Tag: Swedish Match

  • Immunity Waiver Clears Path for Dalli Trial

    Immunity Waiver Clears Path for Dalli Trial

    Photo: Kirill Ryzhov

    The European Commission waived John Dalli’s immunity from prosecution, allowing the court case against him to begin, reports The Independent.

    “The commission can confirm that, on the request of the attorney general of Malta, the commission has waived the immunity of former Commissioner John Dalli,” a European Commission spokesperson said.

    Dalli’s aide Silvio Zammit allegedly tried to obtain a €60 million ($71.17 million) bribe from Swedish Match to reverse the EU ban on snus (the company rejected the offer as improper and reported it to the European Commission). Dalli was the European commissioner for health at the time, in charge of managing reforms to the EU’s tobacco rules.

    The European Commission forced Dalli to quit in 2012 due to the scandal after the EU’s anti-fraud office uncovered the bribery attempt. Zammit was charged in December 2012 for trading influence and complicity in the request.

    Dalli insists the case is an orchestrated scheme created the “corrupt” media.

    The case is set to begin on Dec. 21.

  • Swedish Match Reports Record Sales

    Swedish Match Reports Record Sales

    Photo: Swedish Match

    Swedish Match released its interim report, showing record sales with year-on-year revenue growth across product segments, despite comparing to a prior year quarter with elevated demand for certain product lines.

    In local currencies, sales increased by 10 percent for the third quarter. Reported sales increased by 9 percent to SEK4.79 billion ($556.8 million).

    The company had record operating profit from product segments in spite of continued ramp-up in spending behind growth opportunities for smoke-free products. In local currencies, operating profit from product segments increased by 2 percent for the third quarter. Reported operating profit from product segments increased by 1 percent to SEK2.1 billion.

    Operating profit amounted to SEK2.08 billion for the third quarter. Profit after tax for the third quarter amounted to SEK1.54 billion. Profit after tax for the third quarter of the prior year included a charge of SEK286 million following an adverse ruling in a tax case.

    On Sept. 14, Swedish Match announced its intention to spin off its U.S. cigar business to shareholders. Subject to various conditions, the separation is expected to be completed during the second half of 2022 at the earliest.

    “I am pleased to report that Swedish Match in the third quarter continued to deliver double-digit revenue growth in local currencies along with improved operating profit compared to the third quarter of the prior year,” said Swedish Match CEO Lars Dahlgren.

    “With continued ramp-up in marketing related activities to support brand building and long-term growth, as well as the elevated demand (brought on by the pandemic) for several product lines in the prior year period, the financial development in the third quarter is a testimony to the strength and potential of our business.”

  • Swedish Match to Spin Off Cigar Business

    Swedish Match to Spin Off Cigar Business

    Photo: Swedish Match

    Swedish Match intends to separate its cigar business via a spin-off to shareholders and to completely exit the manufacturing of combustible tobacco products. Swedish Match has initiated preparations for a separation and a subsequent listing on a major U.S. securities exchange, with a final decision on execution subject to various considerations. The separation is expected to be completed during the second half of 2022 at the earliest.

    Swedish Match started transforming its business model two decades ago with the divestiture of its cigarette business in 1999. Later, it spun off its pipe tobacco, premium cigars and its non-U.S. machine-made cigar businesses. Going forward, smoke-free products such as nicotine pouches and snus will play the leading role in building a stronger company in line with societal trends, the company explained in a press note.

    According to Swedish Match, the intended separation of the cigar business provides even greater focus on building the company’s presence in the growing modern oral category while also providing opportunities and greater flexibility for the standalone cigar business to execute its own strategic plans toward delivering strong value as an independent company. “As a standalone company, the cigar business will be able to explore a broader scope of growth opportunities and to optimize its operational setup and capital structure, among other benefits,” Swedish Match wrote.

