This week, Swedish Match announced the planned divestiture of its remaining US cigar brand portfolio.
For more than 20 years, Swedish Match has been transforming itself away from combustible tobacco, starting with the divestiture of its cigarette business in 1999, and later with its divestitures of pipe tobacco, premium cigars, and its non-US machine made cigar business.
"This announcement is another milestone toward achievement of our aspiration to become an entirely smokefree organization with a clear leadership position in oral reduced risk products, including ZYN, the largest modern oral brand in the US and globally,” said Lars Dahlgren, president and c.e.o. 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 stand-alone 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
In a press release released on September 14, Swedish Match said of this move away from combustible products, “After conducting a thorough strategic review of its businesses, {…..] the planned separation of the US cigar business marks the next chapter in this transformation, where smokefree products such as nicotine pouches and snus will play the leading role in building a stronger Swedish Match in line with societal trends. As a stand-alone company, the cigar business will be able to explore a broader scope of growth opportunities, and to optimize its operational set-up and capital structure, among other benefits.
The cigar business products in both the natural leaf and homogenized tobacco leaf (HTL) segments of the US mass market cigars category and holds the number two market position with approximately 23% of the market measured by number of sticks. Since 2015, volumes have grown at a compounded annual rate of close to 10% from more than 1.2 billion sticks to more than 1.9 billion sticks in 2020, driven by growth for natural leaf varieties. During the same period, revenues also grew by close to 10% on a compounded annual basis from US$313-493 million, while operating profit has grown by 54% to US$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% as a result of improved pricing and double-digit volume growth and operating profit increased by 44%.
The natural leaf cigar portfolio includes brands such as Garcia y Vega, Game, and 1882. Its White Owl brand of HTL cigars is well known and its portfolios of both non-flavored and flavored cigars are among the broadest in the industry. The business has efficient and modern manufacturing presence in both the US and in the Dominican Republic.