OUR FIVE MUST-WIN BATTLE STORIES - FROM ROUGH DIAMOND TO BUSINESS LEADER - Scandinavian Tobacco ...
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OUR FIVE MUST-WIN BATTLE STORIES
FROM ROUGH DIAMOND SPANISH A DISCIPLINED AND SEEKING THE SINGLE INCREASING
TO BUSINESS LEADER SUCCESS FOCUSED APPROACH TO M&A TRUTH EFFICIENCY, TOGETHER
P. 20 P. 23 P. 25 P. 28 P. 30
company profile 2022
company profile 2022
CONTENTS
LETTER FROM CEO
FROM ROUGH DIAMOND TO BUSINESS LEADER
COVID-19 has made 2021 another challenging
year for all of us. Scandinavian Tobacco Group
continued to adapt and cope successfully with
The Forged Cigar Company is achieving significant growth through focusing on brands with untapped potential
the disruptions from the pandemic to our
in the US, with a nimble team that responds quickly to the needs of retailers. Leading it is Sean Hardiman, a sales
business, our consumers and employees.
professional who has honed his skills during five years with Scandinavian Tobacco Group. PAGE 20
PAGE 06
SPANISH SUCCESS
With a focus on brands that appeal to new consumers,
Scandinavian Tobacco Group has achieved growth and
06 Letter from CEO a significant gain in market share in Spain – even though
overall volumes in this important market are declining.
08 Who we are OUR VISION
PAGE 23
10 Our value chain
12 Our portfolio and brands
BE THE
UNDISPUTED,
14 Financial performance 2021
16 Sustainability
GLOBAL LEADER
18
SEEKING THE SINGLE TRUTH
Our strategy
IN CIGARS
A new ERP platform will bring the whole of Scandinavian
OUR FIVE MUST-WIN BATTLE STORIES Tobacco Group together on a single IT system. This
business transformation will provide better processes
20 From rough diamond to business leader and data, supporting growth, simplification and
23
Spanish success integration of future acquisitions.
PAGE 28
25
A disciplined and focused approach
STRIVING FOR A
to M&A
MORE DIVERSE
28 Seeking the single truth
WORKFORCE
30 Increasing efficiency, together
scandinavian tobacco group
scandinavian tobacco group
Scandinavian Tobacco Group is responding
32 Rituals that make us more to the increased focus on diversity, equality
and inclusion (DE&I) globally through
34 Executive Management and raising awareness and seeking additional
Executive Board progress towards our targets for diversity in
our workforce. PAGE 17
4 35 Stay up to date 5
company profile 2021
company profile 2022
LETTER FROM CEO
KEEPING OUR
PROMISE TO CIGAR
SMOKERS
COVID-19 has made 2021 another challenging year for all of us.
Scandinavian Tobacco Group continued to adapt and cope
successfully with the disruptions from the pandemic to our
business, our consumers and employees.
OUR MUST-WIN BATTLES
NIELS FREDERIKSEN
President and CEO
1
GROW OUR HANDMADE CIGAR BUSINESS
From rough diamond to business leader
O
n the back of strong demand for are delivering on these targets. In this enabling Scandinavian Tobacco Group to
handmade cigars we delivered brochure, you can read about the success manage and overcome the unprecedented DRIVE SUSTAINABLE PROFIT GROWTH
particularly strong financial of The Forged Cigar Company, a new US circumstances we are all working in. I 2 IN MACHINE-ROLLED CIGARS
results and have given ourselves a strong distribution company which is achieving would like to extend my thanks to all the Spanish success
foundation for a successful 2022. significant growth, and how we continue to Group’s employees for their contribution to
simplify and professionalise the company the company.
