Swedish Match on how disruption is key to success in the tobacco category  

By Faye Bartle |

Johannes Varhelyi, Manager Travel Retail, Swedish Match.

Johannes Varhelyi, Manager Travel Retail, Swedish Match.

Swedish Match is on a mission to create a world without cigarettes, with its nicotine-containing, smoke-free alternatives striking a chord with consumers around the globe.

In the US, its focus is on faster growing categories and segments, such as nicotine pouches and moist snuff pouches, whereas in Scandinavia (where it has a heritage of more than 200 years) its growing roster of innovations complement the more traditional products.

While a cigarette-free world may have seemed inconceivable before the late 90s, when smoking bans became a hot topic, the company’s forward-thinking approach is delivering impressive results.

Its H1 2022 (January to June) report shows a strong hike in group sales and operating profit (group sales rose by 23% to MSEK5,561 – that’s approximately US$490,435). Its success is attracting attention.

In May, Philip Morris Holland Holdings B.V. (PMHH) made a bid on the company, announcing a public cash offer to Swedish Match’s shareholders to transfer their shares in Swedish Match to PMHH. The company offered SEK106 per Swedish Match share in cash, which values the issued share capital of Swedish Match at approximately SEK161.2 billion (that’s roughly US$14.2, based upon the exchange rate calculated in mid-October). At the time, the board of directors of Swedish Match recommended that its shareholders accept the offer.

When we caught up with Johannes Varhelyi, Manager Travel Retail in the Harbour Village during the TFWA World Exhibition & Conference in Cannes, any update on a potential takeover was still to be confirmed.

“It was a surprise for me, but I can’t speculate about the bid,” said Varhelyi. “But with Philip Morris heading toward a world without cigarettes, just like our vision, acquiring Swedish Match would make sense for them as we are not making any kinds of cigarettes.

“There are more than 1.1 billion smokers in the world and people want to access nicotine, but they are looking for alternatives, partly as many of them want to embark on the journey to quit. That’s why companies are investing in vaping and alternative forms of nicotine that are smoke-free and Swedish Match is in such a good position to fill that gap.”

Swedish Match

Left: Johannes Varhelyi, Manager Travel Retail, and Jimmie Kreuzahler, Sales Manager Travel Retail, Swedish Match, during the TFWA World Exhibition & Conference in Cannes, 2022.

The company entered the international travel retail space in 2021. Its ZYN nicotine pouches (small white pouches you pop under your top lip for up to 30 minutes) come in a range of strengths and flavours including Cool Mint, Black Cherry, Bellini and Spearmint, as well as the recently launched Gold with a tobacco flavour.

Swedish Match is also drawing on its snus heritage with its traditional style tins – more than 200 million a year are sold of the mini version in the US alone (it launched in the country just six years ago in 2016.)

For those who aren’t familiar, snus arrived on the scene in the 16th century when Swedes began to mix tobacco leaves with salt and water to place behind the upper lip. It started becoming popular again in the late 1960s, when concerns around smoking came to light. It’s permitted to be sold in Sweden (there are more than 1 million daily users in the country) although not the wider European Union.

ZYN Gold.

ZYN Gold.

The company divested cigarettes in 1999 but still has cigars in the States. Plus, it has a range of ‘lights’ (matches and lighters) which plays to the foundations of the company.

“For travel retail, smoke-free is relevant for people who want nicotine during a long flight or if you cannot find a smoking room at the airport,” said Varhelyi. “Similarly, if you are attending a long business dinner and don’t want to excuse yourself, it’s extremely convenient to use.”

In terms of where nicotine pouches sit within the smoke-free offer, Varhelyi breaks it down: “The main choice is either you go for tobacco or no tobacco – still with nicotine. With tobacco you mainly have cigarettes, cigars, heated tobacco and snus. For options not containing tobacco, you have pharma products, such as patches and gum and vaping products. And then you have nicotine pouches. We are not keen on being in the pharma category. We’re not a 10-day cure. We’re not the ones to decide how and when you are supposed to leave your cigarettes.”

ZYN pouches come in a slim, lightweight container and have a shelf life of almost a year, which is fitting for the travel retail environment.

“For a retailer, ZYN offers the opportunity to maintain or even add value to the total category as it is clear that consumers are looking for alternatives to cigarettes,” said Varhelyi.

ZYN recently launched in Qatar Duty Free and is just about to launch in Dubai Duty Free – a goal the company has been working toward for some time, aided most recently by a meeting with COO Ramesh Cidambi during the TR Consumer Forum in Cyprus where Swedish Match had the opportunity to ‘present the category with its opportunities further’.

“It has been a huge success with WHSmith Travel in the UK [ZYN nicotine pouches are currently sold in 280 WHSmith Travel stores] and in the Nordics it is taking an increasing share of the overall tobacco category,” said Varhelyi.

“In Norway and Sweden specifically, the smoke-free category has, for a long period, been larger than cigarettes. In the US, nicotine pouches have already grasped 4.2% of the volume share for cigarettes (12.6% of cigarettes in the western region where it was initially launched).”

The company is about to launch a large format nicotine pouch in Austria under the Thunder brand, which recently added Vienna Airport to its POS.

“Post covid, this is the first year that we are actively targeting new sites in travel retail and the response has been terrific, exceeding our expectations,” said Varhelyi. “2023 will be an extremely busy year.”

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