Swedish Match

History

The operations of Swedish Match originate from two companies: Svenska Tobaksmonopolet, a tobacco monopoly owned by the Swedish state and founded in 1915, and Svenska Tändsticks Aktiebolaget (STAB), a match manufacturing company founded in 1917 by Ivar Kreuger (also known as the ”Match King”) in connection with the acquisition of Jönköpings Tändsticksfabrik. In 1992, the tobacco and lights operations were joined in the Procordia Group. Two years later, they were merged into an independent company named Swedish Match, which became publicly listed in 1996.

Svenska Tändsticks AB (STAB)
In 1917, Ivar Kreuger founded Svenska Tändsticks Aktiebolaget (STAB) in Jönköping (also known as "City of the matches"). It was a merger between Aktiebolaget Förenade Tändsticksfabriker and Jönköpings & Vulcans Tändsticksfabriksaktiebolag. A year later, STAB was listed on the Stockholm Stock Exchange. By expanding through acquisition of government-created monopolies by lending money to the governments, and through mergers with for instance the British match company Bryant and May in 1927, it became the world's largest match manufacturer. In 1930, the company controlled 60 percent of the world’s match production and was the sole owner of match companies in 33 countries.

Following the death of Ivar Kreuger in 1932, the ownership structure in STAB changed and a number of factories were liquidated. During 1938, STAB’s share of the world’s matchmaking fell to 20 percent. When the match market declined sharply in the 1950s, STAB looked for new business ventures and acquired more than 50 companies between 1968 and 1976.

In 1980, Svenska Tändsticks AB changed its name to Swedish Match to create unity throughout the group. In 1988 the company was acquired by Stora AB and was sold two years later to Nederlight. After another two years, Procordia acquired Swedish Match.

AB Svenska Tobaksmonopolet
In 1915, the Swedish government founded AB Svenska Tobaksmonopolet and nationalized all Swedish tobacco production plants. The monopoly was introduced in order to give the government funds to finance the country’s military defense and a new national pension system.

During the 1960s, the monopoly on production, import and sale of tobacco was abolished in Sweden. Svenska Tobaksmonopolet was converted to a new state-owned company named Svenska Tobaks AB. In 1971, the ownership of the tobacco group was transferred to Statsföretag, the Swedish National Wealth Fund, which in 1984 was renamed Procordia.

As a result of the monopoly being abolished and in order to broaden the market, the Dutch cigar company Elisabeth Bas/La Paz (EBAS), the American tobacco manufacturer Pinkerton Tobacco Company (maker of Red Man, a chewing tobacco brand introduced in the US in 1904) and the Dutch cigar producer Willem II were acquired between 1968 and 1989. In 1989, Procodia was listed on the Stockholm Stock Exchange. Volvo acquired part of Procordia in 1990 and became the principal owner together with the Swedish government. To complement the tobacco business, Procordia, in 1992, acquired the match and lighter company Swedish Match from Nederlight.

Swedish Match AB
In 1992, the listed company Procordia acquired the match and lighter business named Swedish Match. The operations of Swedish Match were integrated with Procordia United Brands, one of Procordia’s business operations, and was renamed Swedish Match to take advantage of international name recognition. In 1994, Swedish Match functioned as an independent company and was later, in 1996, listed on the OMX Nordic Exchange Stockholm AB and on Nasdaq.

In 1999, the company sold its cigarette manufacturing to Austria Tabak but is still active as a distributor of cigarettes on the Swedish market. In the same year, Swedish Match expanded its cooperation with PT. Java Match Factory (Jamafac), the biggest safety matches manufacturer in Indonesia, to a joint venture agreement in order to strengthen its position within lights and matches in Southeast Asia. Jamafac was divested in 2005 and now has a license agreement with Swedish Match to produce matches and distribute Cricket lighters in Indonesia.

In 2009, Swedish Match entered an agreement with Philip Morris International and formed the joint venture company SWPM International for exploring and developing new markets for snus and other smokefree tobacco products outside Scandinavia and the United States. The companies have an ownership of 50 percent each in SWMP International.

In 2010, Swedish Match and Scandinavian Tobacco Group (STG) formed a new company specialized in cigars. Swedish Match brought its entire cigar business (with the exception of U.S. mass market cigars) and pipe tobacco into the new company, while STG transferred all of its tobacco business. The new company took over the name Scandinavian Tobacco Group. Swedish Match became a partner with 49 percent of the company, and the remaining shares are owned by Skandinavisk Holding A/S.

Operations

Snus, moist snuff, cigars, chewing tobacco, matches and lighters are Swedish Match’s main products. They are developed, manufactured, distributed, marketed and sold through the company’s five operating units. The company also sells razors, batteries, light bulbs, and tooth picks on the Brazilian market.

