A Year of Transformation for Swedish Match

Its vision: A world without cigarettes.

From company documents

In many respects, 2019 will stand out as a transformational year for Swedish Match, said its CEO Lars Dahlgren—a year of not only record sales and operating profit from product segments, but also further alignment with its vision.

“[Swedish Match] established itself as the clear market leader for nicotine pouches in the United States and began offering nicotine pouches to markets outside of our core Scandinavian and U.S. markets,” said Dahlgren in a report on late 2019.

Twenty years ago, he said, Swedish Match embarked on a journey toward a world without cigarettes by divesting its cigarette business and choosing to expand its footprint with other products over a broad geography.

Later, the company divested its pipe tobacco businesses as well as its U.S. premium and European cigar businesses, and instead concentrated its focus on smokefree products.

The nicotine pouch ZYN has given Swedish Match a boost.

“Throughout this journey, Swedish Match has dedicated its efforts through research and development, product innovation, regulatory engagement and market insight in pursuit of our vision benefiting our shareholders as well as society as a whole,” he said. “Much like our vision, Swedish Match’s strategy for sustainability is a long-term journey. Our approach to sustainability is not to attempt to cater to broadly defined, and at times, ideological demands of others.”

Rather, the company’s compass is set strategically on specific areas where it believes it has the potential to directly or indirectly influence meaningful outcomes or where the issue has the potential to impact the long-term viability of the company’s businesses.

“Beyond the many successful sustainability initiatives implemented by our businesses during the year, we were particularly pleased to see that our greenhouse gas emission reduction targets were approved by the Science Based Targets initiative in March of 2019,” Dahlgren said. “The trend shift in global consumption of nicotine products away from traditional combustible cigarettes is accelerating.

“As nicotine markets evolve, producers, governments and regulators must work to achieve the societal benefits of harm reduction grounded in science while limiting unintended negative consequences like youth adoption.”

Swedish Match has purchased several smoke-free companies recently including V2 Tobacco, manufacturer of Thunder.

The global regulatory regimes are dynamic and divergent, and 2019 was a uniquely turbulent year, which gave an ironic example of the regulatory divergence that frequently occurs.

“In a period of 10 months, the European Court of Justice ruled that Swedish snus will continue to be excluded from the EU internal market."

[At approximately the same time] Swedish Match became the first company to be granted Modified Risk Tobacco Product (MRTP) designations by the U.S. FDA for our General snus offerings.

“We firmly believe that the best and most proven alternatives to cigarettes lie in smokefree nicotine products that do not require inhalation, and we will continue to advocate for rational and science-based regulatory frameworks that will permit Swedish Match to responsibly market our products to adult consumers as a safer alternative to combustible cigarettes.”

Qvitt and Jakobsson’s, manufactured by Swedish Match's Gotlandssnus subsidiary.

Over the past several years, Swedish Match has invested in its long-term strength and geographical reach.

“Our ZYN factory expansion projects in the U.S. have progressed very well, and following the success of our 2019 national roll-out of ZYN, we have once again taken a decision to further expand our manufacturing capacity in support of future growth,” the statement said. “The opportunity for ZYN extends beyond the U.S. and Sweden/ Norway, and ZYN is now available on a limited scale in a number of European countries, and markets as far away from Stockholm as New Zealand.”

Swedish Match has also worked to build from recent acquisitions of V2 Tobacco, Oliver Twist and Gotlandssnus—[all] smokefree tobacco companies that complement the product portfolio and provide opportunities for a more flexible and adaptive portfolio under changing market and regulatory conditions.

“The Group’s outstanding financial performance in 2019 further reflects our commitment to our vision as the snus and moist snuff product segment accounted for essentially all of our growth in sales and operating profit from product segments in local currencies,” the statement said. “In Scandinavia, cigarette smoking continued to decline and market growth for smokefree alternatives was robust during the year.”

Oliver Twist.

But the dynamics within the smokefree markets have changed as nicotine pouches became more widely accepted in both Sweden and Norway.

“In Norway, market volumes for conventional snus declined as consumers rapidly migrated to nicotine pouches,” said Swedish Match. “In Sweden, market growth accelerated during 2019, driven by nicotine pouches, which generally are priced higher than snus offerings, and by premium snus brands which are offered atsomewhat lower price points than the traditional range of premium products.”

Volume growth was slower than the overall market growth for the combined snus and nicotine pouch categories in these markets.

“We remain committed to actively competing in the attractive growing segments while balancing profit growth,” the statement said. “Swedish Match’s market share is particularly strong within the traditional range of premium snus products, and structural declines within this segment contributed to the market share declines for our total portfolio.

“As we enter 2020, we will continue making strides toward our vision of a world without cigarettes.” [TI]

BAT Recognized for Sustainability

British American Tobacco (BAT) has been named as one of the most sustainable companies in the world as part of the 2019 SEAL Business Sustainability Awards, which celebrate leadership, transparency, and commitment to sustainable business practices.

BAT has been awarded the SEAL Organizational Impact Award, which recognizes overall corporate sustainability performance and represents the 50 most sustainable companies globally.

Winners were selected by combining and ranking the aggregated results of two rigorous, world-class sustainability assessments—the recently-released 2019 CDP A-List and the SAM Corporate Sustainability Assessment.

Matt Harney, SEAL Awards’ Founder, adds, “Companies, CEOs and corporate boards have a simple but not easy choice before them: whether or not to exhibit real leadership by investing in sustainable business practices.”

Sustainability leaders like SEAL Award recipients can secure lasting legacies for their grandchildren and corporate stakeholders alike, Harney said. “ESG leaders will have reputations and balance sheets that survive the climate crisis.”

The mission at SEAL is to rigorously assess and then celebrate extraordinary sustainability leadership. “We are excited to present this elite and impactful 2019 award winner group.”

Simon Cleverly, Group Head of Corporate Affairs at BAT, said, “Our approach to sustainability is at the heart of our plans to build a long-term sustainable business and we have a clear purpose to provide consumers with a range of potentially less harmful products.

“We are also clear that our long-term sustainability will rely on successful delivery against all other environmental, social and governance measures.”

BAT is “delighted” that its integrated approach to sustainability, which drives value for consumers, employees, shareholders and wider society, has been recognized by inclusion on a prestigious list of global companies, Cleverly said.