    According to Swedish Match, the cigar business has solid positions in both the natural leaf and homogenized tobacco leaf segments of the U.S. mass market cigars category and holds the No. 2 market position with approximately 23 percent of the market measured by number of sticks. Since 2015, volumes have grown at a compounded annual rate of close to 10 percent from more than 1.2 billion sticks to more than 1.9 billion sticks in 2020, driven by robust growth for natural leaf varieties. During the same period, revenues have also grown by close to 10 percent on a compounded annual basis from $313 million to $493 million, while operating profit has grown by 54 percent to $195 million. During the first six months of 2021, compared to the same period of 2020 and measured in local currency, sales grew by 25 percent as a result of improved pricing and double-digit volume growth, and operating profit increased by 44 percent.

    The natural leaf cigar portfolio includes such iconic brands as Garcia y Vega, Game and 1882, while its White Owl brand of HTL cigars is recognized nationwide for its quality and heritage. Its portfolios of both nonflavored and flavored cigars are among the broadest in the industry. The business has efficient and modern manufacturing presence in both the U.S. and in the Dominican Republic.

    In addition to its cigar business, Swedish Match operates its Smoke-free and Lights product segments. For the full-year 2020, the Smoke-free and Lights product segments reported combined revenues of SEK11.8 billion and combined operating profit of SEK5.36 billion. Measured in constant currencies, sales and operating profit for these segments combined grew by 21 and 32 percent, respectively, for the full-year 2020. For the first six months of 2021, these segments combined reported revenues of SEK6.4 billion and operating profit of SEK3.06 billion. Measured in constant currencies, sales and operating profit for these segments combined grew by 20 percent and 30 percent, respectively, during the six-month period. Growth continued to be driven by the strong momentum for nicotine pouches. In the U.S., the ZYN brand of nicotine pouches is the clear market leader and has enjoyed tremendous growth, with volumes exceeding 140 million cans for the 12-month period ending June 30, 2021.

    This announcement is another milestone toward achievement of our aspiration to become an entirely smoke-free organization.

    Lars Dahlgren, president and CEO, Swedish Match

    “This announcement is another milestone toward achievement of our aspiration to become an entirely smoke-free organization with a clear leadership position in oral reduced-risk products, including ZYN, the largest modern oral brand in the U.S. and globally,” said Lars Dahlgren, president and CEO of Swedish Match. “The cigar business continues to perform very well and is seeing positive industry dynamics, which we believe will make it an attractive standalone company, balancing strong cash flow generation with attractive growth.

    “The new cigar company will have the ability to explore a wider scope of growth opportunities within its autonomous and focused strategic agenda and to establish efficient and tailored operational and legal structures geared for long-term value creation.

    “Subject to market conditions, we expect that the new standalone cigar business, with its strong cash flow profile, could be capitalized at a higher level of leverage than has been the case for Swedish Match historically, which would create the opportunity for Swedish Match to use financing proceeds upon separation to further enhance shareholder returns. Until a separation is complete, Swedish Match will continue to operate as a single company and will continue business as usual for our customers and employees.”

    Following the potential separation of the cigar business into a new standalone company, Swedish Match expects to provide commercial and administrative support to the new standalone entity during a transitional period. The completion of the intended separation, the resulting structures and other related considerations are subject to final board and shareholder approvals, a thorough review of market and other business conditions, required documentation and other customary and necessary approvals and consultations.

    Goldman Sachs is acting as exclusive financial advisor to Swedish Match on the intended spin-off of its cigar business.

  • Chew on This

    Chew on This

    Photo: Swedish Match

    How sensibly will modern oral nicotine products be regulated in the future?

    By Stefanie Rossel

    Is history repeating itself? The parallels between the development of the vaping sector and that of modern oral nicotine are striking: Quick consumer adoption leads to phenomenal category growth rates. The promising, still-unregulated market lures myriad players and creates an unmanageable number of brands. Leading tobacco manufacturers seek to get their slice of the cake, often by strategic acquisitions. Despite evidence pointing at the reduced harm potential of the product compared to combustible cigarettes, tobacco control activists raise the alarm, urging regulators to crack down. The Wild West, gold-rush atmosphere is then abruptly curbed by the introduction of often-misguided restrictions and even product bans.

