Japan Tobacco, JTI; just how did they end up in Sweden making Real Snus?
JTI, the international arm of Japan Tobacco, is the third largest tobacco company in the world. As with seemingly the entire tobacco industry outside the United States, everything seems to start with Government/Government sponsored Tobacco Monopolies. These monopolies have come and gone since the 15th century; Sweden's last one only ended in 1968. How the spoils are divided afterwards is something which is headache inducing. Here is the history timeline of JTI for the more scholarly among you. I warn you it starts in 1784. Special mention and sincere thanks to tobacco industry veteran and expert Andrew Romeo for his much needed help in making the time-line specific to Per's career coherent.
Per Andersson is passionate about tobacco, the tobacco industry, Real Swedish snus, and JTI. I asked him to tell me some facts not generally known about JTI and snus outside the industry. I admit surprise at his answers.
- JTI introduced the first Maxi Portion in Sweden with their 'Grand XL' snus. The over-sized pouches were designed to increase nicotine absorption by increased physical gum coverage. According to consumer research, the right product. Unfortunately, sales did not reflect this. Today the maxi portion is effectively dead but not quite buried. Swedish Match is the latest to de-list their maxi portion offering; General Maxi. Granit Maxi Portion is pretty much the final maxi portion snus as of today.
- In 2005, 'Strongcut' was launched as the first high nicotine snus in all of Scandinavia. It was available as a bergamot/citrus and as a juniper flavored snus; all strong portion or strong loose. The right concept but its effects on the JTI cigarette P&L doomed it quickly.
- JTI brands were the first Swedish snuses to use catch lids for used snus and the only manufacturer to to this day who uses hinged catch lids.
- In August of 2005, the LD brand was launched as the first discount snus in Sweden. The LD Brand was and is popular and affordable without sacrificing quality. LD is still in my regular rotation and will be until my freezer stock runs out. The current LD lineup is LD Original Portion, LD White Portion, LD Mini Original Portion, LD Loose, LD Salmiak (the Snus formerly known as LD Black).
- For trivia lovers, the font used on Gustavus cans is exclusive to JTI and appears on no other manufacturer's snus cans. The silver foil material used on the Gustavus catch lids is only used by JTI and a "well known German luxury car manufacturer". SnusCENTRAL Labs are running metallurgical studies on the foil in an effort to determine why it is so special. Rumor is the foil turns the can invisible when within 25 feet of a BATF or FDA Agent.
Centuries of persecution of the tobacco industry has made it a fairly closed society. It took me about 3 months and acceptance of a strict list of conditions from JTI Sweden to interview Mr. Andersson. I was effectively restricted to asking him questions about the Swedish market only. Fortunately for the purposes of this article, Swedish snus in Sweden was all I really wanted to discuss....so long as I would be able to discuss it with JTI's Snus Lord of Sweden, the birthplace of and largest consumer market of real snus in the world. Thank you to my friend Joakim Nilsson; Communications Manager, Nordic, at JTI Sweden for making this interview possible.
Per Andersson: The Making of a Swedish Snus Lord
In 1972 at age 2, a toddler by the name of Per Andersson was taken for the first time to the tobacco factory where his father worked. In our conversations, the word "passionate" was often used by Per to describe his love of tobacco and the tobacco industry. That passion was shared and nurtured by his father. He taught his son all about tobacco and the tobacco industry at the time. Per learned how to judge a tobacco's quality, its sensory feel and smell, flavoring, and the absolute importance of producing the highest quality tobacco products from beginning to end. He didn't get to use it until much later: his father was a very responsible man.
Back then, cigarettes were more in vogue than snus. Shocking as it may seem, as recently as 30 to 40 years ago, the perception in Sweden at that time was snus was more a product for the lower class. That perception began changing as more of the downsides of cigarette smoking became known.
Today, snus use in Sweden is truly classless and the social acceptance of snus throughout society is total. One in 9 Swedes use snus and Sweden has the lowest number of cigarette smokers at 11%. Little wonder Sweden today has the lowest rates of lung cancer, throat cancer and mouth cancer in the entire EU.
