Scandinavian exceptionalism

As cigarette sales fall throughout Scandinavia, snus is becoming even more popular—where it is allowed.

By Stefanie Rossel

The Scandinavian countries are united not only by their cultural and linguistic heritage, but also by their aspiration to a healthy lifestyle. Already, Norway, Sweden and Denmark boast some of the world’s lowest rates of cigarette consumption—and cigarette sales volumes continue to decline year on year.

Of the three nations, Sweden is the furthest along in achieving the World Health Organization’s (WHO) dream of a smoke-free society. Smoking prevalence among its adult population was a mere 11.6 percent in 2015, down from 13.4 percent in 2010, according to Euromonitor International. In Norway, smoking incidence dropped to 13.2 percent from 19 percent during that period. Lagging somewhat behind, Denmark had a smoking rate of 20.4 percent in 2015—but the level was still down from 21.5 percent five years earlier.

Vapor prevalence, meanwhile, has moved in the opposite direction, rising from only 1 percent in 2010 in Norway to 10.7 percent in 2015. In Sweden, 9 percent of adults used electronic nicotine-delivery devices (ENDS) in 2015, compared with 5.5 percent five years earlier. Denmark leads the pack: According to Euromonitor, 20.8 percent of Danes vaped in 2015, up from 5.2 percent in 2010.

Sweden’s low smoking incidence is partially a result of the Swedes’ love of snus, a pasteurized oral tobacco that is available loose or in small pouches and has been used in Sweden for about 200 years. Snus is also popular in Norway.

In its 2015 annual report, category leader Swedish Match estimates the region’s snus market at slightly more than 360 million cans, an increase of approximately 5 percent from the previous year. Consumer preference has shifted from traditional loose products to snus pre-portioned in pouches, which accounted for almost 80 percent of volumes in Scandinavia at the end of 2015.

Value-priced products accounted for 46 percent of snus sales in 2015, according to Swedish Match, which held about 41 percent of this competitive segment at the end of last year. In 2015, Swedish Match accounted for 69.3 percent of Sweden’s overall snus market, 1.2 percentage points less than in the previous year.

Sweden’s entire tobacco market was worth $3.34 billion in 2015, with snus and moist snuff accounting for $1.14 billion, according to Euromonitor. The snus segment has been growing, as has Sweden’s vapor category, which more than tripled in value over five years, reaching $3.7 million in 2015.

During the same period, the value of cigarette sales grew at a slower rate, to $2.04 billion from $1.82 billion. The development reflects a trend among consumers to switch from combustible cigarettes to tobacco products that are perceived as less harmful. It is also aided by extensive smoking bans.

In 2015, Swedish Match reported an operating profit of sek3.69 billion ($431.1 million). Snus accounted for 54 percent of that figure. The company’s snus brands in Scandinavia include General, Goteborgs Rapé and Ettan. In addition to manufacturing snus for the Nordic countries and the United States, Swedish Match is a major player in the U.S. mass-market cigar and chewing tobacco segments. As its name implies, the company also supplies lighters, matches and associated products.

Norway

With a population of 5.21 million, Norway is the smallest Scandinavian market. In the period 2010–2015, the retail value of all tobacco sales declined to $2.07 billion from $2.1 billion, according to Euromonitor. However, the smokeless tobacco category, which includes snus and moist snuff, grew to $595.7 million from $340.7 million during the same period.

Norway’s snus volume market alone has grown by more than 20 percent over the past three years and by approximately 7 percent in 2015 versus the prior year, according to Swedish Match. The other categories either stagnated or showed considerable decline. Cigar and cigarillo sales were flat at $21.1 million from 2010–2015, while sales of smoking tobacco decreased to $341.7 million from $473.2 million during that time.

Like their neighbors in the east, Norwegians have turned to snus at the expense of combustible cigarettes. According to Euromonitor, the retail value of the Norwegian cigarette market declined to $1.08 billion in 2015 from $1.26 billion in 2010. Retail volumes of cigarettes including roll-your-own tobacco shrank to 2.3 billion stick equivalents from 3.14 billion stick equivalents over the same period.

British American Tobacco (BAT) holds 51.7 percent of the cigarette market, followed by Philip Morris International (PMI) at 33.6 percent, Imperial Tobacco Group (ITG) at 11 percent, Japan Tobacco International (JTI) at 2.4 percent and Scandinavian Tobacco Group at 0.3 percent.

Euromonitor expects Norway’s smoking prevalence and tobacco market value to drop further.

On the occasion of World No Tobacco Day in May, Norway announced that it would introduce plain packaging for cigarettes. The Norwegian bill is reportedly based on Australian and U.K. legislation and will in principle cover all tobacco products, with the exception of certain product categories that are not used by young people—although the sale of such products might be restricted to specialist sales outlets.

Similar to Australian packs, tobacco packages in Norway will be required to be the same dark green color, using the same font without logos or other design elements. The proposed regulation extends to the tobacco products, which, for example, may feature only a certain color of cigarette or tipping paper.

