With a portfolio of market-leading brands in the matches, filters, lighters and smokers’ requisites categories, Swedish Match is one of the leading UK FMCG manufacturers. Seen by many as the jewel in the Swedish Match crown is the iconic Swan brand, which celebrates its 125th anniversary this year. In the multiple grocery sector, smokers’ requisites continue to prove highly profitable stock for retailers. As a leading supplier, Swedish Match offers an unrivalled product range from Swan matches and Swan Slimline to Extra Slim filters and the Swan Combi pack of Extra Slim filters and papers. All this is underpinned by outstanding service and category management experience. Innovation continues to drive Swedish Match and its latest launch – Swan Smooth – is a totally new concept of filter. With an activated carbon cavity Pop-A-Tip™ filter, Swan Smooth delivers a cooler, smoother smoke than any other filter product currently available on the market. Andrew Hardie, Marketing Manager of Swedish Match UK Sales, spoke to The Grocery Trader.
The Grocery Trader (GT) – Andrew, we last talked at the end of 2006. What’s been happening since then in the smokers’ requisites market?
The two major changes in the last 12-18 months have been the raising of the minimum age for smoking to 18 and the smoking ban in public buildings in England. With the RYO category showing growth, it’s very difficult to isolate the impact these have had on Roll Your Own (RYO) consumption. What we do know is that since the recent Budgets’ tax increases on tobacco, the RYO market has been growing in popularity as a less expensive smoking option. The age change to 18 will have taken away some of the RYO market, yet filter sales have been growing steadily with 5.8% volume growth, driven by market leading Swan’s growth at 6.5% (MAT to March 2008 – Source Nielsen RAL). Following the smoking ban, anecdotally smokers are smoking either less and/or differently. Since the enforcement of the ban, we’re seeing the new social phenomena of people “smirting” – smoking and flirting – outside the workplace and RYO smokers rolling their cigarettes in the pub then smoking them outside. Since the ban Swan filter sales have still been showing growth.The stigma around RYO has decreased in recent years. It is now seen as less ‘down-market’ and more as the mark of an individual. RYO provides an alternative to manufactured cigarettes, and enthusiasts enjoy the ritual and craft of hand-rolling tobacco.
GT – How important is the UK as a market for Swedish Match?
The UK remains a substantial market for the group. Swedish Match is a major supplier in the rest of Europe in cigars and smokeless tobacco. In the UK we are very strong in smokers’ requisites.
Although our main focus is on accessories, we do sell some tobacco products in the UK – Blue Ridge smoking tobacco and Borkum Riff pipe tobacco – and niche cigar brands, Willem II and La Paz.
GT – The switch over to child-resistant lighters happened officially in March (2008). How did that go for you?
Our sales and supply chain team worked intensively during 2007 to support wholesalers and retailers during the changeover. The trade was clear of non-compliant Swedish Match stock by the end of the year, three months ahead of time, a superb joint achievement by the sales and supply side of our business and our trade partners.
GT – How did you ‘police’ the trade to make sure there was no non-compliant product left unsold?
We talked to our customers early on and kept them involved throughout. We made sure that our major wholesale and retail accounts, including Palmer & Harvey, one of our key distribution partners, weren’t caught with stock and they certainly did their part to contribute. The Co-op, for example, is famous for its ethical stance and cleared its stocks of non-child resistant lighters a year early. We also had a website created to communicate the changes at www.safetyfirstlighters.com
GT – Has your marketing role changed since we last spoke? What have been your biggest challenges in the last year as a marketer?
No two days are the same in our business. My biggest challenge is managing a large number of products across several categories, with different market shares and category dynamics, making it an exciting area to work in.
GT – What smokers’ requisites are in your range?
We offer a wide choice of filters and papers under the Swan brand, led by Swan Slimline and Slim Pop-A-Tip™, Extra Slim and Menthol filters, Swan Green chlorine-free cigarette papers and the Swan Combi Pack of Extra Slim filters and papers. We supply matches under various brands including England’s Glory, Scottish Bluebell, Bryant & May, Cook’s household matches and our biggest match brand overall, Swan Vestas, the UK’s bestselling match.
GT – How are you celebrating Swan’s 125th anniversary? Which month does it fall in?
The Swan matches brand was registered 125 years ago on January 17, 1883, and the Swan Vestas name was registered in 1908. We had a celebration for our employees on January 17 2008 and we’re offering commemorative limited edition Swan Vestas collectors’ packs in five variants, featuring images of Swan Vestas packs through the years, which are available to the trade now.
In July we’re also launching a Golden Match promotion, offering 125 prizes of £1,000, with the mechanic being “Strike the match and find the gold head, to claim the prize.” Stocks of promotional packs will be available from mid-July.
GT – What lighters do you sell in the UK?
Swedish Match is the lighter category leader, with 25% market share, and our lighters include Swan refillable lighters, Cricket disposables, which feature stylish European designs, and Poppell flint and electronic lighters for the value sector.
GT – What value and volume shares do you have of filters and papers?
We have 84% of filters and 6.2% of papers. (MAT March 08)
GT – That’s quite a contrast!
The situation in papers has been like this for a number of years. Through quality, innovation and meeting consumers’ needs we had attained leadership in filters. In Britain, people refer to cigarette papers generically by the brand leader’s name, and we are continually striving to rectify this. Meanwhile, our Swan Green extra stick, chlorine-free cigarette papers enjoy a growing following.
GT – You’ve just launched the innovative new filter product Swan Smooth. Can you tell us about it? How does it differ from previous filter products?
We have a history of successful launches in this area: we launched Extra Slim Filter in 1999, which now has over 40% of UK filter sales, and in 2007 we launched the Swan Combi pack, which contains 50 Swan Extra Slim filters and 50 Swan Green papers, and brings convenience to the RYO experience. Swan Smooth is a ‘Pop-A-Tip™’ product, presented in the same pack size as our Swan Extra Slim filters. It combines two filters in one, with activated carbon in the middle and works in a similar way to water filters and smoke extractors, filtering the smoke to make it smoother and cooler.
GT – When did Swan Smooth go into the trade?
We introduced it at the end of April 2008 at the Pro-Retail show. It received very encouraging feedback, and is being sold into the trade now.
GT – What are your predictions for Swan Smooth’s success?
Trade reception has been very positive across the board. We’ve completed a huge amount of pre-launch consumer research, which showed consumers had a high propensity to purchase with clear understanding of the benefits and recognition of the smoother, cooler taste. All the indications are that Swan Smooth will become a key part of our filter range.
GT – How are you promoting Swan Smooth to the trade and the consumers?
We’re promoting the launch to our customers with trade press activity, and Swan Smooth will be sampled this summer to consumers at Bennetts British Superbikes events and music festivals, combined with a consumer advertising campaign.
GT – To remind our readers, what are the UK regulations now about advertising tobacco and smokers’ requisites?
You can’t advertise tobacco products in the UK, but you can advertise smokers’ requisites. There are no age limits on advertising filters, and as a responsible company it is our policy to advertise and promote to adults only.
GT – Can you tell us more about your involvement with British Superbikes?
Swan is an associate sponsor of the 2008 Bennetts British Superbike Championship. There are 12 events at UK circuits, including Thruxton, Oulton Park, Brands Hatch, Donington Park and Silverstone, between now and October and Swan Combi and Swan Smooth will be showcased at all of them!
GT – What was the rationale behind the Superbikes sponsorship?
Swan is a distinctly British brand, which is a good link, and the sponsorship gives us the chance to sample Swan and other products to bike enthusiasts, who are a major part of our core target audience. Swan Combi is ideal for motorcyclists as it is convenient and a handy size pack, reducing the RYO paraphernalia. It’s also a great opportunity to provide hospitality to our customers throughout the series.
GT – You mentioned you’re also promoting your cigarette papers in 2008 at various music festivals. What activity are you carrying out, and where?
We’re finalising the events now, and we’ll be able to confirm our festival activity soon.
GT – Where do you make the products you sell here?
Our matches are produced in Sweden; Cricket lighters come from Holland; and Poppell lighters from the Far East. Our papers and filters are made and packaged in Europe.
GT – How many countries does Swedish Match trade in?
Swedish Match is a global group of companies selling products in more than 100 countries.
GT – How important is the UK to your operations?
We’re a solid contributor to Swedish Match’s global sales. Whilst cigars is a niche market for us in the UK, our matches, filters and papers sales are core to our business here. We report to Swedish Match International, which comprises Swedish Match’s subsidiaries outside Scandinavia and the Americas.
GT – What operational functions happen at your UK office? How many people do you employ?
Swedish Match’s High Wycombe office handles our marketing, sales, finance, HR, logistics and supply chain functions, with a 33-strong team.
GT – What is the total retail value of the UK smokers’ requisites market now?
Filters are approximately £37m, papers £110m, lighters £70m and matches £12m. At over £200m and growing, it’s a significant category, offering good margins – there are few such categories left in UK retailing.
GT – How fast is it growing?
In terms of volume filters are up 5%; papers are fairly static; lighters and matches are in overall decline as a category, but our sales are growing.
GT – How is the UK smoker’s requisites market performing?
Some related products like pipe cleaners and flints are in long-term decline, but the core product lines continue to be strong, and customers can definitely grow their category sales by always stocking our leading brands such as Swan Slimline, Swan Extra Slim and Swan Green Papers. There are further growth opportunities with innovative products such as Swan Smooth, Swan Combi and Swan Menthol.
GT – How do the numbers of consumers buying smokers’ requisites compare with previous years?
The number of overall smokers is declining, but the dualism between smokers of manufactured cigarettes and RYO is beneficial for our brands.
GT – How does this picture compare with the rest of Europe?
These are essentially British products, appealing to British consumers. Our market is very different in consumer behaviour, for example in our response to tax increases. Increases here drive cigarette smokers to RYO, but in Europe they tend to switch to miniature cigars.
GT – Who are the typical consumers for smokers’ requisites these days? How do the different UK regions compare in their smokers’ requisites sales?
Typical RYO smokers are of all ages, people who have made the commitment to roll their own and enjoy the ritual of hand rolling, and appreciate the value and the aesthetic side.
The demographics for RYO are fairly consistent across the UK, but Extra Slim sales are bigger in the south: Swan Slimline filters are more popular in Scotland and the North of England. Our ‘Swan Red’ papers are strong sellers in Wales: Strike anywhere matches are stronger in the north, safety matches perform better in the south, and Scottish Bluebell matches do particularly well north of the border, as you’d expect.
GT – What proportion of UK sales of overall smokers’ requisites go through grocery outlets?
Generally between half and two thirds of volume goes through the grocery channel. The latest figures for total grocers’ share of the categories are filters 64%, papers 58%, lighters 48% and RYO tobacco 64%. These proportions are increasing over time as the number of independent outlets decreases and the consumers’ drive into the multiples continues.
GT – Is there VAT on your products?
Yes, VAT at 17.5% applies to everything in this category.
GT – How do you look after the UK multiple grocery, convenience and forecourt sector in terms of supply? Who handles your supply chain?
We have key account people who handle the multiples and Co-ops. We service the majors directly, working alongside key distribution partners on the in-store tobacco kiosks. Our logistics and warehousing is all handled from Corby.
GT – How do you work with the major retailers to ensure optimum merchandising of smokers’ requisites?
We carry out range reviews with each account by arrangement, and put through recommendations for the different channels, led by market leading products such as Swan Extra Slim and Swan Slimline and supported by product innovation to drive the category, in the form of Swan Smooth and Swan Combi. Once these reviews are agreed, the retailers liaise with the category captains to give our products a suitable presence on the gantry.
GT – What are your stocking and ranging recommendations to supermarkets and convenience store chains, to help them maximise their profits from smokers’ requisites?
We recommend using the bold colours of the Swan range to signpost the requisites category. Placing market-leaders Swan Extra Slim and Swan Slimline filters as prominently as possible and stocking the full range will help to maximise profitability. With Swan’s 125th anniversary, and Swan Vestas’ Golden Match promotion, there are good reasons to increase the visibility of the brands. We’d suggest leading the match offering with Swan Vestas.
As category leader in lighters all our brands do well in supermarkets, these are Poppell, the entry point brand, Swan refillable and Cricket premium lighters. It’s a good idea to stock smokers’ requisites products as ‘manager’s choice’ items, based on local customer demand in individual stores.
GT – Do you offer on-line merchandising advice?
Yes, we do – we recently launched www.houseofswan.com with a new trade section, which is in the process of being updated to feature detailed advice.
GT – How has merchandising of these products changed in recent times?
Retailers are increasingly recognising the role of the RYO category and giving it more prominence. Swan papers and filters offer good margins compared to competitor products, and based on the performance of our products and the category we’re being allocated more space now.
GT – What external factors do you see impacting on the UK smokers’ requisites market over the next year and beyond?
The impact of the major changes over the last year or so will continue to be felt in the industry, and in time we’ll have a clearer idea of their effect on our business. From 1 October 2009 pictorial health warnings must be displayed on all tobacco products sold in the UK, however this doesn’t apply to our non-tobacco RYO lines.
GT – What happens to smokers’ requisite sales in a downturn?
If consumers see value in RYO they will tend to purchase in this category. Flints and gas sales improve as more consumers re-flint and re-gas their lighters.
GT – Are your sales of these products an indicator of the real state of the UK economy, and what can you tell us about consumer confidence?
Sales of these products track the economy reasonably well. When they feel the pinch, consumers trade down over time, from premium cigarettes to economy brands and possibly to RYO. Having said that, the ‘RYO’ fans we’ve seen at the British Superbikes Championship events still seem to be enjoying life!
GT – Finally, where do you see Swedish Match’s UK business going from here?
Our lighter sales are ahead of expectations. Matches are in long-term decline worldwide, but our matches are holding up well in the UK and we expect them to go on doing so. We’d like to see Swan Smooth and Swan Combi thrive as our new innovations alongside our flagship brands, Swan Extra Slim and Swan Slimline. We’ve launched new products in the UK in 2005, 2007 and 2008, and will continue to listen to consumers, developing products to meet their needs and to work with our retail partners to help them use these products to drive the category and realise the profit opportunities.