Market for Snus and moist snuff
Swedish Match’s primary tobacco markets are in Scandinavia and the US.
Snus and moist snuff markets have been growing in volume in both Scandinavia and the US – and Swedish Match has been a participant in this growth. As the market leader in Scandinavia and a significant player in the US, Swedish Match is well positioned to grow further. In Scandinavia, Swedish Match has experienced growing volume in both the Swedish and Norwegian markets. In the US, the Company grew its moist snuff business by offering attractive alternatives in two of the fastest growing formats – pouches and tubs. The US snus market continued to grow, and Swedish Match has outpaced the market.
Snus in Scandinavia
Swedish Match is the leading snus producer in Scandinavia and enjoys strong market positions in both Sweden and Norway. In Sweden, General is the largest brand in the premium priced segment, while Kronan and Kaliber are among the leading brands in the value priced segment.1) In Norway, General is the largest Swedish Match brand on the market. In addition to its traditional snus products, Swedish Match offers the number one brand in the tobacco free snus segment in both Sweden and Norway with Onico, providing consumers with a high quality nicotine free alternative.
The Scandinavian snus market is estimated to have amounted to slightly more than 375 million cans in 2016, up by approximately 4 percent from previous year.1) Over the past several years, consumption has been moving from traditional loose products to pouch products, which at the end of 2016 accounted for approximately 80 percent of volumes in Scandinavia.1)
Swedish Match’s Scandinavian shipment volumes measured in number of cans grew by 2 percent, while underlying volumes (excluding hoarding and year-end calendar effects) are estimated to have increased by approximately 1 percent.
Sweden is the largest snus market in Scandinavia with approximately one million consumers, and growing.2) It is estimated that some 20 percent of Swedish men use snus on a regular basis. The overall percentage of women using snus is lower than for men, and growing.2)
The Swedish snus market is estimated by Swedish Match to have grown by close to 4 percent in volume terms in 2016 versus prior year. The growth of the Swedish snus market in 2016 came from both the value priced segment (which for the full year represented approximately 46 percent of the market) and the premium segment (supported by the XRANGE snus series).
In Sweden, Swedish Match’s market position is strongest in the premium priced segment. This segment declined somewhat as a share of the total market while volumes grew. Within the value priced segment, competition remained intense during the year, and Swedish Match grew volumes while losing some market share.
In Norway, the snus market volume has grown by more than 20 percent over the past three years and by close to 8 percent in 2016 versus the prior year.1) Swedish Match’s market share in volume terms in this market is estimated to have declined by somewhat more than 3 percentage points.1)
1) Source: Swedish Match estimates of can volume using Nielsen data (excluding tobacconists), full year 2016.
2) Ipsos Sweden, Market Report, 2016.
Highlights in Scandinavia
In Sweden, Swedish Match defended its strong position in the premium segment, despite efforts by competition with new products. Swedish Match’s well-known brands and quality were reinforced through line extensions and packaging. The XRANGE series of attractively priced premium snus, launched in the spring of 2015, has performed well and continued to gain market share during 2016. XRANGE has drawn consumers from both higher and lower priced products, and has helped to stabilize volumes for premium brands. During 2016, Swedish Match launched Omni, a slim, dry, all white portion product, with the appeal of fresh taste, using a unique patented technology. The product is available in Sweden and Norway in limited distribution. In the value priced segment in Sweden, the Kaliber and Kronan brands maintained strong positions during the year.
In Norway, to address a challenging competitive situation, Swedish Match launched line extensions under the General G.3 range, with functional properties such as a soft fit, minimal drip and a long-lasting snus experience. An exciting innovation was the launch of General G.3 Mint Strong Super Slim, a slimmer white pouch snus with broad appeal, especially among younger adult men and women. Volumes for loose snus and for the more traditional original pouches in Norway, segments in which Swedish Match has particularly strong positions, declined, which contributed to overall share declines for Swedish Match.
During the year, Swedish Match also expanded its snus store concept in Sweden. The Swedish Match snus stores provide a unique consumer experience, where snus users can learn more about snus and the Swedish Match range of products. Snus stores are also an ideal venue to present new products. Starting with a store in downtown Stockholm at the end of 2012, the concept has been further expanded and includes locations in Gothenburg, as well as in Strömstad and Åre – both within a short drive from the Norwegian border.
Snus and moist snuff in the US
The Swedish Match brand portfolio for moist snuff is positioned in the value priced segment, with traditional loose products as well as pouch products. Longhorn is Swedish Match’s largest brand in the US market.
Swedish Match sells Swedish snus in the US under the General brand, priced in line with premium priced moist snuff products. ZYN is the Company’s brand for its nicotine pouches without tobacco.
Moist snuff is sold throughout the US and volumes are particularly strong in the southern and mid-Atlantic states. The moist snuff market is highly price competitive. The vast majority of moist snuff users in the US are men. The recent rapid growth of the pouch segment of the market has broadened the appeal of moist snuff to a larger consumer base.
In 2016, the US moist snuff market is estimated by Swedish Match to have grown by approximately 3 percent, and amounted to approximately 1.5 billion cans, with the pouch segment accounting for approximately 15 percent of this market. Swedish Match’s moist snuff volume measured in number of can equivalents was lower compared to last year. For the full year 2016, Swedish Match estimates its market share by volume of the moist snuff market to be approximately 8 percent.
The US snus market is growing but is still quite small and amounted to approximately 55 million cans in 2016. This segment’s potential for growth is strong, as snus which is primarily a pouch category, may appeal to a wider segment of the adult tobacco consuming population who desire a discrete, spitless alternative. The market for nicotine pouches without tobacco is relatively new.
Highlights in the US
The premium priced segment of the moist snuff market declined in 2016, while the value priced segment grew.1) There was continued intensive competitive activity among large competitors, especially in the value segment. While Swedish Match’s volume and market share declined for its higher priced brands in the value segment, the Company has strengthened its position in the growing value priced segment with its Longhorn brand, as well as for its pouch products in that rapidly growing segment. Packaging and labelling changes were made during the year to further strengthen positioning for both the Longhorn and Timber Wolf brands.
While approximately 85 percent of moist snuff in the US is sold in the traditional loose format1) , over the past several years, the percentage of moist snuff sold in pouches has increased. Swedish Match estimates the growth in the pouch segment to have been approximately 11 percent in volume terms in 2016. While volumes declined for more traditional loose products, the Company experienced solid volume growth for its pouch assortment, and for its large pack tub format of loose products.
Swedish Match continued its efforts behind Swedish snus in the US market and there were significant investments during the year to support the expansion of snus. In the US, the Company markets the General snus brand – an authentic Swedish snus, available in tobacconists, convenience, and other select stores. The trends for General snus are encouraging and in 2016, as a result of both higher volumes and improved pricing, the net loss after market investments improved. During the year, Swedish Match expanded the availability of ZYN, a range of nicotine pouch products without tobacco, beyond its Colorado base. By the end of 2016, ZYN was widely available in the western US.
1) Source: Swedish Match estimates.