Market
Swedish Match estimates that the global market amounts to approximately 15 billion cigars, with North America and Western Europe being the two largest markets, accounting for more than 90 percent of global cigar sales.
Hand-rolled premium cigars account for less than 3 percent of global volume but account for more than 25 percent of the total sales value.
The premium hand-rolled cigar market in the US is estimated by Swedish Match to amount to 320 million cigars in 2007, fluctuating from year to year, but generally growing at between one to two percent per year in volume terms. Premium cigars are produced mainly in Latin America and the Caribbean with about two-thirds of this production estimated to be sold in the US. Outside the US, other important premium cigar markets are Spain, France and the UK.
The market for machine-made cigars in the US is estimated by Swedish Match to amount to more than 7 billion cigars, and has been growing at an average rate of 2 percent per year in volume terms over the last ten years. In 2007, the US machine-made cigar market is estimated to have grown by more than 8 percent*, with growth in the little cigar segment offsetting declines in the flavored cigar segment. The European market is estimated by Swedish Match to amount to approximately 6 billion cigars, and is estimated to have declined by nearly 3 percent in 2007. The decline in Europe is partly due to the enactment or expansion of smoking bans in several countries.
Over the course of 2007, Swedish Match strengthened its presence in both Europe and the US by integrating the Hajenius and Oud Kampen European businesses acquired in 2006, acquiring the Bogaert cigar business in Europe and the Cigars International Inc. business in the US.
In June 2007, the acquisition of Bogaert took place, a manufacturer of both branded and private label machine-made cigars with production units in Belgium and Indonesia. Bogaert brands include, Hollandia and Bogart.
During the third quarter, Cigars International Inc. was acquired, a fast growing provider of high quality premium cigars which caters directly to consumers via mail order and the internet. With this acquisition, Swedish Match will be able to more quickly and accurately assess consumer trends in the premium cigar business, as well as improving the Company's ability to market directly to the consumer.
North America - Premium cigars
Main brands
Macanudo
Partagas The leading brand in the US is Macanudo, produced in the Dominican Republic by Swedish Match. Other major Swedish Match Dominican and Honduran premium cigar brands in the US include Partagas, Punch, Hoyo de Monterrey, Cohiba, La Gloria Cubana, Don Tomas and Helix.
Market
Premium cigars on the North American market accounted for 38 percent of the Groups total cigar sales in 2007. Swedish Match estimates that the North American market for premium cigars grew modestly in volume terms during 2007, reaching 320 million units. The trend in the US has been toward a higher percentage of smaller premium cigars. Swedish Match is the market leader in the US, with a market share estimated by Swedish Match to be approximately 35 percent, measured in number of cigars sold.
Consumers of premium cigars in the US are brand loyal, but enjoy trying new varieties of their favorite brands. Continuous new product development and line extensions are therefore very important in this category.
Point of sales
Premium cigars are generally sold in fine tobacconist shops, where the interaction between the consumer and the cigar expert is very important. Mail order and internet sales are also an increasingly important class of trade.
Competitors
Swedish Match is the market leader in the US. The Company has a number of large competitors, including Imperial/Altadis, Fuente and Davidoff.
North America Machine-made cigars
Main brands
Swedish Match is well positioned in the natural wrapper machine-made cigar segment, with its Garcia y Vega brand and its popular Game assortment. The Companys other major brand is White Owl, a popular priced cigar line which is strong in the flavoured cigar segment. Machine-made cigars on the North American market accounted for 24 percent of the Groups total cigar sales in 2007.
Market
During 2007, little cigars continued their upswing in popularity in the US, while in the US mass market there was a transition away from flavoured cigars and toward natural wrapper and lightly aromatic cigars. As natural wrapper cigars tend to sell at higher retail price than these flavored cigars, this trend has had a positive impact on sales.
In the US, manufacturers typically introduce several new products using well-established brands every year. During 2007, Swedish Match was active with new product launches, especially in the natural wrapper segment, with line extensions in its Garcia y Vega Game assortment as well as the White Owl portfolio.
Point of sales
Machine-made cigars are primarily sold in gas stations and convenience stores, as well as in supermarkets and tobacco sales outlets, and on the internet.
Competitors
Imperial/Altadis, Swisher and Altria/Middleton are the major competitors to Swedish Match on the US market for machine-made cigars. Imperial/Altadis is the largest competitor in sales terms. Swedish Matchs market share by volume in this sector is close to 7 percent*.
Europe
Main brands
La Paz
La Paz Across Europe, Swedish Match is present with a number of well known machine-made cigar brands including La Paz, Willem II and Justus van Maurik. The portfolio also includes brands which are especially strong in certain markets such as Hajenius and Oud Kampen which are mainly sold in the Netherlands. The acquisition of the Bogaert business also added the Bogart and Hollandia brands to the portfolio in 2007 which are especially strong in the Benelux region.
The Company has only a limited presence in the hand-rolled premium cigar market in Europe.
Market
The European machine made cigar market is estimated to have declined slightly in terms of volume during 2007, with market declines in France, Germany, and the Netherlands partially offset by market growth in Spain, Italy, and Finland. Sales of machine-made cigars in Europe accounted for 30 percent of the Groups total cigar sales during 2007.
Swedish Match estimates that its market share grew in most European markets during the year, driven largely by the acquisitions of the Oud Kampen and Hajenius brands as well as the Bogart and Hollandia brands. Countries in Europe where Swedish Match sells the most cigars include the Benelux countries, France, Finland, Spain, and Germany which are also the largest markets in Europe for machine-made cigars. In some of these markets, restrictions on smoking have led to market declines during 2007.
Swedish Match owns 40 percent of Arnold André, a German company with production units in Bünde and Königslutter, Germany.
Point of sales
Cigars are sold in Europe mainly through tobacconists but also through supermarkets, gasoline stations, convenience stores and specialty stores.
Competitors
The European market for machine-made cigars is fragmented. The Groups largest competitors are Wintermans/STK and Imperial/Altadis, and there are a number of privately held cigar companies that are strong in their respective home markets.
Other markets
Swedish Match has a small presence in various markets outside the US and Europe. Swedish Match is the market leader in the Australian market with its best selling cigar brand Willem II. Swedish Match estimates its market share in Australia to amount to approximately 40 percent. Swedish Match also sells cigars in parts of Asia. Cigar volumes are small in Asia and Eastern Europe but there is growth potential in countries with increasing purchasing power in these regions.
* Volume share based on ACNielsen (US machine-made) or Swedish Match estimates (other businesses).