    It is at these crossroads where modern oral nicotine currently finds itself. The category, still a niche, has grown impressively in the five years since Swedish Match introduced Zyn, the first product of its kind. Market analysts are outdoing each other in their forecasts. 360Research Reports expects the category to increase to $32.77 billion in 2026 from $2.38 billion in 2020. Five key global players jointly hold a 77 percent share of the world market, according to Precision Reports. With 66 percent, Europe is the largest market, followed by North America and Asia-Pacific with more than 30 percent each, the company states.

    Competition in the market has rapidly heated up. Research and Markets notes the launch of 27 new brands of nicotine pouches in 2020. By now, all major tobacco companies and several smaller players are represented in the category. To cater to the increased demand, many of them had to step up production capacities, among them British American Tobacco, which in September 2020 built a new plant in Hungary that is dedicated to the production of nicotine pouches for export markets.

    The most recent company to enter the segment is Philip Morris International. In an investor presentation in February 2021, then-CEO Andre Calantzopoulos announced the development of a respective product through a “combination of partnerships and internal development.” In May, PMI acquired Danish family business AG Snus, a manufacturer of nicotine pouches. The deal was followed by PMI’s takeover of Danish firm Fertin Pharma on July 1, a company specializing in nicotine-replacement therapy (NRT) type products such as gums, pouches, liquefiable tablets and other solid oral systems for the delivery of active ingredients, including nicotine.

    Less Harmful Than Snus

    Nicotine pouches or “modern oral,” as manufacturers have termed the novel segment, are considered a subcategory of the smokeless tobacco segment. They are an evolution of traditional Swedish snus, a pasteurized oral tobacco that is available as loose products or in pouches and has been consumed in the Nordic country for 200 years. Unlike snus, however, modern oral nicotine contains no tobacco. In some brands, the nicotine used is not even derived from tobacco but produced synthetically. The nicotine pouches are white, pre-portioned little bags comprising nicotine applied to a carrier material, such as food-grade fillers. They come in a variety of flavors and nicotine strengths and even as nicotine-free variants. Like snus, they are discreet and spit-free and can be disposed of in household trash after use.

    For years, Sweden has had the lowest smoking rate in the European Union. According to Statista, the share of daily smokers in the country stood at 7 percent in 2019 (if the rate were to drop below 5 percent, Sweden would be considered “smoke-free” by some definitions). This compares to an average smoking prevalence of 23 percent throughout the EU. Sweden’s low smoking incidence is largely attributed to snus, which is used by 1 million Swedes. Decades of scientific research have confirmed the product’s efficiency as a smoking cessation tool. Snus use is estimated to be about 90 percent to 95 percent safer than smoking combustible cigarettes, which puts the product on par with e-cigarettes on the continuum of risk scale. A 2020 survey conducted by the European Tobacco Harm Reduction Advocates found that 43.3 percent of Swedish ex-smokers had used snus and/or nicotine pouches to quit smoking whereas more than 31 percent of current European smokers would be interested in trying snus if it was legalized.

    However, snus sales have been banned in the EU since 1992 except in Sweden, which negotiated an exemption from the ban when it became part of the trading bloc in 1995. The EU prohibition has survived two lawsuits, and few expect it to be lifted in the foreseeable future. Modern oral products, which offer non-Swedish EU users an alternative to snus, may rank even lower than snus on the risk continuum, according to a recent BAT study published in Drug and Chemical Toxicology. The research found that the company’s nicotine pouches had a toxicant profile comparable to that of NRTs, which are currently considered the least risky of all nicotine products.

    In a Gray Zone

    Given the EU’s attitude toward tobacco harm reduction, such an acknowledgement appears unlikely, however. Because modern oral products don’t contain tobacco, they cannot be regulated under the current EU Tobacco Products Directive (TPD); their status will be reconsidered during in the next TPD revision.

