Market
The US market for chewing tobacco is in a long term state of decline. Volumes typically fall in the range of 5–10 percent per year. This occurs as consumers leave the category, some moving to moist snuff. The percentage of chewing tobacco consumers who also use moist snuff has been increasing over the past several years. This, combined with price changes and tax increases, have further contributed to the overall market decline.
In April 2009, federal excise taxes increased for all tobacco products, including chewing tobacco. Combined with tax increases by individual states, most notably in Florida and Texas, this has caused significant retail price increases in many cases, leading to some down trading to value priced brands and formats. With declining consumption, manufacturers continuously strive to reduce their costs and adjust pricing in order to maintain profitability.
In June 2009, a law was passed shifting regulatory authority over the US tobacco industry from the Federal Trade Commission to the Food and Drug Administration. The change in regulatory authority will impact the way US tobacco products are marketed and in some cases will change the product assortments offered. Regulations, as it relates specifically to marketing, will cover product placement requirements at retail, new products, labeling, advertising, and product sampling. Swedish Match is the largest producer of chewing tobacco in the US; the Group’s brands have a volume share of approximately 45 percent.1)
The market is segmented by brand and price point, with the value priced segment growing as a percentage of the overall mix. Nearly two thirds of sales are estimated to be in the premium segment, with Red Man being the leading brand.
North America
Main brands
The Group’s best known brands include Red Man, Red Man Golden Blend, Southern Pride, J.D.’s Blend, Red Man Silver Blend and Granger Select. The Red Man brand family is by far the largest in the US, with approximately one third of all volumes sold.
Point of sales
Chewing tobacco is sold in the same stores as other tobacco products. Convenience stores and low-price tobacco outlets account for the majority of sales.
Competitors
Competitors in the North American market include Reynolds American Inc. (Conwood), being the largest competitor, National Tobacco, and Swisher.
Other markets
Swedish Match has very limited sales of chewing tobacco outside the US, for example, the Piccanell brand in Sweden.
Production and distribution
Production takes place in Owensboro, Kentucky in the US. Swedish Match ships products daily to wholesaler and selected retailer locations throughout the country direct from its production facility and through both owned and third party warehouses. During 2008, a manufacturing agreement was reached with National Tobacco, which has approximately 18 percent1) of the chewing tobacco market. Swedish Match produces chewing tobacco for both companies in the Owensboro facility.
1) Source: Nielsen