Swedish Match Moves Ahead With Snus in U.S.

Published in CSP Daily News

Will expand distribution, increase marketing investment

STOCKHOLM -- Tobacco products group Swedish Match will step up promotion of moist Swedish-style snuff, called snus, in the United States this year where it expect the market to grow faster than its Scandinavian home territory, said Reuters.

Snus, a tobacco product put under the lip and sucked, mostly in pouches, is the group's most profitable product, sold mainly in Scandinavia.

Swedish Match wants to differentiate itself in the larger U.S. market by growing sales of snus, which is pasteurized and has a different texture and taste to fermented U.S.-style snuff.

"During 2012, we will continue to invest for growth. In the U.S. we will expand distribution and invest further in marketing activities," said Swedish Match, which is the largest producer of snus in Sweden. The product is banned in the rest of the European Union.

Swedish Match, a rival to Altria Group Inc, Reynolds American Inc and British American Tobacco, also makes cigars.

Marketing costs for snus in the United States weighed on fourth-quarter profit, the group said on Wednesday. Operating profit fell to 1.02 billion crowns ($153.6 million U.S.) from a year-earlier 1.42 billion ($312.6 million U.S.).

It said significantly higher international snus investments weighed on the profit margin for snuff and snus, which make up more than half of profit. The margin fell to 45.9% from 48.1%, well below a forecast for 47.6%.

As well as aiming at the U.S. market, its venture with Phillip Morris, SMPM International, planned to trial snus in at least one more market this year, after tests in the Russian city of St Petersburg, Taiwan and Canada.

CEO Lars Dahlgren told Reuters that he expected the U.S. snuff market to grow 5% this year, against 6% in 2011, and the Scandinavian market to grow by at least 3%, against 5% to 6% in 2011.

He said the group would spend 60 million to 100 million ($9 million to $15 million U.S.) crowns more this year on marketing snus outside Scandinavia. Swedish Match said volume at its second key business, U.S. mass-market cigars, was up 14%.

"In the U.S. mass market cigar business ... we expect to continue to grow faster than the overall market and generate increased sales and profits in local currency," it said.