    In Germany, this has recently led to confusion over the legality of nicotine pouches. Several courts at the federal level have ruled that modern oral products are to be classified as foodstuff. As such, they would have to meet the requirements of European food legislation, which does not permit nicotine as food, food ingredient, food additive or flavor. Furthermore, food must not be hazardous to consumers’ health, according to the legislation. However, toxicological studies have shown that the nicotine dose that is taken up even by moderate users of modern oral is linked to health damage, courts argued. The rulings led to local sales bans. Due to this legal uncertainty, BAT in July 2021 suspended sales of its Velo nicotine pouches in Germany. The company called for legislation to set advertising standards for tobacco-free nicotine pouches and to limit nicotine concentration to 20 mg/mL.

    In the absence of EU legislation, several countries have tried to regulate nicotine pouches at the national level. In May, the Czech Republic amended its food and tobacco products act, obliging manufacturers, importers, retailers and distributors of nicotine pouches to ensure that these products meet the requirements for the composition, appearance, quality and characteristics stipulated by the decree of the Ministry of Health under similar conditions as those for e-cigarettes. In addition, they will have to inform the ministry, on a regular basis, on the nicotine pouches that they intend to launch on the EU/European Economic Area market. Manufacturers will also have to collect information on the suspected adverse effects of these products on human health. Tobacco-free nicotine pouches that do not comply with the amendment and that were produced or marketed before May 12, 2021, will have to come off the market in 2022.

    Italy, where nicotine pouches are considered consumer products, will reportedly consider modern oral products when it revises its anti-smoking law by the end of the year. Estonia’s parliament announced in July that it might relax its snus regulations to help reduce smoking.

    The U.K., no longer an EU member and therefore not bound to the common market’s regulation, is expected to follow Sweden’s example. To achieve its goal of a smoke-free society by 2030, the British government is presently shaping a tobacco control plan, which may very well include stronger promotion of cigarette alternatives, such as heated-tobacco products and nicotine pouches.

    Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.
  • Momentum Continues for Swedish Match

    Momentum Continues for Swedish Match

    Lars Dahlgren (Photo: Swedish Match)

    Swedish Match reported sales of SEK4.5 billion ($518 million) in the second quarter of 2021, up 9 percent from those reported in the second quarter of 2020. Operating profit was SEK1.96 billion compared with SEK1.69 billion in the 2020 quarter. The company’s operating margin increased to 45 percent from 42.9 percent from quarter to quarter.

    The performance was driven by continued momentum for Swedish Match’s ZYN nicotine pouch in the U.S. Sales and operating profit also grew in Scandinavia.

    For the cigars product segment, sales and operating profit were up significantly in local currency compared to a relatively soft prior year period due to improved pricing and increased natural leaf shipments.

    “Following an impressive financial performance in the first quarter, Swedish Match today reported another quarter with double-digit sales and operating profit growth across all product segments in local currencies,” said Swedish Match CEO Lars Dahlgren in a statement.

    “Our strategic focus on growing categories and segments is paying off as consumers are seeking alternatives and enhanced experiences.”

    “Swedish Match is very well positioned to build upon its strong platforms, and we are excited to determinedly pursue the growth opportunities that lie ahead while working toward our vision of a world without cigarettes.”

  • Swedish Match Reports Double-Digit Growth

    Swedish Match Reports Double-Digit Growth

    Photo: Swedish Match

    Swedish Match reported sales of SEK4.46 billion ($528.46 million) in the first quarter of 2021, up 11 percent over those in the 2020 first quarter. In local currencies, sales increased by 23 percent.

    Reported operating profit from product segments increased by 26 percent to SEK2.09 billion. In local currencies, operating profit from product segments increased by 40 percent.

    Operating profit, which includes a settlement income of SEK300 million related to a previously ongoing arbitration concerning nicotine pouches, amounted to SEK2.35 billion.

    Profit after tax amounted to SEK1.78 billion.