Scandinavia Division
The Scandinavia Division is responsible for the supply chain management for the Group’s smokeless tobacco products (snus, moist snuff and chewing tobacco). It is also in charge of production, product development, marketing and sales of snus in Sweden and Norway. In addition to this, the division is responsible for the Group’s product development. The head office is located in Sweden.

US Division
The US Division manages sales and marketing for snus, moist snuff and chewing tobacco in the US. It also handles marketing and supply chain management for mass market cigars on the US market. The head office is located in Owensboro, Kentucky.

Lights Latin America
The division Lights Latin America manufactures and markets matches and lighters in Latin America. It also sells razors, batteries, light bulbs, and toothpicks. The head office is based in Brazil.

Lights International
Produces lights and matches in the Netherlands, the Philippines and Sweden. The division also manufactures and markets these products outside Latin America. The head office is located in Sweden.

SMD Logistics AB
The SMD Logistics AB division, distributes mainly tobacco products to the Swedish market, approximately 10,000 stores, as well as over-the-counter drugs. The head office is located in Sweden.

Partnerships
Swedish Match has two partnerships: SMPM International and Scandinavian Tobacco Group. SMPM International is a joint venture company equally owned by Swedish Match and Philip Morris. The company markets and sells snus outside Scandinavia and the US. Scandinavian Tobacco Group, of which Swedish Match owns 49 percent, is specialized in cigars, pipe tobacco and fine cut tobacco.

Operating locations and factories

Swedish Match operates in nine countries and has production units in six of these: Brazil, the Dominican Republic, the Netherlands, the Philippines, Sweden and the US. The company has 12 factories, of which ten, in 2013, had ISO 9001 and ISO 14001 certifications.

The table below presents an overview of Swedish Match's operations as of 2014:

Production of matches and lighters
The matches produced by Swedish Match are safety matches and are manufactured in Sweden and Brazil. The entity that produces matches in Sweden, Swedish Match Industries AB, is since 2009 certified according to the Forest Stewardship Council chain of custody standard and the standard for controlled wood. The matches are manufactured according to the European match standards EN 1783:1997. 40 percent of the production is sold in Europe and 60 percent to Africa, Central America, The Caribbean, Oceania and the Middle East. The Swedish manufacturing facilities are located in Tidaholm and Vetlanda. In Brazil, 95% of the wood consumption for safety matches and matchboxes is from Swedish Match’s own plantations which are part of Brazilian reforestation projects. The match manufacturing facilities in Brazil (Curitiba and Piraí do Sul) are not certified by ISO. Swedish Match produces lighters in the Philippines, the Netherlands and Brazil. The company’s main lighter brand, Cricket, is manufactured according to ISO 9994:2006 and EN 13869 (child resistance), which are mandatory in the European Economic Community.

Workplace and safety

In 2014, Swedish Match employed 4,395 people of whom 37 percent were women. In 2014, 75 percent of the employees were based in either the US, Sweden, or the Dominican Republic. All manufacturing facilities have health and safety committees that provide safety training and wellness programs to employees.

Every year, Aon performs two audits of compliance at Swedish Match’s manufacturing facilities. They inspect supplier contracts, human rights, occupational health and safety within the areas of social responsibility, workplace practices, business ethics and environment, and the absence of child labor and forced labor. Swedish Match is a member in the ECLT Foundation (Eliminating Child Labour in Tobacco Growing) and is represented on the Board. The table presents employee related data from Swedish Match for 2011,2012, 2013 and 2014:

Environment

Swedish Match states in its annual report that its environmental efforts are focused on energy consumption, electricity, waste, water use in manufacturing, and greenhouse gas emissions. In 2011, the company set environmental targets and performance indicators for 2016 at factory level.

Market

While today's Swedish Match still produces matches, the majority of its sales and operating profits comes from its smokeless tobacco products (snus and moist snuff) and other tobacco products (cigars and chewing tobacco). In 2014, these tobacco products accounted for 59 percent of sales and 93 percent of Swedish Match’s operating profit, whereas matches and lighters accounted for 10 percent of sales and 6 percent of operating profit. Swedish Match generates most of its sales in Scandinavia, the US, and Brazil (98 percent of company sales in 2013) but also has a significant worldwide presence through its matches and lighters businesses.

Snus and moist snuff

Scandinavia and the US are the primary markets for Swedish Match’s tobacco products. The company is market leader in snus in both Sweden and Norway. In 2014, the operating profit for snus and moist snuff increased to 2,207 MSEK (2,195 MSEK in 2013). The market for Scandinavian snus and the US moist snuff/snus is approximately 1.745 billion cans per year (345 million cans in Scandinavia and 1.4 billion cans in the US). The snus market in the US is about $175 million, and Swedish Match has about 10 percent of the market.

