Swedish Match participates in the smokeless tobacco markets in Scandinavia and the US, with its snus, moist snuff, and chewing tobacco products, and is exploring opportunities for snus products in other markets through its joint venture company, SMPM International.
The Company participates in the US market for mass market cigars and in the global match and lighter market. Swedish Match also owns 49 percent of Scandinavian Tobacco Group, which participates in the global pipe tobacco, fine cut tobacco, and cigar markets. Swedish Match can therefore be considered a niche player in the global tobacco market, as the Company does not participate in the largest segment, cigarettes.
The global tobacco market
The largest single segment of the global tobacco market is cigarettes, which account for roughly 90 percent of all tobacco consumed.1) A small number of large global tobacco companies rely on cigarettes for the bulk of their revenues and profits. Generally, cigarette consumption has been declining over the past decade in most developed countries, while in many emerging markets cigarette consumption has continued to increase.1)
The global tobacco market’s other smoking products include fine-cut and roll-your-own tobaccos, cigars, and pipe tobacco. Smokeless tobacco products primarily include various forms of chewing tobacco, snus, moist snuff, and nasal tobacco, as well as non-traditional products, such as dissolvables. Recently, there has been the rapid emergence of the e-cigarette category in certain markets.
The global tobacco market is exposed to ever-increasing levels of restrictions and regulations, as governments and other regulatory and non-governmental organizations seek to reduce tobacco consumption, and, most notably, cigarette consumption. These regulations, along with taxation measures, have had impacts on tobacco growing, tobacco production, product availability, packaging and labeling, consumer pricing, and location of use.
Consolidation within the global tobacco market among industry manufacturers has been limited in 2013, with very little M&A activity among leading industry players. Among publicly traded tobacco companies, Swedish Match is a small player, active primarily in the Scandinavian and US tobacco markets.
The global smokeless tobacco market
Smokeless tobacco is a relatively small tobacco category compared to the much larger cigarette category, and is consumed in many parts of the world in different types and formats. In Scandinavia, the dominant form of smokeless tobacco is snus. In the US, snus is a small but growing segment, while the dominant forms of smokeless tobacco are moist snuff and chewing tobacco. In other parts of the world, such as India and certain countries in Africa and Asia, local variants of oral and nasal smokeless tobacco products are consumed. In the European Union and certain other countries, snus and other oral tobacco products not intended to be chewed are prohibited, while chewing tobacco products are allowed to be sold.
Swedish Match’s markets
Snus and moist snuff
Swedish Match’s primary tobacco markets are in Scandinavia and the US. Both the Scandinavian snus market and the US moist snuff/ snus markets are growing in volume terms, and the combined Scandinavian/US snus and moist snuff markets are approximately 1.7 billion cans per year, with the Scandinavian snus market at more than 325 million cans, and the US moist snuff market at approximately 1.4 billion cans.2) Both the Norwegian and Swedish markets experienced growth in volume terms during 2013.2) Swedish Match holds the leading position in the Scandinavian snus market, with approximately 71 percent volume share in Sweden, and 62 percent volume share in Norway during the final three months of 2013.2)
The smokeless tobacco markets in the US and Scandinavia have experienced increased product innovation and increased activity among large cigarette manufacturers in recent years, with the introduction of new varieties and formats.
In nearly all countries outside of Scandinavia and the US, the knowledge of snus is limited. Outside of Scandinavia and the US, Swedish Match is exploring, through SMPM International, other potential markets for snus. Markets currently being explored include Canada, Russia, Israel, and Malaysia.
Other tobacco products (cigars and chewing tobacco)
The market for mass market cigars in the US excluding the little cigars segment (where Swedish Match does not participate) is estimated by Swedish Match to amount to slightly more than 5 billion cigars. The US mass market cigar market (excluding little cigars) is estimated to have grown in volume terms in 2013.2) Swedish Match is the third largest player in the US mass market cigar market (excluding little cigars), with a growing market presence. Swedish Match estimates that the US chewing tobacco market is a 275 million US dollar market (manufacturers’ sales). Volumes have typically declined by 4-7 percent annually. Swedish Match is the market leader in this category, with approximately 40 percent share of market in pounds, up slightly from prior year.3) The Company also has a contract manufacturing agreement, and produces close to two thirds of all chewing tobacco sold in the US.
Lights (matches and lighters)
In addition to tobacco products, Swedish Match also participates in the global match and lighter markets. Swedish Match’s largest match markets in Europe include the UK, the Nordic countries, France, and Spain. Swedish Match is also the market leader for matches in Australia and Brazil. For lighters, Swedish Match holds market leading positions within the premium disposable category in for example Malaysia and Russia. The Group also has solid positions for lighters in Brazil, the Nordic countries, the UK, and France. In several markets in Asia, Swedish Match’s lighters continued to demonstrate strong volume development, reflecting efforts to build business in this part of the world.
Swedish Match also has match sales in a number of African and Asian markets.