    Continued momentum for ZYN drove strong U.S. performance in the smoke-free product segment. In Scandinavia, strong underlying development was enhanced by timing effects on shipments and Covid-19-related channel mix effects.

    We remain encouraged by the strong market growth for the nicotine pouch category as consumers continue to seek satisfying alternatives to cigarettes and other traditional tobacco products.

    Lars Dahlgren, CEO, Swedish Match

    The cigar business featured record volumes, sales and operating profit on the back of strong category growth and improved price mix.

    No major operational Covid-19-related disruptions and Covid-19-related effects in aggregate are estimated to have elevated the reported financial performance.

    “Swedish Match delivered an impressive financial performance in the first quarter,” wrote Swedish Match CEO Lars Dahlgren in the company’s interim report. “We remain encouraged by the strong market growth for the nicotine pouch category as consumers continue to seek satisfying alternatives to cigarettes and other traditional tobacco products, and we are excited to be well positioned to participate in this market dynamic.

    “I am very pleased with our first-quarter performance and look forward to the opportunities and challenges facing Swedish Match with confidence.”

  • Swedish Match Holds Annual Meeting

    Swedish Match Holds Annual Meeting

    Photo: Swedish Match

    Participants in Swedish Match’s annual general meeting on April 13 resolved, in accordance with a proposal of the Board of Directors, to pay a dividend of SEK15 ($1.76) per share.

    Charles A. Blixt, Andrew Cripps, Jacqueline Hoogerbrugge, Conny Karlsson, Alexander Lacik, Pauline Lindwall, Wenche Rolfsen and Joakim Westh were re-elected as members of Swedish Match’s board of directors. Karlsson was re-elected as chairman of the board and Cripps was re-elected as deputy chairman of the board.

    The annual general meeting further approved the proposed remuneration to the members of the board of directors as set out in the notice. The annual general meeting also adopted the board of directors’ remuneration report for 2020.

    Furthermore, the annual general meeting approved the board of directors’ proposal that it be authorized to resolve on acquisition of the company’s own shares, on one or several occasions prior to the next annual general meeting, provided the company’s holding does not at any time exceed 10 percent of all shares in the company.

    In addition, the annual general meeting resolved to reduce the company’s share capital by SEK10,086,095.88 by means of withdrawal of 4,200,000 previously repurchased shares held in treasury, with a simultaneous bonus issue, without issuing any new shares, of a corresponding amount to restore the share capital.

    Furthermore, the annual general meeting approved the board of directors’ proposal that it be authorized to, for the period until the end of the next annual general meeting, to issue new ordinary shares on one or more occasions, with or without deviation from shareholders’ preferential rights and against payment in cash, in kind or by set-off. The number of shares that may be issued may not exceed a maximum dilution effect of 10 percent of the share capital and votes at the time of the annual general meeting 2021.

    The annual general meeting elected Deloitte as auditor until the end of the annual general meeting 2022.

    The annual general meeting resolved, as proposed by the board of directors, to amend the articles of association, primarily as regards the stipulation on minimum and maximum number of shares and share capital due to the proposed share split but also by introducing the possibility of postal voting to facilitate and increase flexibility in the conduct of general meetings.

    The annual general meeting resolved, as proposed by the board of directors, to split the share of the company, whereby each existing share shall be split into 10 shares of the same class of shares (10:1 share split). The board of directors was mandated to decide on the record date for the share split, which is estimated to be May 10, 2021.

  • Swedish Match Releases Annual Report

    Swedish Match Releases Annual Report

    Photo: Swedish Match

    Swedish Match has released its annual report for 2020.

    Highlights included record sales and operating profit, driven by strong traction for ZYN nicotine pouches in the U.S., and double-digit operating profit growth in local currencies for the smokefree and cigar product segments.

    In local currencies, sales increased by 17 percent. Reported sales increased by 13 percent to SEK16.7 billion ($1.96 billion), despite significant strengthening of the Swedish krona during the year versus the U.S. dollar, the Norwegian krona and the Brazilian real.