Denmark

Denmark is a bit of an outlier in Scandinavia. While its smoking rates stagnated around 20 percent between 2010 and 2015, the retail volume of its cigarette market shrank dramatically over that period, to 5.64 billion sticks from 7.7 billion sticks, according to Euromonitor. Including RYO stick equivalents, the cigarette market declined to 6 billion from 8.1 billion in the five years reviewed. Cigars and cigarillos, by contrast, saw a bit of boom before the revised EU Tobacco Products Directive (TPD2) took effect in May. Between 2010 and 2015, according to Euromonitor, the retail volume of the cigar/cigarillo category in Denmark almost doubled to 114.4 million units.

Value-wise, the Danish tobacco market contracted to $2.12 billion in 2015 from $2.4 billion in 2010. Euromonitor anticipates the decline to continue “relentlessly” between now and 2019. Cigarette value sales including RYO accounted for the vast majority of the market, representing $1.78 billion in 2015, down from $2.09 billion five years earlier.

Aided by its 2008 acquisition of House of Prince, BAT boasted a Danish market share of 73.6 percent in 2015. The remaining market was shared by PMI (17 percent), JTI (7.5 percent), ITG (0.2 percent) and Von Eicken (0.1 percent).

In contrast to shrinking cigarette volumes and value, the vapor category showed impressive growth in Denmark, increasing to $41.8 million in 2015 from $22.1 million in 2010. By comparison, the 2015 retail value of vapor products in Norway and Sweden was $24.1 million and $3.7 million, respectively. This contrast is especially remarkable given Denmark’s population—only slight larger than Norway’s—and regulatory history: Until recently, the country classified e-cigarettes with nicotine as medicinal products, requiring manufacturers to obtain market authorization.

According to ECigIntelligence, this all changed on June 7, when Denmark introduced the draft proposal to transpose TPD2 into national law: Since then, selling nicotine-containing e-cigarettes and e-liquids has become legal.

Contrary to their Nordic neighbors, the Danish traditionally have displayed a strong liking for smoking combustible tobacco and pipe smoking. While the Danish smoking tobacco market shrank to $126.6 million from $144.5 million in 2010–2015, the decline was less dramatic than that in Sweden and Norway.

Perhaps unsurprisingly, Denmark is home to the world’s largest manufacturer of cigars and pipe tobacco, Scandinavian Tobacco Group (STG), which sells about 3 billion cigars and 5,000 tons of pipe tobacco annually. In 2015, it generated net sales worth dkk6.732 billion ($1 billion). According to Euromonitor, it led the Danish smoking tobacco category with a market share of 73 percent in 2014, followed by Mac Baren Tobacco Co. (22 percent).

Sidebar

Swedish Match eyes EU sales—again

In 2014, Swedish Match presented its vision of “a world without cigarettes.” To help accomplish that goal, the company said it would focus on less risky tobacco products. It named the development of the snus category in Sweden and the U.S., as well as continued efforts to establish snus and other innovative smoke-free products in select markets, as the core of its strategy.

As far as the EU is concerned, these efforts have not gone far; snus has been banned there since 1992. The EU based its measure on a WHO study suggesting some risk to snus users but ignored a number of Swedish long-term studies more favorable to snus. When Sweden entered the EU in 1995, it negotiated an exemption from the snus ban based on cultural heritage considerations. Swedish Match and the German tobacco manufacturer Arnold Andre have challenged the snus ban, but the European Court of Justice (EJC) rejected their arguments.

In July 2016, Swedish Match tried again, this time in Britain’s High Court of Justice, according to Reuters. The company has reportedly asked the U.K. court to make a reference to the ECJ on the validity of an article in TPD2. As TPD2 allows novel tobacco products, the company claims, the legal circumstances have changed. The supposed novelty of the product had been a main argument in the EU’s decision to ban snus.

This time, the company’s chances may indeed be better. Clive Bates, director of The Counterfactual, lists 10 reasons why Swedish Match has a strong case to overturn the EU snus ban (see www.clivebates.com/?p=2461).

For starters, according to Bates, there is now a better scientific basis supporting the harm reduction properties of snus. Swedish Match’s interaction with the U.S. Food and Drug Administration (FDA) will likely play a role, too: In November 2015, the FDA authorized the marketing of a new Swedish Match snus range in the U.S. Although the agency does not allow the manufacturer to make a reduced-risk claim, it nevertheless means that the product has been evaluated by the FDA as being “appropriate for the protection of public health.”

Also, unlike its predecessor, TPD2 includes a notification process for “novel tobacco products,” which makes it difficult for lawmakers to treat snus differently from other “new” products.

Although the European Commission in its 2010 TPD2 consultations decided to uphold the snus ban, both the public consultation statistics and the governmental representative response statistics showed that a majority was in favor of lifting the prohibition, according to Bates.

Swedish Match says it chose Britain because the procedure to make a reference to the ECJ was unavailable in Sweden. Britain is also known for its open-minded attitude toward innovative tobacco products, but it remains to be seen whether the country was the right choice for such a move in the light of the country’s decision to leave the EU. Should the British High Court refer the case to the ECJ, Swedish Match expects a ruling by mid-2018 at the earliest.—S.R.