Market
Scandinavia and the US are the world's largest markets for snuff. In 2007, the US moist snuff market grew by more than 7 percent* in volume terms, with the value priced and pouch segments demonstrating the strongest growth.
Growth in the US market has accelerated in recent years, as more consumers entered the category, including those having made the transition from cigarettes. A broader range of brands, product varieties, and price points have further fuelled this market growth.
The Scandinavian market offers a broad range of brands and product varieties, with pouch products being the most popular and continuing to grow in importance. By far the largest market in Scandinavia is Sweden, which is a mature market.
Scandinavia
Main brands
EttanThe largest brands on the Scandinavian market are General, Ettan, Grovsnus, Göteborgs Rapé, Kronan, and Catch. During 2007, the Company improved the package design of several of its brands, the most notable being for General. Kronan, a value priced product, has grown quickly and is now the number one brand in that segment in Sweden. On the Swedish market, the Company expanded its product range in the non-tobacco smokefree segment under the Onico brand. Onico gives consumers a nicotine free alternative to traditional snus products. On the Norwegian market, the Company has continued to increase its presence with brands such as Nick and Johnny, General, Röda lacket, and Göteborgs Rapé.
Market
Swedish Match is by far the largest manufacturer of snus, with a volume share in Sweden of nearly 90 percent at the end of 2007**. In Norway, Swedish Match has an estimated volume share of 85 percent**. While both the Norwegian and duty free markets continued to grow at double digit levels, declines in the Swedish market, brought on by higher retail prices on the back of significant tax increases, caused overall sales in Scandinavia to decline by 4 percent during 2007. During the past few years, sales of portion-packed (pouch) snus have increased sharply and now account for about 62 percent of volumes in Scandinavia.
With more than one million snus consumers in Sweden approximately 200,000 are women. Swedish Match estimates that over 26 percent*** of men use snus on a regular basis. The number of men using snus has been relatively stable, while the number of women using snus on a regular basis is increasing.
Tobacco excise taxes in Sweden, based on weight, are a significant proportion of the retail price of a can of snus. In September 2007, the Swedish Government announced that this weight based tax on snus would increase by 90 SEK per kilo, effective January 1, 2008. This follows an increase in 2007 of 123 SEK per kilo, double the level in 2006. The effect of these tax increases caused volumes at the end of 2006 and 2007 to rise substantially due to both consumer and retailer product hoarding. During the first six months of 2007 both trade destocking and consumption declines in Sweden resulted in lower shipment volumes. Volumes in Scandinavia reverted to prior year levels in the third quarter of 2007 as increases in Norway and duty free offset declines in Sweden.
Point of sales
The most important sales channels for snus in Scandinavia are supermarkets, convenience stores, and gasoline stations. Snus is also sold on the Internet, in tobacconists, bars, restaurants, and in duty free outlets, including airports and ferries. The sales price is set by the retailers, with the result that prices can vary widely. Snus is merchandised from coolers to help ensure freshness and quality.
Competitors
The largest competitor in Scandinavia is Skandinavisk Tobakskompagni (STK) with approximately 6 percent volume share of the market**. Other competitors on the Scandinavian market include Japan Tobacco/Gallaher and Imperial/Altadis, among others. Most competitive brands are positioned in the low priced segment.
North America
Main brands
Red Man snuff
The largest brands for Swedish Match on the US market are Timber Wolf and Longhorn. During the second half 2007, the Company launched a new moist snuff brand, Red Man. The Red Man family of products is a range of traditional moist snuff in the market's most popular cuts and flavors. The Red Man brand is well known in the smokefree tobacco category, as it is the number one brand of chewing tobacco.
Market
In the US, the market for traditional moist snuff has continued to experience rapid growth, as more and more consumers recognize the advantages of this smokefree product. Moist snuff is sold throughout the US, with particularly strong sales in the Southern US. The fastest growth in the US moist snuff market is in the value priced segment and the pouch segment. There is also increased interest in the US for Swedish style snus which unlike American moist snuff is spitless and is used under the upper lip. The production processes for American moist snuff and Swedish snus differ in that moist snuff in the US is fermented while Swedish-style snus is pasteurized. However, both production techniques complies with the quality standard GothiaTek®. Still a very small category in the US, Swedish style snus is considered to have a long term growth potential.
The US is the world's largest moist snuff market, with consumption in 2007 estimated at more than 1.1 billion cans. During the past four years, the moist snuff market has grown at the rate of more than 6 percent annually, and during 2007 the market growth rate is estimated to have been more than 7 percent****. The pouch category in the US is rapidly growing, up by more than 15 percent in 2007****, and now accounts for approximately 7 percent**** of the cans of moist snuff sold in the US.
The portfolio of products available to the US consumer continues to grow, further encouraging volume growth in this dynamic category. Pricing is also a significant factor in the growth of the snuff category in the US. Retail prices vary considerably, with premium brands in many cases double the price of value priced brands. Swedish Match is active in the value priced segment. Another factor in the accelerating category growth is the influx of cigarette smokers into the category, as more convenient formats, like pouches, are introduced into the market.
During the year, Swedish Match's market share by volume was 11.1 percent up from 10.0 percent in 2006****. The increase during the year was primarily attributable to the growth of Longhorn, which had approximately 4.4 percent of the market at the end of 2007****. Longhorn was the fastest growing brand in the US moist snuff category****. Timber Wolf also grew.The value segment grew by more than 15 percent in terms of the number of cans sold during the year, and at year-end accounted for approximately 43 percent of the US market****.
Point of sales
The main distribution channels are special low-price tobacco stores, supermarkets, convenience stores and gasoline stations, as well as on the internet.
Competitors
The largest competitors in the market are UST (with a market share by volume of 60.6 percent for 2007), and Conwood (26.7 percent)****. Traditional cigarette companies have recently shown increased interest in both Swedish style snus and traditional American moist snuff products and have been actively testing products in these areas.
Other markets and other snuff products
Sales of snus and moist snuff are limited outside the US and Scandinavia. Swedish Match is continuing its small scale sales of Swedish brands in Moscow and Saint Petersburg in Russia. Sales of snus have been banned within the European Union since 1992. Sweden was granted an exemption from the sales ban for the Swedish market when it became an EU member in 1995.
In addition to its moist snuff products, Swedish Match sells nasal snuff in both South Africa and Europe. Swedish Match is number two in the South African market with the locally produced Taxi brand, sold mainly via convenience stores, low-price outlets, small stores and kiosks. In Europe, Swedish Match markets nasal snuff under the Singleton's, Kensington and Rumney's brands, mainly in and around the Alps.
- * Source: Swedish Match and industry estimates. ACNielsen estimates 2007 market growth of 10 percent.
- ** Source: ACNielsen
- *** Source: National Public Health Survey, Hälsa på lika villkor, The Swedish National Institute of Public Health
- **** Source: ACNielsen for market share in volume, and Swedish Match for market size