Sales driving growth
We have had ten years of success and when looking at the financials, we have increased operating income almost four times over the past decade, says Lennart Freeman, President, Swedish Match North America Division.
To be as successful over the next ten years there is hard work ahead. Despite a declining world economy, increasing tobacco regulations and a tough market environment, Freeman is convinced that Swedish Match will continue to successfully drive innovation and increase sales.
“With the existing conditions in the US, sales of luxury goods, such as premium cigars, are not doing as well as before,” he says. “Tobacco regulations and the ongoing debate about the health risks in using tobacco products are challenges we have to address. We have to find ways to turn tough market challenges into profitable business opportunities.”
“The snuff area is growing rapidly,” he says. “Over the past several years the US moist snuff market has grown by more than six percent per year. So far in 2008, ACNielsen estimates market growth to be in the range of seven percent with the value-priced and pouch segments delivering the strongest growth. More consumers are entering this category, including those having, or trying to, quit smoking. A broad range of brands, products and attractive pricing have further fuelled the market growth.”
Expanding strong brands
In the US market, the moist snuff product Red Man was launched in 2007. Red Man has strong recognition among smokefree tobacco consumers in the US and by expanding the brand to include the moist snuff category, provides access to the strong brand values that Red Man represents: quality, heritage and tradition.
“We expect continued growth in the moist snuff area due to smoking bans and increased understanding of the concept of harm reduction,” Freeman says. “When the message of relative low health risks associated with smokeless products is fully understood, the market will enormous.”
Consumer dynamics are different in the moist snuff category and the consumers tend to be more conservative than in, for example, the cigar category.
“The number of new players entering the markets are increasing, which challenges us to offer a broad selection that attracts our consumers. The cigar category is more of a fashion industry; the consumer appreciates different flavors, new packaging and innovative formats. The volume will always be smaller, especially in the premium segment; it is a lifestyle product of higher value.
Compared to other large international tobacco companies, Swedish Match is a rather small player on the US market. However, Freeman sees competitive advantages.
“It is not as easy for large corporations to have flexible production, marketing, sales and administration as it might be for smaller companies,” he says. “We are innovative and can easily adapt our efforts, including production, which has especially shown in the category of machine-made cigars. We have an organization with efficient decision processes and we can more easily adapt to the market and it’s changing consumer demands.”
Other important success factors, Freeman says, include having the right people in the right places with passion for the business, and a good leadership.
“I am proud to say, we have some of the best people in the industry,” he says. Some of the big tobacco companies have entered the snuff market and are showing strong decisiveness in developing the smoke free category.
“To go forward, we have to follow our consumers, stay focused, be innovative about our strong brands and keep refining our business model from year to year. That’s how we will drive profitable growth through new offerings,” Freeman concludes.By: Karoline Hammar