Building on great brands

Global company Scandinavian Tobacco Group holds a number of market leading positions worldwide. With its recent strategic merger and a sophisticated understanding of the market, the company expects continued success. Emma-Jane Batey spoke to executive vice president of sales and marketing Christian Hother Sorensen to find out more.

ASa global company with a Danish head office, Scandinavian Tobacco Group is dedicated to the manufacture and sale of cigars and smoking tobacco to adult smokers worldwide. The company employs more than 10,000 people across its network of sales companies and production facilities in 20 countries, and it sells its products in more than 100 countries worldwide.

Established as Scandinavian Tobacco Group in 2010 following the merger of the tobacco business of the former Scandinavian Tobacco Group A/S and the cigar and pipe tobacco business, not including the US cigar business, of Swedish Match, the history of the company actually reaches back more than 200 years, when three Danish tobacco dynasties joined to launch new products. Strong global position

Executive vice president of sales and marketing Christian Hother Sorensen explained how the company’s historical markets continue to contribute to its strong position today. He said, “Scandinavian Tobacco is the world’s largest player in the field of pipe tobacco, holds a shared number one position within the world of cigars, and has a strong position within the fine-cut tobacco segment in Scandinavia. We are proud of our history and our profession, and it is our vision to continue that growth based on strong brands and committed employees. We are aware that our products and our business require consideration and responsibility in everything we do.”

The merger of Scandinavian Tobacco with Swedish Match during 2010 doubled the size of the organisation, and it is now concentrated on the three core segments of cigars, pipe tobacco and fine-cut tobacco. The integration of Swedish Match continues to be an important focus for the Group, with both central functions such as marketing, sales and finance and overlapping markets all adding value.

In addition to the merger, on March 1 2011 Scandinavian Tobacco acquired Lane Ltd, a US-based company that is the local market leader in the pipe tobacco and finecut segments. This company is now being integrated into Scandinavian Tobacco Group. Mr Sorensen added, “Lane Ltd is a perfect fit with us as it enables us to cover a previous gap in our global portfolio, particularly with Lane’s well-known Captain Black brand.”

Impressive products

Scandinavian Tobacco produces around 2.5 billion machine-made cigars and 115million handmade cigars each year, with about 1800 tonnes of pipe tobacco and 2100 tonnes of fine-cut tobacco produced annually. Although keen to continue its upward market growth trajectory, the company is clear that it only appeals to adult consumers that make the personal choice to smoke. Mr Sorensen explained that the company’s aim is to make adult smokers prefer Scandinavian Tobacco products over its competitors, and it is never its objective to encourage people to start smoking.

The impact of the global recession was felt by the company to some extent in that its finecut, or hand-rolling, tobacco saw an increase in sales. Mr Sorensen said, “As the economy is under pressure consumers shift towards a value-based product, and there is also some lifestyle choice in smoking hand-rolled cigarettes. In order to maximise this growth, we are putting considerable resources behind our fine-cut product concepts and we expect to present new high quality products that suit the current trends in the segment.”

Creating new concepts

Scandinavian Tobacco is continually working to develop new concepts that complement its products in response to the demands of its customers, working within the strict tobacco advertising laws in each of its geographical markets. With some countries, such as Iceland, Ireland and Canada, operating so-called ‘dark markets’, whereby tobacco products can only be specifically asked for by name and given from ‘under the counter’, it can be difficult to introduce and promote new products. The company aims to overcome this challenge by utilising its excellent word of mouth advertising, and by encouraging its trade customers to talk directly to consumers.

The latest product launched by Scandinavian Tobacco is the innovative ‘Filter & Flavour’ addition to its well-known Café Crème range. The product has a new packaging style, with a metalised box that is rather like a cigarette packet instead of the classic thin box the brand is known for, with the three new varieties each offering a ‘different flavour sensation’ that is smoother than regular cigarillos. The Café Crème Filter & Flavour is currently in five European markets and will be rolled out to other markets over time. There is also a new concept brand of non-addictive tobacco called Crossroads which Scandinavian Tobacco predicts will have unisex appeal. This product was launched in 2011 and is already being sold in Germany, Spain and Portugal.

Scandinavian Tobacco is certainly positive about its future, with the continued integration of Swedish Match and the upcoming inclusion of Lane Ltd bringing a number of positive synergies both in product development opportunities and new market presence. Mr Sorensen concluded, “We expect to see growth in volume and value, and we have the organisation, plans and people in place to make it happen.” n