leppert.