    In local currencies, operating profit from product segments increased by 28 percent. Reported operating profit from product segments increased by 23 percent to SEK7.16 billion.

    Operating profit amounted to SEK6.99 billion and profit after tax was SEK4.89 billion.

    We enter 2021 as a stronger, yet different, company.

    Lars Dahlgren, president and CEO, Swedish Match

    “On a local currency basis, all product segments delivered top-line and operating profit growth for the year,” said Lars Dahlgren, president and CEO of Swedish Match. “The U.S. smokefree business contributed with significant year-on-year sales and profit growth throughout the whole year. For cigars in the U.S. and for the first half, the year-on-year financial development was negatively impacted by Covid-19, but over the course of the second half of 2020, we saw an impressive recovery with accelerated volumes, sales and operating profit growth.”

    Dahlgren expressed optimism about 2021. “We enter 2021 as a stronger, yet different, company,” he said. “The success that we experienced in 2020 would not have been possible without the tireless dedication and ingenuity of our employees, the long-forged relationships that we have with our vendors and the continued passion and trust that our customers and consumers place in Swedish Match and its brands.”

  • Swedish Match Plans Annual Meeting

    Swedish Match Plans Annual Meeting

    Photo: Swedish Match

    Swedish Match will hold its annual general meeting on April 13.

    Due to the continued Covid-19 pandemic, the meeting will be conducted pursuant to so called mail-in procedures, meaning that no shareholders will attend the gathering in person or through proxy. Instead, shareholders can participate in the meeting by voting and submitting questions in advance pursuant to the instructions described here.

    Swedish Match posted record sales and operating profit in 2020, finishing the year with top-line growth across all product segments.

    Performance was driven by strong traction for ZYN nicotine pouches in the U.S. along with double-digit operating profit growth in local currencies for the smoke-free and cigar product segments in both the full year and the fourth quarter, the company announced in February.

  • Swedish Match Reflects on Strong Year

    Swedish Match Reflects on Strong Year

    Photo: Swedish Match

    Swedish Match posted record sales and operating profit in 2020, finishing the year with top-line growth across all product segments.

    Performance was driven by strong traction for ZYN nicotine pouches in the U.S. along with double-digit operating profit growth in local currencies for the smokefree and cigar product segments in both the full year and the fourth quarter, the company said in a press release.

    Covid-19-related effects are estimated to have elevated sales and operating profit for the full year as well as in the fourth quarter.

    In local currencies, sales increased by 15 percent for the fourth quarter and by 17 percent for the full year. Reported sales increased by 5 percent to SEK4.14 billion ($497.12 million) for the fourth quarter and by 13 percent to SEK16.7 billion for the full year despite significant strengthening of the Swedish krona during the year versus the U.S. dollar, the Norwegian krona and the Brazilian real.

    In local currencies, operating profit from product segments increased by 23 percent for the fourth quarter and by 28 percent for the full year. Reported operating profit from product segments increased by 12 percent to SEK1.7 billion for the fourth quarter and by 23 percent to SEK7.16 billion for the full year.

    Operating profit amounted to SEK1.65 billion for the fourth quarter and to SEK6.99 billion for the full year. The fourth quarter of 2019 included a non-cash impairment charge of SEK367 million related to the European chewing tobacco business.

    Profit after tax amounted to SEK1.24 billion for the fourth quarter and to SEK4.89 billion for the full year. The full year 2020 includes a charge of SEK286 million following an adverse ruling in a tax case.

    Lars Dahlgren

    Referring to the challenges presented by Covid-19, Swedish Match CEO Lars Dahlgren described 2020 as “a year of adaptability.”

    “The success that we experienced in 2020 would not have been possible without the tireless dedication and ingenuity of our employees, the long-forged relationships that we have with our vendors and the continued passion and trust that our customers and consumers place in Swedish Match and its brands,” he said.

    Swedish Match’s full financial report is available here.