News; Nov 10, 2007 CET

Strategy strengthens global stance

Although the world market for lighters is becoming increasingly competitive, Swedish Match is maintaining a stable level of profitability in the product category. Production efficiency, close cooperation with important subsuppliers and an emphasis on quality, in addition to product development and innovative marketing, are some of the reasons behind the Group's ability to defend its position as a major player in the lighter market.

Swedish Match's strategy in the lighters product category has produced results. The number of lighters sold is on the rise and profitability has been stable in recent years.

"Considering the increased competition, primarily from large manufacturers in Asian countries such as China, the profitability of lighters was favorable during 2006," says Lennart Carlsson, Vice President Lights Operations for Swedish Match. "I believe the situation will remain stable in the foreseeable future, despite the competitive environment."

Carlsson also explains that lighters are an important product for the Swedish Match sales teams around the world. Lighters are sold in large volumes to businesses and, together with matches, form a solid foundation to support sales of Swedish Match's other products.

"Our strategy is to produce high-quality lighters, to be innovative in design and marketing, and to constantly strive to increase efficiency in our production units," he explains.

New legislation in the EU

Swedish Match's competitive advantages when it comes to quality are that its lighters are ISO certified and have a heat-resistant nylon casing and a fixed flame, among other features. They are also child resistant, meaning they are equipped with a mechanism that makes them difficult for children to operate, in accordance with the requirements put into effect in the EU this year. In the US, Canada, Australia and New Zealand, child resistant mechanisms have been mandatory for more than 10 years.

"It is too early to see the effects that the legislation on child resistant lighters will have in the EU, but we believe that it will prove to be an advantage for Swedish Match. Because we have been active in the American lighter market for quite a long time, we have solid experience of manufacturing child resistant lighters. As a preparation for the introduction in Europe, we have developed a new solution that is very user-friendly. We believe that we have the best child resistant solution and a number of Asian manufacturers will probably not be able to meet the demands."

Production around the world

Lighters are manufactured in Swedish Match's production units in Assen in the Netherlands, Manila in the Philippines and Manaus in Brazil. For all units, the goal is to increase the number of lighters produced per employee. In the Netherlands, Swedish Match has long worked to increase efficiency through "lean manufacturing," a project that, according to Lennart Carlsson, has led to improved productivity and better control over such matters as tied-up capital.

In the Philippines, preparations are under way to move the manufacturing of lighters from one area of central Manila to a modern industrial park outside Manila, which will lead to improved cost effectiveness, among other results. One advantage of production in the Philippines is the proximity to subsuppliers of components that are primarily located in Asia. "We were forced to move within Manila because the authorities will no longer allow industrial manufacturing in the area in which the old production unit is located. But this suited us just fine since we were already beginning to outgrow the premises. Now we get the opportunity to further improve the production flow at the same time. It will be a modern production unit, prepared for the future," Carlsson explains.

Bright future

"As mentioned, the competition is getting tougher, but our profitability is strong at the moment. Despite rising raw material prices, which affect all manufacturers of lighters, our plants have succeeded in reducing production costs in recent years. We have strengthened our competitive ability, expect further volume increases and will continue working to improve productivity. As of the beginning of next year, we will also have a modern, cost-effective plant in Manila. We are also continuing our work on product development. An exciting area that we are looking at right now is how to apply our unique technology for lighters to other products in the future. The future looks bright for Swedish Match's lighter operations, but it will take continuous hard work to further strengthen our position in the world market."