Swedish Match Turns Focus to U.S. Snus Market
Snus, a moist, Swedish-style snuff found mostly in pouches, is the company's leading product and sold mostly in Scandinavia, according to Reuters. However, Swedish Match expects to grow the market in the United States faster than in its home region.
"During 2012, we will continue to invest for growth. In the U.S., we will expand distribution and invest further in marketing activities ...," said Swedish Match, which is the largest producer of snus in Sweden. The product is banned in the rest of the European Union.
During its 2011 full-year earnings call yesterday, the company said marketing costs for snus in the United States weighed on fourth-quarter profit. Operating profit fell to 1.02 billion crowns ($153.6 million) from a year-earlier 1.42 billion, the news outlet reported.
Swedish Match executives added that significantly higher international snus investments weighed on the profit margin for snuff and snus, which make up more than half of its profit. The margin fell to 45.9 percent from 48.1 percent, well below a forecast for 47.6 percent.
In addition to turning its sights to the U.S. market, Swedish Match's venture with Phillip Morris, SMPM International, plans to trial snus in at least one more market this year, after tests in Taiwan, Canada and St Petersburg, Russia.
Swedish Match Chief Executive Lars Dahlgren told Reuters he expects the U.S. snuff market to grow 5 percent this year, against 6 percent in 2011, and the Scandinavian market to grow by at least 3 percent, against 5 to 6 percent in 2011.
He said the group would spend 60 to 100 million crowns more this year on marketing snus outside Scandinavia. Swedish Match said volume at its second key business, U.S. mass-market cigars, was up 14 percent.
"In the U.S. mass market cigar business ... we expect to continue to grow faster than the overall market and generate increased sales and profits in local currency," the company said.