Market
The Global market for moist snuff and snus is estimated to be in excess of 1.4 billion cans, and growing. Scandinavia and the US are by far the world’s largest markets for snuff and snus.
General White PortionThe Scandinavian market offers a broad range of brands and product varieties, with pouch products being the most popular and continuing to grow in importance. The largest market in Scandinavia is Sweden, categorized as a mature market. Norway and taxfree (which serves consumers throughout the Nordic area) are fast growing markets which have substantially offset any volume declines on the Swedish market. The US moist snuff market has enjoyed sustained volume growth over the past decade, where in recent years the value priced and pouch segments have demonstrated the strongest growth. Many of the new consumers entering the moist snuff category are cigarette smokers.
Within the European Union, sales of snus have been banned since 1992. Sweden was exempted from the sales ban for the Swedish market when it became an EU member in 1995.
Scandinavia
Main brands
The largest brands on the Scandinavian market are General, Ettan, Grovsnus, Göteborgs Rapé, Kronan, and Catch. During 2008, the Company launched a number of new products, either as line extensions of existing brands, (the most notable being for General, such as General Sterk) or under new brands. Kronan, the Company’s value-priced brand in this region, is the number one brand in that segment in Sweden. In Scandinavia, growth of the share of white-portion snus was particularly noted, with unique product characteristics produced using Swedish Match’s patented technologies.1) In addition to its traditional snus products, Swedish Match also offers the number one brand in the non-tobacco smokefree segment, Onico, providing consumers a high quality nicotine free alternative. On the Norwegian market, the Company has continued to grow with such strong traditional brands as General, Röda Lacket, and Göteborgs Rapé.
Market
In 2008, consumption in the Scandinavian snus market amounted to 240 million cans.2) Swedish Match is the leading manufacturer of snus, with a volume share in Sweden of approximately 87 percent in October– November 2008.2) In Norway, Swedish Match estimates its volume share to be close to 80 percent.2) While both the Norwegian and taxfree markets continued to grow at double digit levels in volume terms, declines in the Swedish market, brought on by higher retail prices on the back of significant tax increases, caused overall market volumes in Scandinavia to decline by 1–2 percent during 2008.2) During the past few years, consumers have moved from traditional loose product to portion-packed (pouch) snus, which now accounts for about 64 percent of volumes in Scandinavia.2)
The Swedish market has more than one million snus consumers, of whom approximately 200,000 are women. It is estimated that over 25 percent of men use snus on a regular basis.3) 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. During the first half of 2008, destocking effects were, however, more modest than the previous year.
Point of sales
The most important sales channels for snus in Scandinavia are supermarkets, convenience stores, and gasoline stations. Snus is also sold in tobacconists, bars, restaurants, and in taxfree 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. During 2008, Swedish Match continued its efforts with its consumer website for the Swedish market. By logging on to www.swedishmatch.com/konsument, Swedish consumers can easily explore the Swedish Match product range.
Competitors
The largest competitor in Scandinavia is British American Tobacco (BAT), which acquired the snus business of Scandinavian Tobacco Group (STG) including Fiedler & Lundgren (F&L) during the year. In October– November 2008, BAT (F&L) had a market volume share of approximately 9 percent in Sweden.2) Other competitors on the Scandinavian market include Japan Tobacco Inc. and Imperial (the largest competitor in Norway). Most competitive brands are positioned in the low-priced segment.
North America
Main brands
The largest brands for Swedish Match on the US market are Timber Wolf and Longhorn. During the second half of 2007, the Company launched a new moist snuff brand, Red Man. During 2008, Red Man was rolled out nationally, and is now available in most stores that carry Swedish Match products. 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 draws on the heritage from its number one position in the chewing tobacco category.
Market
Timber Wolf The US is the world’s largest moist snuff market, with consumption in 2008 estimated by Swedish Match to be nearly 1.2 billion cans. During the past five years, can volume in the moist snuff market has grown at the rate of 6 percent or more annually, and during 2008 the market growth rate is estimated to have been approximately 6 percent in volume terms.2) This growth comes primarily from new consumers, including cigarette smokers, who recognize the advantages of this smokefree product in a country where smoking restrictions continue to intensify. Moist snuff is sold throughout the US, and volumes are particularly strong in the Southeast, Southwest, and mid-Atlantic states.
