Market for Cigars
The US machine made mass market cigar category has experienced notable growth over the past several years.
Based on distributor shipments to retail in 2020, the market excluding little cigars1) increased by more than 16 percent in volume terms and amounted to approximately 8.4 billion cigars. The strong category growth appears to have been positively impacted by COVID-19 related effects on consumption patterns. While both the HTL and natural leaf segments grew in 2020, the growth for natural leaf cigars continued to exceed that of HTL cigars. The market is highly competitive.
| Key data | 2020 | 2019 | Change, % |
|---|---|---|---|
| Financials | |||
| Sales, MSEK | 4,533 | 4,249 | 7 |
| Operating profit, MSEK | 1,796 | 1,577 | 14 |
| Operating margin, % | 39.6 | 37.1 | |
| Shipment volumes | |||
| Homogenized tobacco leaf (HTL) cigars, million sticks | 838 | 625 | 34 |
| Natural leaf cigars, million sticks | 1,065 | 1,067 | 0 |
| Cigars total | 1,903 | 1,692 | 12 |
| Market shares1), % | 2020 | 2019 | Change, % |
|---|---|---|---|
| Homogenized tobacco leaf (HTL) cigars | 15.3 | 12.5 | 2.8 |
| Natural leaf cigars | 37.7 | 43.4 | –5,8 |
| Cigars total | 22.9 | 22.5 | 0.4 |
1) Based on MSA distributor shipments: Mass market cigars (excluding little cigars), full year 2020 and 2019. Figures for 2019 have been restated to reflect changes in MSA store measurements.
- Swedish Match’s cigar shipment volumes increased by 12 percent compared to the prior year, with strong volume growth for HTL and good growth for natural rolled leaf cigars more than offsetting volume declines for other natural leaf varieties.
- Based on MSA measures of distributor shipments to retail, Swedish Match’s volume increase was 19 percent, which was a somewhat higher level than the level of shipments from Swedish Match to distributors. This difference was impacted by production limits for natural leaf varieties, and resulted in somewhat lower inventory levels at distributors and at retail for those varieties.
- Swedish Match estimates that the Company’s share of the category grew slightly and was approximately 23 percent in 2020.
- The Company’s share within HTL grew and amounted to approximately 15 percent, while for natural leaf, Swedish Match’s share declined and was approximately 38 percent.
- Within HTL the White Owl brand grew strongly, while the value priced Jackpot brand grew modestly.
- Due to the onset of the COVID-19 pandemic, the decision was made by Swedish Match to suspend the cigar operations of its subsidiary Swedish Match Dominicana for two weeks beginning in late March.
- In conjunction with the resumption of factory operations, adequate hygiene and social distancing measures, as well as other initiatives to lower the risks related to COVID-19 for the employees, were implemented. These actions had a negative effect on factory output and productivity, but over the course of the second half of the year notable progress in restoring supply levels was achieved.
- The US FDA required that cigar manufacturers submit regulatory filings for all their cigars which they wish to remain on the US market (with few exceptions) as part of the SE/PMTA2) process. Swedish Match submitted applications for its entire current US cigar portfolio prior to the September 9 cut-off date.
1) Little cigars are typically filter tipped and packaged in packs of 20. Swedish Match does not participate in this segment.
2) More information about substantial equivalence (SE) and premarket tobacco product application (PMTA) can be found at the Company’s website.