We have delivered on our top priority, by moving towards a single Enterprise
to keep our employees safe during the
pandemic while maintaining business
Resource Planning (ERP) system. I hope you enjoy reading more in this
Company Profile. 3 INTEGRATE NEW MERGERS AND ACQUISITIONS
A disciplined and focused approach to M&A
operations allowing us to keep our promise Scandinavian Tobacco Group aims to be
to cigar smokers around the world. We the best acquirer and integrator in the
made good progress through 2021 on industry and to achieve this ambition, we
4
our “Rolling Towards 2025” strategy and have introduced a new M&A Playbook with SIMPLIFY EVERYTHING WE DO
edged closer to our vision of becoming guidelines around future acquisitions. We We have delivered on our top Seeking the single truth
the undisputed, global leader in cigars. also have a significant success story from
Underpinning this strategy are our five Spain, where Scandinavian Tobacco Group
priority, to keep our employees
safe during the pandemic
scandinavian tobacco group
scandinavian tobacco group
must-win battles, focus areas where we has achieved growth and a significant
5
need to succeed in order to reach our market share gain even when overall while maintaining business EMBRACE A PERFORMANCE CULTURE
ambition, and these are the theme for volumes are declining, and the details of Increasing efficiency, together
this 2022 Scandinavian Tobacco Group how we have been able to increase efficien- operations allowing us to keep
Company Profile Brochure. cy at our production sites. our promise to cigar smokers
around the world
To show the progress of our strategy in These articles will give you a sense of Read the articles on page 20-31
action, we are presenting five examples the dedication and innovation of our
6 of how different parts of our business employees, whose sterling work is 7
company profile 2022
company profile 2022
WHO WE ARE
Scandinavian Tobacco Group is a global leader in cigars.
For more than 250 years, we have been maker of rituals
by providing premium tobacco products and experiences to
consumers embedded by textures, flavours and aromas.
With our portfolio of industry leading cigar brands, we
deliver consumer experiences that really make a difference.
10,000 1,000,000
EMPLOYEES WORLDWIDE ACTIVE ONLINE CONSUMERS IN THE US
100
UNRIVALLED CIGAR BRAND PORTFOLIO
scandinavian tobacco group
scandinavian tobacco group
DISTRIBUTION MARKETS
8 9
company profile 2022
company profile 2022
OUR VALUE CHAIN
WE SELL IN MORE THAN
100 COUNTRIES
We have sales companies throughout Europe
and the US, and we sell our products in around
100 countries via wholesalers, distributors
and a variety of supermarkets and retail stores
including our own 7 cigar super stores in
Pennsylvania, Texas and Florida in the US.
WE PURCHASE RAW TOBACCO
We purchase raw tobacco from the majority of all tobacco
growing countries. Tobaccos used for cigars, pipe tobacco and
OUR PRODUCTION
SETUP IS GLOBAL
fine-cut tobacco are not the same. More than two thirds of
the raw tobacco market for pipe tobacco and fine-cut tobacco
is handled by three large wholesalers, whereas tobacco for We have a global supply chain with 11 manufacturing
IT STARTS WITH A SEED cigars is purchased from a number of smaller suppliers. sites. Production is strategically located close
All tobacco starts with a seed. The development of a tobacco to both tobacco growers and the consumers.
plant depends on factors such as soil, sun, rain, position of Handmade cigars are produced in the Dominican
IN THE US WE SELL ONLINE
TO CONSUMERS
the leaf on the tobacco plant and the time of harvesting. Republic, Honduras and Nicaragua, while machine-
Our cultivation activities take place within Caribbean rolled cigars are produced primarily in Europe,
Cigar Holdings Group, in which we own a 20% stake. the Dominican Republic and Indonesia. Pipe The market for catalogue and online sales
tobacco and fine-cut are produced in Denmark. to consumers is growing in the US. In 2021,
we sent out 25 million catalogues and had
around 1 million active online consumers
shopping from our five websites customised
for different consumer profiles.
scandinavian tobacco group
scandinavian tobacco group
10 11
MACHINE-ROLLED
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company profile 2022
CIGARS
OUR PORTFOLIO
AND BRANDS LEADING BRANDS
In Scandinavian Tobacco Group, we take pride in our brands. Within
handmade cigars, we are the market leader in the US, and we have leading
positions outside the US. In machine-rolled cigars, we are the market
leader outside the US and have a broad assortment of global brands.
HANDMADE SMOKING
CIGARS TOBACCO
LEADING BRANDS LEADING BRANDS
scandinavian tobacco group
scandinavian tobacco group
12 13
company profile 2022
company profile 2022
FINANCIAL NET SALES BY DIVISION
PERFORMANCE 2021
32% 33%
NET SALES EBITDA BEFORE SPECIAL ITEMS
8,233 4.5% 2,233 18.4% NORTH AMERICA EUROPE BRANDED
ONLINE & RETAIL
DKK million Organic growth DKK million Organic growth
Division Europe Branded includes sales of all product
categories to wholesalers, distributors and direct
DKK million Organic Growth DKK million Organic Growth Division North America Online & Retail includes direct to retail in Germany, Denmark, Sweden, France,
10,000 12% 2,500 25% 25
to consumer sales of all product categories sold via the Italy, Belgium, the Netherlands, Luxembourg,
8,000 8% 2,000 20% 20 online, catalogue and retail channel in North America. Spain, Portugal, as well as the UK & Ireland.
6,000 4% 1,500 15% 15
4,000 0% 1,000 10% 10
2,000 -4% 500 5%
35%
0 -8% 0 0
2018 2019 2020 2021 2018 2019 2020 2021
FREE CASH FLOW BEFORE RETURN ON INVESTED
ACQUISITIONS CAPITAL
NORTH AMERICA BRANDED
1,393 14.5 & REST OF WORLD
DKK million %
% Division North America Branded & Rest of World includes sales of all
15 product categories to wholesalers and distributors that supply retail
1,500
in US, Canada, Australia, New Zealand, International Sales (Norway,
12
Finland, Switzerland, Israel and Russia), Asia, Global Travel Retail
1,000 9 and contract manufacturing for third parties.
6
500
3
0 0
2018 2019 2020 2021 2018 2019 2020 2021
scandinavian tobacco group
scandinavian tobacco group
TO BROWSE THROUGH ALL OF OUR FINANCIAL NUMBERS,
READ OUR ANNUAL REPORT 2021
ANNUAL REPORT 2021
14 15
company profile 2022
company profile 2022
SUSTAINABILITY
STRIVING FOR A MORE DIVERSE
WORKFORCE
Scandinavian Tobacco Group is responding to
the increased focus on diversity, equality and
inclusion (DE&I) globally through raising aware-
ness and seeking additional progress towards
When Scandinavian Tobacco Group in 2019 decided to reboot and lift our targets for diversity in our workforce.
our sustainability work, we set out on what we knew would be a
multi-year journey that would call for careful self-analysis, the creation Our global goals are supported by different local initiatives,
each relevant to societal conditions where the Group operates.
of new and more robust capabilities, honest dialogue with our key
stakeholders, and a strategy to provide a roadmap for our work. In the US, for example the Group in 2021 partnered with
an external DE&I consultancy to facilitate management
50%
workshops focused on gender and racial equity considerations
in the workforce.
“A diverse and multicultural workplace brings several
advantages, including greater creativity and increased
productivity, broader cultural awareness, and, we hope,
recognition as a desirable employer” says Caryn Metzger,
Head of People Services, North America. Four out of eight of the members
PEOPLE AND COMMUNITIES PLANET ETHICS GOVERNANCE of our Executive Board are women
How we engage with our How we work to ensure How we promote responsible How we embed strong
READ THE FULL STORY AND MORE IN OUR
employees and the sustainable production actions in our businessand oversight and transparency in
communities where they industry our business SUSTAINABILITY REPORT 2021
work and live
PILOT INITIATIVES SHOW PROMISE
-3.7% -3.1% -16.4%
Scandinavian Tobacco Group is already working
to identify areas for lasting emissions reductions
in our business and manufacturing operations.
The Group’s Operations division in 2021 launched
a number of pilot initiatives to test different ideas
for reducing or further limiting emissions.
Group CO2 equivalent emissions Water use in our production Overall reduction in tobacco waste
“We are already trying to anticipate next steps and place some (Scope 1 and 2) decreased by 3.7% facilities declined in 2021 by of 16.4% in production sites.
smart bets on activities that we believe can really move the in 2021 compared to 2020. 3.1% compared to 2020.
emissions needle downward and the carbon agenda forward”
says Graham Cunningham, Chief Supply Chain Officer for A more efficient production
Scandinavian Tobacco Group.
footprint – in terms of where you’re
scandinavian tobacco group
scandinavian tobacco group
“We are doing this methodically and in a way that is consistent placed and what’s being produced
with international best practice. It’s also key to our target
in different locations
setting discussions as these experiments provide us with a TO READ MORE ABOUT OUR SUSTAINABILITY INITIATIVES,
sense of both opportunity and impact looking forwards.” – is another lever we can use to
READ OUR SUSTAINABILITY REPORT 2021
impact greenhouse gas emissions
READ THE FULL STORY AND MORE IN OUR
SUSTAINABILITY REPORT 2021
16 SUSTAINABILITY REPORT 2021 17
company profile 2022
company profile 2022
OUR STRATEGY OUR 5 MUST-WIN BATTLES
In 2020, we revised and updated our strategy. With Rolling Towards 2025 Our five must-win battles represent our key priorities and
we renewed the vision and strategic direction for the Group until 2025 dictate the prioritisation of time and resources.
as we cemented our focus on cigars and our goals to become a larger
company, to grow EBITDA and to create outstanding cash generation
to support our continued growth and for our shareholders.
Rolling Towards 2025
The revised strategy is based on five establish a steady intake of new talent into must-win battles we launched, advanced
must-win battles; areas where we need the Group while identifying new paths to and completed initiatives that allowed
to succeed by 2025 and that will allow growth. us to continue the modernisation and
us to improve the products, processes professionalisation of Scandinavian
and consumer experiences that really We have made good progress in all areas Tobacco Group. GROW OUR HANDMADE DRIVE SUSTAINABLE INTEGRATE NEW
make a difference. Each must-win battle of the strategy in 2021 and edged closer CIGAR BUSINESS PROFIT GROWTH IN MERGERS AND
is supported by four enablers that ensure to our vision of becoming the undisputed, MACHINE-ROLLED CIGARS ACQUISITIONS
efficient operations and IT infrastructure, global leader in cigars. Within each of the
OUR PURPOSE OUR VISION
CRAFT THE BE THE
RITUALS THAT UNDISPUTED,
MAKE US MORE GLOBAL LEADER SIMPLIFY EVERYTHING
WE DO
EMBRACE A
PERFORMANCE CULTURE
IN CIGARS
scandinavian tobacco group
scandinavian tobacco group
18 19
company profile 2022
company profile 2022
Now I’ve learned more
about our customers - how
to work with them and
our team to achieve the
best results. And when I
look back, I’m proud that
this personal journey
has made me a stronger
contributor, with new skills ACHIEVEMENTS IN 2021
that are helping to build
the business of The Forged
34% 189
Cigar Company and deliver
results for Scandinavian
Tobacco Group
net sales growth new accounts
16,299
new distribution points
S
ean Hardiman was a rough stronger contributor, with new skills that into two businesses and instead of
diamond when he was hired are helping to build the business of The one launch a year, now there’s two.
FROM ROUGH DIAMOND
by Scandinavian Tobacco Forged Cigar Company and deliver results Finance teams and invoicing were set
Group in 2016. for Scandinavian Tobacco Group.” up, warehouse people have to ship more
cigars, the factory has to scale up – it’s
Five years after joining the company, FACE OF A BOUTIQUE, BODY OF A truly a team effort.”
he has harnessed the right skills to take MACHINE
TO BUSINESS LEADER
charge of The Forged Cigar Company, a Largely funded from within General Cigar The Forged Cigar Company has taken
stand-alone US distribution company with Company, The Forged Cigar Company was brands from General Cigar Company –
its own dedicated sales force developed to created to fulfill a need in the marketplace including Partagas, La Gloria Cubana, El
deepen support for the brick and mortar by providing increased value to retailers Rey Del Mundo, Bolivar Cofradia, Diesel
business through investment in brands and greater support in helping them and Chillin’ Moose – and put more focus
with strong potential. grow their business. This is accomplished on them, with a dedicated sales force. The
through a deeper investment in its brands business has achieved net sales growth of
“I was just rough around the edges. I and in enabling the team to be nimble 34% in its first year with 189 new accounts
The Forged Cigar Company is achieving significant growth through spoke my mind with no filter. Now it’s in responding to the needs of retailers in and 16,299 new distribution points.
more refined. When I talk it is much more meeting marketplace demands.
focusing on brands with untapped potential in the US, with a
scandinavian tobacco group
scandinavian tobacco group
calculated and it comes from actually “The success is based on collaboration
nimble team that responds quickly to the needs of retailers. Leading understanding what I’m talking about,” “From the moment we decided to do and speed,” Broersma says. “The Forged
it is Sean Hardiman, a sales professional who has honed his Hardiman says. this, it took just four to five months to Cigar Company is unique because the face
have everything up and running with is boutique but the body is machine, with
skills during five years with Scandinavian Tobacco Group.
