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CIGARS INT'L POWERS SWEDISH MATCH Print E-mail
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As Altadis was acquired last year by Britain’s Imperial Tobacco, Swedish Match is spoken of as an attractive candidate for purchase by another of the cigarette giants, perhaps British American or Philip Morris International. Swedish Match’s total 2007 sales of $2.1 billion U.S. pale compared to the cigarette giants and since Swedish has no cigarette interests anymore, remains a good candidate for acquisition. Its operating profit of $501.4 million would be welcomed.

What’s next for Swedish Match?
In addition to its first-quarter financial report, the company’s annual report gives an interesting glimpse at some parts of the company’s standing and 2008 strategy:

  • About the U.S. premium-cigar market, the annual report notes that “Swedish Match is the market leader in the U.S., with a market share estimated by Swedish Match to be approximately 35 percent, measured in number of cigars sold.” The report also indicated that the trend is toward a higher percentage of “smaller premium cigars” in the U.S., meaning you can expect to see even more brands with short robustos of less than five inches later this year.

  • On machine-made cigars, the report stated that “During 2007, little cigars continued their upswing in popularity in the U.S., while in the U.S. mass market there was a transition away from flavoured cigars and toward natural wrappers and lightly aromatic cigars. As natural wrapper cigars tend to sell at higher retail price[s] than these flavoured cigars, this trend has had a positive impact on sales.” Swedish has about a 7 percent market share in this sector, dominated by Altadis U.S.A., Swisher International and the John Middleton division of Altria (Philip Morris).

  • Customers of Cigars International will find some new things to consider as the annual report notes that “The company’s customer database will constitute a unique asset for Swedish Match and provide opportunities for directly testing various product concepts.”

    The annual report also revealed the details of the company’s acquisitions in 2007:

  • Bogaert Cigars was acquired last June for $68.4 million U.S. (converted from Kronor) or about 2.4 times its annual sales.

  • Cigars International was acquired in August for $117 million U.S. or about twice its annual sales.

  • The premium-cigar business of flavored-cigar stalwart Havana Honeys was acquired in December for $6 million U.S. The little-cigar business and the Las Vegas airport cigar kiosk operated by Havana Honeys were not included in the transaction.

    Also worth noting: during 2007, Swedish Match employed 3,942 people in the Dominican Republic, 1,893 in Honduras and 1,686 in Indonesia, all in its manufacturing and production group. These are the people who would be most impacted by the passage of the SCHIP taxes in the U.S. as the American cigar market would contract. When the bill comes up for another election-year debate, be sure your representatives know the damage that it will cause to countries which are generally friendly to the U.S.
    ~ Rich Perelman
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