Cigarette Companies Investing in Snus
The European cigarette market, the second largest in the world by volume and highly profitable, is shrinking. Although Transnational Tobacco Companies (TTCs) have successfully raised cigarette prices to offset these volume declines, thus maintain profits, industry analysts have raised doubts about the sustainability of this pricing strategy in the medium to long term.
Not surprisingly, TTCs have been steadily diversifying into alternative tobacco and nicotine products.
More recently, TTC diversification has focused primarily on E-cigarettes and ‘Heat not Burn’ tobacco products.
European Snus Market
The main snus markets in Europe are Sweden, and to a lesser degree, Norway.
All TTCs, albeit in varying degrees, entered the European snus market in the period from 2002 to 2008.
Japan Tobacco International
JTI sells snus in Sweden only, under three brands: LD in the value segment, mid-priced Gustavus, and premium Camel snus which it launched in 2009.
British American Tobacco
Initially, BAT sold snus under cigarette brands Lucky Strike, Peter Stuyvesant, and du Maurier, and snus brands Granit, Mocca, and Knekt snus, in South Africa, Canada and Scandinavia.
In March 2011 BAT announced that it had “scaled back” its snus trial markets “to review our [BAT’s] approach to developing new reduced risk product categories”, and in addition, cancelled a test market planned for 2011.
From 2012, the company only sells snus in Sweden and Norway.
Imperial sells Skruf, its main premium brand, in Sweden and Norway. Knox, its value brand, is only available in Sweden.
At Imperial’s 2010 Investor Day, Marcus Diemer, General Manager for Central Europe North, credited snus as a “sizeable, and highly profitable business, and less vulnerable to growing regulatory pressures”.
However Imperial has not made any snus acquisitions since 2008.
Philip Morris International
Philip Morris International (PMI), Europe’s cigarette market leader, no longer sells snus on the Scandinavian market.
In 2006 the company briefly sold 1847 by Phillip Morris on the Swedish market following its acquisition of snus manufacturer Rocker Productions.
In 2009 it sold Rocker Productions to Swedish Match as part of a deal that saw PMI and Swedish Match set up joint venture SMPM International, to 'globalise snus'. This joint venture was dissolved in 2015.
|British American Tobacco||10.3%||6.0%|
|Small independent manufacturers||1.7%||0.3%|
Swedish Match, the only listed snus manufacturer without cigarette interests, retains the largest market share of the European snus market.
In 2009 Swedish Match established a joint venture with PMI to 'globalise' snus. Genuine competition between snus and cigarettes on the Scandinavian markets has thus slowly been reduced.
The share of the small independent snus manufacturers has always been, and remains, relatively insignificant.
Superseded by Vapour Category
Despite these TTC investments, smokeless tobacco use is not well established in Europe, other than Norway and Sweden. This partly reflects the fact that sales of snus have been prohibited in European Union member states other than Sweden.
TTCs have unsuccessfully tried to lift the ban on snus since 2008.
From 2012, TTC alternative investments moved from snus to vapour products.
Like snus, TTCs are looking to the vapour category to ensure its long-term future, should regulation further constrain the cigarette market or reduce its pricing power, and reassure investors that TTCs have a revenue growth potential.
In the interim, in the context of the reduced risk potential of snus and vapour products, these investments provide the tobacco industry a vital public relations function to rehabilitate their reputation as ‘a responsible industry’.
- * Snus: EU Ban on Snus Sales
- * Snus: Marketing to Youth
- * EU Tobacco Products Directive Revision
- * TPD: Dalligate
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