Sweden is also the only country in the EU not subject to the infamous EU Snus Ban. But back to Mr. Andersson's journey, the corporate intermarriages resulting in JTI Sweden entering the snus business and Per Andersson becoming their Snus Lord of Sweden .
In 1999, Andersson entered the tobacco industry officially in Swedish Match's cigarette and RYO division. Also in 1999, some idiot at RJ Reynolds sold the their international tobacco operations and brands to Japan Tobacco for a paltry 8BB USD. Andrew Romeo does make a business case for that decision, but I still find it stunning. Leaving all that aside, the key here as that Japan Tobacco now owned the international rights to the CAMEL brand name. Keep in the back of your mind that BAT was and is a major shareholder of RJ Reynolds. The sale was completed and JTI was now born.
Andersson then went to work for the Austrian Tobacco monopoly ("AustriaTabak") as Brand Manager. In 2002, Gallaher Group purchased AustriaTabak, which included three Austrian factories, plus a collection of local cigarette brands (Memphis, Ronson, Nil, etc.) as well as a lucrative private label contract for German discount chains Lidl and Aldi, which are located throughout Central and Eastern Europe.
Within AustiraTabak's holdings was their recent purchase from Swedish Match of their cigarette business. Production of Swedish brands "Blend," "John Silver," "Commerce" and others were transferred to Austria, included the unique machines for "Blend" which bridged the gap between slim and King Size (80mm) to minimize the impact of the then weight-based tax, and became the number one female brand in Sweden in the 1970s.
Per Andersson became Brand Manager Scandinavia - Cigarettes, for Gallaher Group. His portfolio included CAMEL cigarettes. Now the plot thickens.
In 2003, Gallaher Group purchased the Gustavus snus factory in Vårgårda and invested in improvements in quality to make what were essentially "me-too" Swedish Match copies into real high-quality products. They succeeded perhaps too well resulting in a lawsuit by Swedish Match in 2004/2005.
In 2007, three critical events occurred:
- Andersson left Gallaher for Scandinavian Tobacco and then went to BAT to manage their Snus Portfolio. This is the same BAT who allowed Reynolds to sell the non-US rights to the CAMEL brand and the rest of their international holdings to Japan Tobacco back in 1999, thus creating JTI.
- JTI purchased Gallaher Group, their brands, and factories....including Swedish snus.
- I discovered Swedish snus and was finally able to quit smoking after 35 years. I also wrote my very first article on snus: Marlboro and Camel: When it comes to Snus; you Lose.
I leave it to the reader to determine which of the above three events had the largest historical effect on Swedish snus and especially Swedish snus use in the United States.
Finally in 2010, we arrive full circle and back on topic. As the public and the world stock exchanges exploded in joy, Per Andersson was anointed Snus Lord of JTI Sweden. I sadly was unable to attend his coronation but I understand the parade and military fly-over was breath-taking.
All Hail the Snus Lord of JTI Sweden
I wanted to understand the snus world from the Swedish market perception. First, I asked Per to define what a 'Brand Equity Manager - Snus and OTP' (a.k.a Snus Lord) does and is responsible for. At a base level, the Snus Lord sees that a well balanced portfolio of brands, price-points, ratio of loose/original portion/white portion, high quality JTI snus is represented in the market. "The Swedish snus consumer is very sophisticated. RESPECT for the consumer is paramount at JTI. Through quality, innovation, and the goal of perfection, JTI Sweden earns it's customer loyalty every day."
Price marketing and key account targeting is another major responsibility of a Snus Lord. Volume discounts are a major tool when targeting these key accounts. Sweden's advertising laws are even more draconian than FDA's in the USA (the ones the Courts have not found where FDA overstepped its authority).
In Sweden, consumer marketing is essentially considered the name of the product. If the product is new, manufacturers are allowed to use the word "new". If the flavor is new, manufacturers are allowed to say "new flavor". While manufacturers may have kiosks at special events and each can control the product brands offered in the kiosks, no free sampling is allowed. Any of the advertisements/displays must be inside the kiosk and conform to existing advertising restrictions. Price positioning in the marketplace is critical.
