Friday, 15 May 2009 01:01


Written by Andrew Romeo
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It's difficult being in Big Tobacco and running its snus business in Nordic Europe.  It's even more difficult if you are in Small Tobacco, and don't have a cigarette business to bring in the cash while your snus factory loses money annually.

At last count, there are under 10 tobacco companies in Sweden manufacturing snus.  There is at least one in Denmark (V2).

Scandinavia sells 220 million cans of snus per year, 200 of which go through the Swedish market + duty free (and leak over to Finland), and 20m which are purchased in Norway.  Until the Swedish government changed, and levied a 100% excise tax increase in 2006, and another 50% increase in 2007, snus was growing at 10% per year in volume terms.  It's now stable, after a quick volume drop.  Norway was increasing excise regularly, and up to 35% of Norwegian consumption now comes from Swedish border shops.


In Sweden, Big (and small) Tobacco sell snus (and smokes) into 9000 shops, including many independents, organized convenience outlets (7-11, Pressbyran (Reitan)), and organized grocery (ICA, COOP, Axfood).  98% of all tobacco products are delivered by Swedish Match Distribution, a nearly flawless distribution company with roots in the old monopoly.  Swedish Match AB also has 87% market share in snus, so the other producers have all had those 'prickly' moments of being locked in the Death Star's tractor beam when they signed with SMD for snus distribution.

Several snus companies did try to go it alone in the last few years, but retailers are used to having one pricelist, and one invoice for all the tobacco products and accessories they sell.  Swedish Match Distribution also has a solution in place for product recalls, and keeps products properly rotated in two warehouses in a suburb of Stockholm (East) and Gothenburg (West). Also, some chains won't list a snus product unless it is delivered by Swedish Match Distribution.

Swedish Match AB, as a company which markets and sells snus is a vicious competitor.  Their snus fridges (Floor standing, and look like Pepsi coolers) dominate the market, and truly give them the footprint to defend their marketshare.  A few years ago (2006), I watched a Swedish Match sales team de-merchandise several new PRINCE tabletop checkout fridges in a Gothenburg Axfood supermarket, and fill them with General.  Prince snus was a direct threat at the General pricepoint, so the SMAB supervisor, who physically presided, did his job (As GM, Gallaher, and SMD's largest customer for cigarettes, I asked what he thought he was doing).  SMAB was losing share to the new discount segment (LD, Granit, Knox), and analysts were lobbing apocalyptic, and wrong, predictions that the company may start bleeding huge share points (and profit) to competitors.

In 2009, Swedish Match has stabilized (after an approximate 7% share drop, but no new excise chadbanner3anges *phew!*).  BAT's Fiedler and Lundgren has managed to gain a foothold and some points with investment in fridges, and SMAB's "Kronan" has done well to regain lost share in the value segment. Imperial's "Skruf" does OK, but shares a small segment with JTI and the fighting Taboca AS.  Gotland is almost unseen in the shops outside of Christmas, and joins V2 as an Internet star as the fridges in crowded shops fill up with brands that sell to Swedes. Snusab is primarily a contract manufacturer for non-Swedish companies.  Companies like WISE/Oomph and Rebel (whose Elixyr is a European B-brand cigarette, Dutch, I believe) survive on small volumes via the net as well.


It has become an inside joke in the industry that Swedish focus groups will tell you what you want to hear instead of what they really want. Bright cans and new flavors, metal tins and larger portion sizes,smaller portions, and higher nic, etc.

The Swedes, in fact, like General, Grov and Goteborgs Rape, while in the North, they like Ettan.  Kronan and Granit sell on price.  That's the market.  These people are conservative.  Montecristo sells out in the 7-11's near sexy Stureplan in Stockholm on Friday nights, but the core SMAB portfolio rules the roost the six other days of the week.  The Swedes seek reliability:  Swedish Match, Volvo, Electrolux, H&M, SAS.  They get it by sticking with what they know.  Also, the research shows that snusing is a personal experience for each consumer, and that these old, friendly brands will provide reliable and predictable comfort on demand.


By far the more frustrating of the two markets, Norway's tobacco market hides behind an oligopoly of buying groups who control all 5,000 tobacco retail outlets.  By far the largest, Norgesgruppen AS, services approximately 70% of the market, sharing it with Swedish ICA, Reitan (7-11/Narvesan/Rema 1000/Texaco), and COOP.

There are no independent shops outside of those rare ones who operate on a cash-only basis, and tobacco companies are forbidden to distribute directly to retail.

Launching a consumer good in Norway requires that you get a meeting with these groups before one of the three launch windows in February, May, or September.  If you get the meeting, you must present the product, produced, and complying with all Norwegian packaging laws, even though the trade group, or groups, may very well reject the product. No "dummy cans." Factories hate this.

And there's the thing.  Even if Norway is on your list for a full Nordic launch of a line of products, one, or more, buying groups can say "No, thanks" or "We'll take the bergamot" even though the pomegranate is in your business plan. "That's too many SKU's too soon" is often heard, as is "let's see how it does in Sweden. Come back in a year."

Your natural reaction is to try to get to know the person who handles your category.  But in Norway, buyer-managers have often been fired for accepting invitations to producer-sponsored events (influence peddling).  Additionally, traditional listing fees are illegal, and are paid as something called "joint marketing," which is the same as listing fees.