Cigars and chewing tobacco

In 2014, the US cigar market was estimated to more than 5 billion cigars (excluding little cigars) of which Swedish Match produced 1.1 billion sticks of cigars. The cigar market grew 9 percent compared to 2013 in terms of volume. Two thirds of the chewing tobacco sold in the US is produced by Swedish Match. Chewing tobacco is a 275 million US dollar market (manufacturers’ sales). In 2014, the operating profit for cigars and chewing tobacco increased by 8 percent to 1,109 MSEK (1,029 MSEK in 2013). In addition, Swedish Match holds a 49 percent ownership in Scandinavian Tobacco Group (STG) which is the world’s largest cigar producer and manufactures more than 50 percent of the world’s pipe tobacco. The company produces 3 billion cigars and 5,000 tons of pipe tobacco per year.

Matches and lighters

Swedish Match supplies matches worldwide. The main markets for matches are Scandinavia, the UK, France, Spain, Australia and Brazil. For lighters, the most important markets are Brazil, Indonesia, Malaysia, Russia, Scandinavia, France and UK. In 2014, 81.5 billion matchsticks were produced and 422.5 million lighters. Sales for matches and lighters was 1,295 MSEK (1,332 MSEK in 2013) and the operating profit declined by 5 percent to 218 MSEK (230 MSEK in 2013).

Main brands

Below are Swedish Match’s main brands along with market information as of 2014:

Swedish Match is also active on the Brazilian market with disposable razors, batteries, light bulbs and toothpicks under the Fiat Lux brand.

Snus in Sweden

The table shows the market shares for snus in Sweden according to Nielsen, as of 12 week data to December 22, 2012.

In 2014, Swedish Match estimated that its market share for snus in Sweden was 70 percent. In 2015, estimates by Nielsen showed that market shares were down to 68.7 percent based on a four-week period to 22 February 2015.

Snus and moist snuff in the US

In 2012, Swedish Match estimated that the company had a market share for snus and moist snuff of 10 percent in the US. The market share has decreased to 9 percent according to Swedish Match and industry estimates for 2014.

Cigars

Nielsen estimated that Swedish Match had a market share of 17 percent for cigars in the US in 2012 (based on 12 week data to December 22, 2012). In 2014, market shares increased to 22 percent according to Swedish Match estimates.

Chewing tobacco

In 2014, Swedish Match estimated that the company had a 40 percent market share for chewing tobacco in the US. This is a decrease with 8 percentage point compared to estimates for 2012 made by Nielsen (based on 12 week data to December 22, 2012).

Swedish Match in the US

In the US, Swedish Match produces and distributes the Longhorn, Timber Wolf and Red Man brands of moist snuff. The company also expanded into the United States premium cigar business by purchasing General Cigar Company Inc. (producer of non-Cuban versions of Macanudo, Partagas and Punch) from Edgar Cullman and El Credito Cigar Company (producer of La Gloria Cubana and El Rico Habano) from Ernesto Perez-Carrillo. In October 2010, the company transferred its US premium cigar and European cigar businesses, as well as its pipe tobacco and accessories businesses, to a new company named Scandinavian Tobacco Group, while receiving a 49 percent ownership stake in the new company.

In an effort to expand its snus business outside of Sweden and Norway, the company has, since 2009, been selling its Scandinavian market leading brand of snus, General, at tobacco retailers in the US. The distribution of General snus has increased over the years, from being sold in approximately 10,000 stores in 2012 to more than 24,000 stores by the end of 2014.

For the US, snus is a relatively new category while the main smokeless category is moist snuff. Moist snuff is made using a fermentation process and usually placed under the lower lip, requiring spitting. Snus is made using a steam heat process (much like pasteurisation) and is usually placed under the upper lip, which means that spitting is not necessary.

International Expansion

As of February 2009, it was announced that Swedish Match collaborated with Phillip Morris International in a joint venture, effectively testing various international markets. Their aim was to expand the Swedish Match smokeless product line outside of the US and Scandinavian markets. The collaboration placed test markets in Tel Aviv, Israel; St. Petersburg, Russia; Taiwan, and nationwide Canada. In Swedish Match's 2012 Q3 Interim report, CEO Lars Dahlgren commented, "In the US, General snus is now available in more than 9,000 retail outlets. We will continue to invest behind the brand and expand distribution, and expect to be in more than 10,000 stores by the end of the year. Test market activities for snus through SMPM International continue in Canada, and St. Petersburg, Russia, and we have now added Tel Aviv, Israel, as another test market."

Key people

Lars Dahlgren (born 1970) is President and CEO of Swedish Match. Conny Karlsson (born 1955) is chairman of the board since 2007 and board member since 2006.

As of the annual general meeting 2014, Swedish Match had the following board of directors:

President and CEO:
Lennart Sundén, 1998–2004
Sven Hindrikes, 2004–2008
Lars Dahlgren, 2008–

Ownership

As of March 2015, according to Euroclear Sweden, these were the 10 largest shareholders of Swedish Match: