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Tobacco-Free Pouches Boost Swedish Match's Q1 Profit

Swedish Match posted on Thursday a slightly bigger than expected rise in quarterly profit helped by US sales growth for its relatively new non-tobacco nicotine pouch product and recent price hikes on its rolled leaf cigars.

The tobacco group, whose main business is its moist snuff "snus" in Scandinavia, in April started rolling out its non-tobacco pouch product ZYN across the United States, from the country's western region. Like snus, the ZYN pouch is held under the upper lip.

Quarterly operating profit was SEK 1.19 billion (€110 million) against SEK 1.05 billion (€97 million) a year-ago,  and a mean forecast in a Reuters poll of analysts for SEK 1.17 billion (€110 million).

Swedish Match expects ZYN to be available in 60,000 US stores by the end of the year, up from 15,000 at the end of March.

'New Product Introductions'

"Several of our markets remain fiercely competitive with a heightened concentration of new product introductions and promotional activities in increasingly attractive growth segments," Chief Executive Officer Lars Dahlgren said.

"The first quarter financial performance showed the importance of our strategy of prioritising market segments that present the greatest opportunity for long term profitable growth," he said.

Swedish Match has expanded in the US cigar market in recent years and is pushing for similar success in the country with snus, whose home market has become crowded.

Fast-Growing Segment

More recently, it has also stepped up efforts to grow within the still small but fast-growing non-tobacco nicotine pouch segment in the United States, as well as in Scandinavia. It is ramping up production at a new factory in the United States for ZYN.

A shortage of leaves for rolled leaf cigars led to a 20% volume slump for the segment in the quarter, but Dahlgren said shipment volumes should return to year on year growth in the second half of 2019.

Operating margin at the snus, snuff and nicotine pouch division slightly tightened to 44.6% from 45%, in line with expectations.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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