Add to this the constant threat that the government will follow Iceland and put all tobacco under the counter, and ask the Industry to foot the bill.  Excise has already put a pack of Marlboro at about US $14, and a tin of General is already in double digits as well. As mentioned above, a large percentage of Norwegians get into their Volvos every Saturday, and cross the border into Sweden to buy consumer goods in massive shopping centers with tobacco shops the size of a Tower Records, cinemas, supermarkets and porn shops (no joke).

Norwegian coolers carry no branding, and Swedish Match carries around 80% share.  Imperial/Skruf has about 8 to 10%, and the usual suspects make up the rest.  Native Taboca AS has recently gone with Imperial's company-owned distributor, Gunnar Stenberg AS, and its Norwegian heritage and Skruf's own success, may give it some leverage to grow. But, it's a rough ride, and a questionable investment fighting for share of a market which is under 10% of Sweden in terms of volume.


The "Ettan in the north" phenomenon exists here as well due to historical considerations, and the consumer base is quite similar.  Despite the fact that Norwegians celebrate once a year their freedom from the Swedish crown in 1905, Swedish Match very much controls the market, and the government threat to "go dark" has caught the attention of the EEA (European Economic Area, which includes Norway, unlike the EU).  There has been talk that the darkening of the market will give Swedish Match a de facto monopoly in a market where competition would essentially be  disallowed by a dark market.

Norway has 10% of the volume reported from the Swedish market, but their consumption is very much influenced by the proximity of Sweden in several locations, where tobacco, and many consumer goods, are far cheaper.


Denmark:  The Danes are connected to Malmo, Sweden by a long bridge.  While Swedes use it, as well as ferries, as a path to cheaper alcohol at coveniently located border shops, they actually have a legal loose snus market which is based on a bizarre loophole so that Swedish sailors could buy the product while in port ages ago.  Loose product has come out of Denmark with cartoonish labels (70,000 cans per year).  I honestly cannot remember the company's name.

These days, V2, based in Silkeborg, has several products focused on the Internet trade (and, IMHO, decidely North American tastes), and are avoiding the expensive barriers to entry in Sweden and Norway retail. They are focusing instead on the burgeoning international interest in snus and avoiding the costs of entry to Sweden and Norway, though they are available via local distributors..

Finland:  The great mystery.  The anecdotal consumption is 20m cans per year, the same as Norway.  It's illegal to sell snus there, but not to use it. All of the snus consumed in Finland comes either out of duty free product sold on Swedish ferries in international waters or in Gardermoen airport in Oslo, Norway, or from the Swedish border town of Haperanda. There is also a market for loose, the fave in Finland, which is served by border and duty free shops in Russia (St. Petersburg and Vyborg (right on the border).  The EU keeps slapping Helsinki's hand, especially since they tried to hide a Finnish island, Aland, from Brussels, in 2006.  Finnish-flagged ferries would hit Aland, and sell snus duty free, and claim exemption from the EU ban.

Losing the case, the ferries were re-flagged as Swedish. Finland shares in the snus tradition of the region, due to its long tradition as a Swedish neighbor and subject.  Unlike Sweden, they did not apply for the 1994 exemption for the EU snus ban.  I heard Aland once even had a snus factory, and Swedish is still an official language in Finland.  Someone dropped a ball. Snus is now a major "under the counter" product in Finland, and because cigarettes are not allowed to be displayed, snus has a rumored popularity with the underage, because it's sold from friend to friend, or invisibly and illegally in shops. Sweden was blamed by Finland for poor regulation of snus sales across its borders in December 2008,and proposed a ban on Ferry sales, in my opinion, to impress Brussels.  Yay, Finland.  Get a Health Minister.


The Nordic market is frustrating, but achieving volume and profit targets must be long-term propositions for all companies, large and small, with investment in point-of-sale materials as part of the package.

And spending time in the region, surrounded by over 100 of my relatives, as I did for almost four years, seeing all the Volvo V-70's, the power of local cigarette brands (Prince, Blend, Look, Teddys, Commerce, Level, etc) over almost all multinationals (except Marlboro, a long road ahead), and the absolute absence of Starbucks in a region where strong coffee is part of the gestalt, it made me realize that turning Scandinavians away from what they trust is a task which requires perseverance, time and lots of money.And tobacco advertising is in the last stages of existing

Nordic Europe is not a good test market for consumer goods, but instead, is a study of the roots of rooted brand loyalty and the importance of availability and reliability over novelty. The locals are great worldwide travelers, but have absolute trust that their brands are the best in the world.  Their worlds are hectic, with shared responsibility in a family unit that would surprise an American, and a healthy lust for the good things of a quiet life.  Once they've found them, they want to be left alone to enjoy their personal pleasures (snus, for example) and those pleasures they enjoy with friends and family (golf, the sun, some skiing, and proximity to the sea, odd dinner parties, or a midsummer celebration).

In conclusion, For consumer goods launches, Finland is worse than Norway, which is worse than Sweden, which is worse than Denmark. A remarkable conglomeration of people, and a tough market to crack.  All the producers are working hard, and they should be judged by the experience you have, as a consumer, when you put it in your mouth.

Live from New York on

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Read 6595 times Last modified on Saturday, 09 November 2013 03:08

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