The Brand Equity Manager for Snus also closely follows trends and market shares. Product innovation which will meet tough Swedish snus consumer desires and standards are drawn up and submitted by the Snus Lord. At JTI Sweden, this is at all time focused around the respect they have for Swedish snus consumers. Unlike the US where advertising and hype are paramount to new product development, In the Swedish market, satisfying Swedish consumers with quality products and strategic price marketing is the road taken.
Today's JTI snus brand portfolio in Sweden consists of three tiers and brands. LD is a high quality value priced snus. Gustavus was also reinvented at the Vårgårda factory as a top quality snus which became a "heritage challenger" in Sweden, giving Swedish Match a run for their money. CAMEL Snus was designed as a new top quality approach and is available as an original portion or white portion only....for now.
With the exception of LD, snus products using cigarette brands are generally not popular in Sweden. I asked specifically about JTI CAMEL Snus; how it's sales were and was it in danger of an early death. To the contrary, Andersson stated that CAMEL snus sales in Sweden were growing to plan. More importantly, that plan is a long-term one. CAMEL Snus will not go the way of a Pall Mall, 1847 by Philip Morris or worse; be tethered to a short performance clock as certain other manufacturers do. JTI Sweden understands the maturity of the Swedish market and is pursuing it with a long-term vision; not a flavor or brand of the week. It gets back to respecting the consumer and delivering quality.
Considering Per's preceding statement, I drilled a little deeper: how snus fits into the overall stategy of a company which was primarily involved in cigarettes? At JTI, does snus get pushed down in priority or have its budgets cut in favor of cigarettes?
Mr. Andersson responded "JTI as a leading tobacco company that is dedicated to always improving our potential. We want to be able to show our tobacco expertise in all areas. The simple fact that JTI Sweden just last year created a dedicated Snus sales force is a good sign that JTI Sweden is a serious contender int the Snus category in this country."
In closing, I decided to float a few questions which were a grey area in my agreement with JTI Sweden for this interview. There is a massive trade in Swedish snus sold aboard the ferries between Sweden and Finland. I asked how JTI figured the volume of their product sold on ferries into their overall sales figures. There was silence for what seemed an eternity. Per finally stated that JTI Sweden only tracked internal sales in Sweden. They had no idea of anything as regarding the ferry trade in snus. I dropped the subject. After all, like 99% of all tobacco products in Sweden, JTI's products were distributed for them by Swedish Match Distribution (SMD). SMD has no idea the ferries exist either. Neither does the rest of the snus industry. Or the Swedish Government. Hmmm.
There was one final question I had been saving. Once it became known that Mr. Andersson was to become the Snus Lord of JTI Sweden, he made some mysterious comments about "changing the world". I asked him exactly what that meant? He smiled as JTI Security terminated the interview.
I don't wear rose colored glasses anymore when it comes to Sweden and snus. There are the top tier manufacturers who are laser focused on quality and customer satisfaction. Then there are the low tier manufacturers who have no pride of brand and no real commitment to quality if it costs too much to achieve. The only two characteristics these two tiers share is the desire for maximum market penetration and maximizing shareholder return. Tobacco is a business, after all. It just doesn't have to be like American Big Tobacco.
Let there be no doubt: JTI Sweden is one of the top tier manufacturers who is passionate about the quality and taste of their products. They respect the Swedish consumer and the history of the brands they produce. They personally use their own products; not because it is expected, but because they are proud of them and they enjoy them.
JTI Sweden did not choose their current Snus Lord casually. Per Andersson passionately and enthusiastically personifies the JTI culture and pride of product. The reason I spent so much space on the complex corporate intermarriages which bring us to JTI Sweden 2010 is because of Per's answer to one question. I asked him how he felt about being at JTI Sweden 2010. His response? "It's like coming back home".
Yours in Snus,
Swedish Snus Ambassador to the United States
Reporting for SnusCENTRAL.org