Other tobacco products

Swedish Match holds the number 2 position in the US market for mass market cigars and is the largest manufacturer for chewing tobacco.

Other tobacco products mainly include cigars and chewing tobacco for the US market but also chew bags for certain markets in Europe. The product area experienced another growth year in both sales and operating profit.

Production of cigars takes place in Santiago, Dominican Republic and Dothan, Alabama. Production of chewing tobacco takes place in Owensboro, Kentucky and Odense, Denmark. Chew bags are produced in Denmark. 

Key data, MSEK201720162015
Sales4,6344,2833,829
Operating profit1,7761,7051,554
Operating margin, %38.339.840.6

 

Swedish Match shipment volumes20172016Change, %
Cigars, millions of sticks1,6291,47211
Chewing tobacco, thousands of pounds
(excl. contract manufacturing volume)
6,3416,709-5

 

Share of Group total:
Sales: 29%
Operating profit: 41%

Main brands:
Cigars, the US: Garcia y Vega, Game by Garcia y Vega, 1882, White Owl, Jackpot
Chewing tobacco, the US: Red Man, Oliver Twist
Chew bags, Europe: Thunder, General CUT

Main markets:
the US, Europe
Production units: the US, the Dominican Republic, Sweden, Denmark

Strategy

In the product area Other tobacco products, Swedish Match works to maximize long term profitability, leveraging its strong market presence and trusted brands.

For cigars, the Company will drive profitable growth through strong sales and marketing execution, while maintaining strict cost discipline. The Company continues to adapt its assortment in order to maintain its leadership in offering high quality products with ­outstanding value with a focus on products in growing segments.

For chewing tobacco, Swedish Match will capitalize on its leading position in the category and continuously drive productivity improvements. By mitigating the impact of volume declines through cost focus and price leadership Swedish Match can ensure good profitability in this declining category.

Financial development

(Note: Comments below refer to the comparison between full year 2017 vs. full year 2016).

In local currencies, sales for Other tobacco products were up by 8 percent, while operating profit was up by 4 percent, driven by cigars. Operating profit and operating margin were negatively impacted by the introduction of FDA user fees for cigars beginning from October 1, 2016. Adjusted for the FDA fees (10.1 MUSD incurred in 2017 and 2.5 MUSD in 2016), the operating profit in local currencies would have increased by 8 percent.

Cigar volumes increased by 11 percent, with growth from both natural leaf and HTL varieties, and sales in US dollars increased in line with volumes. Operating profit was also higher despite the full year effects of FDA user fees.

Sales for chewing tobacco were on par with prior year while operating profit grew somewhat. For US chewing tobacco, volumes were down by close to 6 percent and sales declined as increased average price only partly mitigated the effect from the lower volumes. Chew bags contributed positively to both sales and operating profit and compensated for the lower sales and operating profit for US chewing tobacco.

See financial tables by product area for more financial information.