The fastest growth in the US moist snuff market is in the value-priced and pouch segments. The Swedish Match portfolio is almost exclusively in the value-priced segments, with both traditional loose and pouch products. The pouch category now accounts for approximately 7 percent of the cans of moist snuff sold in the US.4)
This is a dynamic category, with new products, new brands, and line extensions constantly offering consumers a wide variety of choices. Pricing is an important factor in the growth of the snuff category in the US. In many cases, premium brands can be double the price of value-priced brands.
For the full year 2008, Swedish Match’s market share by volume was 12.1 percent, up from 11.1 percent in 2007.4) Red Man reached 1.8 percent of the market in December 2008, only 15 months from its initial launch in September, 2007, an successfully achieved full distribution in the marketplace, available in 65,000 outlets. The increase during the year was also partly attributable to the continued strong performance of the Company’s established Longhorn brand, which had approximately 4.6 percent of the market at the end of 2008.2) The value segment grew by more than 10 percent in terms of the number of cans sold during the year, and accounted for approximately 46 percent of the US market during 2008.2)
Swedish Match, as well as other competitors, continued efforts to assess and develop a market for Swedish style snus in the US market.
Snus differs from traditional American moist snuff in a number of ways. The production processes for American moist snuff and Swedish Snus differ in that moist snuff is fermented while Swedish-style snus is pasteurized. For Swedish Match, both production techniques comply with the GothiaTek® maximum allowable limits. Another difference is that the American moist snuff is placed behind the lower lip while Swedish Snus is spit less, placed behind the upper lip.
The main Swedish Match brand for snus in the US is General, available in selected tobacconists. The Company also has a joint venture with Lorillard, (the third largest cigarette company in the US), and produces snus for this joint venture in Sweden. The product is marketed under the Triumph brand, and is available in Georgia and Ohio. Still a very small category in the US, Swedish style snus is considered to have a long term growth potential.
Point of sales
The main distribution channels are convenience stores and gas stations, discount tobacco outlets, supermarkets, as well as the Internet. The product is merchandised through point of sale displays, and supported by both in-store and adult lifestyle related activities.
Competitors
The largest competitors on the market are Altria (UST), with a market share by volume of 58 percent for 2008, and Reynolds (Conwood), with a market share of 28 percent.4)
Other markets and other snuff products
Swedish Match has a small presence for snus in Russia, in Moscow and Saint Petersburg. The Company also has a limited test market of snus in South Africa.
Swedish Match sells dry nasal snuff in both Europe and South Africa. 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.
Production and distribution
In Sweden, production of snus takes place in Gothenburg and Kungälv. The Kungälv facility opened in 2003, and is currently being expanded. This state of the art unit specializes in portion-packed (pouch) products including the Swedish Match proprietary white-portion technology.
In the US, production of moist snuff takes place in Owensboro, Kentucky. The Owensboro factory, in addition to moist snuff, produces chewing tobacco and pipe tobacco. The plant has developed a flexible production platform which allows resources to be employed where needed. This flexible setup means that the Company can efficiently adapt to production changes as increases in snuff production offset declines in chewing and pipe tobacco. Swedish Match produces nasal snuff in Boksburg, South Africa.
Distribution for all tobacco products in Sweden, including products from other manufacturers, is shipped from the Company’s distribution facilities in Stockholm and Gothenburg. The Company has a high level of purchase orders through its webshop and supplementary electronic purchase systems. Products are most often delivered on a weekly basis to avoid retail out of stock situations.
In the US, Swedish Match ships products daily to wholesaler and selected retailer locations throughout the country direct from its production facilities and through both owned and third-party warehouses.
Consumers can also purchase Swedish snus directly on the Internet. This distribution channel is limited to countries where the product is permitted.
1) For example its white-portion technology, as well as star formation.
2) Source: ACNielsen and Swedish Match estimates.
3) Source: SCB/ULF.
4) Source: ACNielsen.