Growth drivers
In order to deliver continued and sustained growth, in line with the objectives of being the Global smokefree leader and best in class in cigars, the Company employs four basic growth drivers - the first being organic growth, the second being acquisitions, joint ventures and divestments, the third being productivity enhancement and the fourth being financial strategy.
Organic growth
Organic growth over time for Swedish Match occurs primarily within:
- Snuff in North America
- Snus in Scandinavia
- Cigars in the US
Snuff/snus North America
The world’s largest moist snuff market is the US, and has experienced rapid growth over the past several years, up more than 6 percent in volume terms per year. Swedish Match's goal is to grow at least as rapidly as the market. Growth drivers are:
- Volume growth for the existing brand portfolio, which includes Timber Wolf, Longhorn, and, from 2007, Red Man snuff.
- Line extensions and new product variants, which includes for example, new flavors and formats.
The US market could also be a potential market for Swedish snus. During 2008, Swedish Match expanded its test sales of Swedish snus produced in Sweden in metropolitan areas in the US. The product is merchandised in custom coolers at premium cigar and tobacco shops. Growth drivers for Swedish snus:
- Simple to use.
- Unlike traditional American snuff and chewing tobacco, spitting is not necessary.
- A potentially large assortment of flavors and varieties.
- A product that is suitable for cigarette smokers who wish to have an alternative.
Snus Scandinavia
The snus market in Scandinavia comprises mainly of Sweden and Norway, as well as the travel retail class of trade. In Sweden, there are snus products for the entire demographic target group: different products, segments, prices and flavors. Growth drivers include:
- Product development, for example, the development of products using White portion-packed snus technology.
- New brands.
- Line extensions within existing brands.
- New flavors.
- New product varieties, for example General Sterk.
- New product segments, for example tobacco and nicotine free products, such as Onico.
Cigars USA
The market for cigars in the US has grown over the past several years, both for hand-rolled cigars and machine-made cigars. In 2008 however, the hand-rolled premium cigars declined, primarily due to the general economic downturn. Within machine made cigars, Swedish Match strives to improve its presence in this growing segment. Within hand-rolled cigars, the goal is to continue supplying products that both the consumers and customers demand. Growth drivers for cigars in the US market are:
- New brands.
- Development of existing brands, for example the recent introduction of the Game line of products, part of the Garcia y Vega brand portfolio.
- New designs and sizes.
- New product varieties under existing brand names.
- Flavors and aromas.
Acquisitions/divestments/joint ventures
Swedish Match continues to investigate suitable acquisitions and joint ventures within both the cigar and smokefree product areas. Most recently, the Company has entered into a joint venture with Philip Morris International to help develop the smokefree market outside of the US and Scandinavia.
Acquisitions create the possibility for synergies in production, sales and distribution. Acquisitions also make it possible to offer a wider assortment of products.
Examples of recent acquisitions are Bogaert Cigars in Europe, through which Swedish Match strengthened its position in Benelux, Germany and France as well as Cigars International in the US, which was acquired in order to supplement Swedish Match’s traditional US distribution channels for cigars.