Market for Snus and moist snuff
Markets for smokeless alternatives, including snus and moist snuff, as well as innovative products, such as nicotine pouches without tobacco, have been growing in volume in both Scandinavia and the US. As the market leader in Scandinavia and a significant player in the US, Swedish Match has been a participant in this growth and is well positioned to grow further.
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, including its G.3 assortment. In addition to its traditional snus products, Swedish Match offers its nicotine pouches without tobacco product, ZYN, in Sweden. Swedish Match also offers Onico in both Sweden and Norway, the number one brand in the segment for products with neither nicotine nor tobacco.
The Scandinavian snus market is estimated to have amounted to slightly more than 390 million cans in 2017, up by close to 4 percent from the previous year.1) Over the past several years, consumption has been moving from traditional loose products to pouch products, which at the end of 2017 accounted for more than 80 percent of volumes in Scandinavia.1) Swedish Match’s Scandinavian shipment volumes measured in number of cans grew by 3 percent, while underlying volumes (excluding hoarding and year-end calendar effects) are estimated to have increased more than 1 percent.
Sweden is the largest snus market in Scandinavia with approximately one million consumers, and growing.2) It is estimated that more than 20 percent of Swedish men use snus on a regular basis. The overall percentage of women using snus is lower than for men, but growing.2)
The Swedish snus market is estimated by Swedish Match to have grown by close to 4 percent in volume terms in 2017 versus the prior year. The growth of the Swedish snus market in 2017 came from both the value priced segment (which for the full year represented approximately 47 percent of the market) and the premium segment.1)
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 approximately 20 percent over the past three years. During 2017, growth moderated slightly compared to recent years’ levels and was around 5 percent 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 1 percentage point.1) Unlike the Swedish snus market, the Norwegian market is an all premium market and has no value segment.
1) Source: Swedish Match estimates of can volume using Nielsen data (excluding tobacconists in Sweden), full year 2017.
2) Ipsos Sweden, Market Report, 2016.
Highlights in Scandinavia
In Sweden, Swedish Match maintained 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 innovations. The One series of attractively priced premium snus, based on innovative technology, which was launched during the fall has been received well by consumers. This follows on the successful launch of XR in 2015 with similar pricing. One has drawn consumers from both higher and lower priced products, and has helped to stabilize volumes for premium brands of pouch products. Swedish Match also expanded the distribution for ZYN beyond the Company’s own snus stores in Sweden and was during 2017 made available online and in one of Sweden’s largest convenience store chains. ZYN was first launched on the US market prior to being offered in Sweden. In the value priced segment in Sweden, Swedish Match maintained its leading position, with support from the Kaliber+ launch and a packaging and product upgrade for the Kronan brand. Kaliber+ has a more fully packed portion than the traditional Kaliber and provides a more robust flavor.
In Norway, modern snus products continued to show positive trends, which enabled Swedish Match to improve its share performance. To address a challenging competitive situation, Swedish Match continued to launch line extensions under the G.3 range, with functional properties such as a soft fit, minimal drip and a long-lasting snus experience. G.3 Volt and G.3 Wire were launched during the year. They are both a stronger product in the slim white dry format. Swedish Match also launched a completely new all white snus under the brand G.4 – a moist product with a soft mouth feel developed utilizing innovative technology. Volumes declined however for loose snus and for the more traditional original pouches in Norway, segments in which Swedish Match has particularly strong positions, thus contributing to the overall share decline for Swedish Match in this market. From July 1, 2017, Norway has imposed plain packaging regulation, which applies to all snus products launched since that date and from July 1, 2018, the regulation requires that all snus products be in plain packaging.
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 now includes locations in Gothenburg, as well as in Strömstad and Åre – both within a short drive from the Norwegian border. During the year, Swedish Match continued to develop the snus store concept with the opening of an e-commerce service.
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 vast majority of moist snuff users in the US are men. The moist snuff market is highly price competitive. The recent rapid growth of the pouch segment of the market has broadened the appeal of moist snuff to a larger consumer base.
In 2017, the US moist snuff market is estimated by Swedish Match to have grown by approximately 1 percent, and amounted to more than 1.5 billion cans, with the pouch segment accounting for approximately 16 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 2017, 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 55-60 million cans in 2017. 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.
A relatively new category on the US market is nicotine pouches without tobacco. This category is small, but is growing at a rapid pace.
Highlights in the US
The premium priced segment of the moist snuff market declined in 2017, 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 maintained its position with its Longhorn brand, as well as strenghthened its position with pouch products in that rapidly growing segment.
Approximately 84 percent of moist snuff in the US is sold in the traditional loose format1), but 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 4 percent in volume terms in 2017. 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 snus and nicotine pouches without tobacco in the US market and there were significant investments during the year to support the expansion. The trends are encouraging and in 2017, as a result of both higher volumes and improved pricing, the net loss after market investments improved. In the US, the Company markets the General snus brand – an authentic Swedish snus, available in tobacconists, convenience, and other select stores. During the year, Swedish Match continued to expand the availability of ZYN, a range of nicotine pouch products without tobacco, in the western US. By the end of 2017, ZYN was available in approximately 9,000 stores. Growing volumes for ZYN did not only come as a result of expanded distribution but also from an increase in turns per store. The Company will invest more than 60 MUSD into US production capacity of ZYN – a project that was initiated in the fall of 2017 with production anticipated to be operational in 2019.
1) Source: Swedish Match estimates.
Snus outside Scandinavia and the US
Outside the Company’s core markets, Swedish Match continues its efforts to establish Swedish snus in selected markets. Swedish Match sees good opportunities for its snus products over the longer term and is currently active in Canada and Malaysia.