“Now I’ve learned more about our sales people on the street,” says Regis the resources of a big company. And it’s a
customers - how to work with them and Broersma, President and SVP North basket of legendary brands, whereas other
our team to achieve the best results. America Branded and Rest of World. companies might just have one.”
And when I look back, I’m proud that “Marketing needs to do two times the
20 this personal journey has made me a work because we have split the brands Continues 21company profile 2022
company profile 2022
BRAND SUCCESS AND
CONSUMER PULL
Hardiman has more than 11 years in
the premium cigar category, both as a
retailer and as a sales manager. He has a
deep passion for the industry, a firsthand
knowledge of what makes brands a
success at the retail level and knows how
to drive consumer pull. The Forged Cigar
Company has leveraged on Hardiman’s
experience and connections to recruit
sales professionals with a diverse range
of backgrounds, from dyed-in-the-wool
cigar industry experts to those with deep
experience in large corporates, to provide
a diverse range of views and skills.
The company management Claes Berland
Marketing Manager, Signature Global
have given me every tool
Eva Ramos Peter Schønheyder-Vitek
to be successful and to Marketing Activation Manager VP Brand Marketing
improve as a sales rep and
as a person,” Hardiman
says. “I’m grateful for this
support and so pleased
that I’m able to pay it back
with this success
In addition to supporting brick and mortar
retailers in growing their businesses,
The Forged Cigar Company will leverage
relationships with its proprietary network
of cigar factories to meet the changing
to the retailer, and will provide product
innovations that meet the needs and
wants of consumers.
“The company management have given
SPANISH SUCCESS
demands of retailers and consumers. me every tool to be successful and to With a focus on brands that appeal to new consumers, Scandinavian Tobacco
improve as a sales rep and as a person,”
Group has achieved growth and a significant gain in market share in Spain
Under the guidance of Hardiman, the sales Hardiman says. “I’m grateful for this
team can move fast, adapting and pivoting support and so pleased that I’m able to – even though overall volumes in this important market are declining.
as needed to deliver valuable support pay it back with this success.”
S
pain has long been known as a “It was a traditional market – a very OFFSET DECLINE AND INTO GROWTH
very traditional market for cigars, traditional offer for a traditional consumer, In 2017, Scandinavian Tobacco Group
based on wealthy, middled aged, declining year on year – and we’ve driven had a market share in Spain of 13%. As a
scandinavian tobacco group
scandinavian tobacco group
male consumers. Scandinavian Tobacco it to become more modern,” says Claes result of the new focus on new categories,
Group has brought it back to the future. Berland, Marketing Manager, Signature the future winning segments such as
Global. “We dared to do something compacts, filters and flavours, that share
Total volume in Spain had been declining different. We looked at what we believed is soon to reach a milestone of 25%,
over five to 10 years. With fewer was going to be big and focused on it. We largely driven by the Signature brand. The
consumers to fight for, Scandinavian now see an inflow of consumers that are acquisition of Agio Cigars in 2020 has also
Tobacco Group decided to focus on different than before, with a wider age helped to reinforce market share.
REGIS BROERSMA SEAN HARDIMAN
President and SVP North National Sales Manager
compact cigars and introduced filters and spread and more women.”
22 America Branded & RoW the development of flavours. Continues 23company profile 2022
company profile 2022
“Signature is now aiming to be a leading FOCUS PAYS OFF
brand in Spain,” Berland says. “If we had It was not a question of addressing
not done this the market would be double underperformance, but rather a continued
digit decline. We offset the decline and and focused effort, with the impact
What’s happening now
went into growth.” now being clearly seen in the numbers. in Spain is we’re hitting
It is supported by the capability of the a milestone for our
Rather than conduct 10 or 20 launches organisation and the backing of a strong
a year, across the whole portfolio, the international company, with global performance. The focus
business focused on specific brands and product capability that fits local needs. on winning segments is
ensured these performed and delivered
paying off
after launch. As a result, Scandinavian Tobacco Group
has become more valued to key customers
“We were focused and single minded and in Spain, by providing a bigger portfolio
stuck with it – we said, this is our target that is stronger and more balanced,
and this is what we’re betting on, everyone covering all consumer needs.
is behind it and then we get these results.
We can really outperform the market if we Now, other markets are now able to look
focus on something and give it time and at Spain and consider a possible route to
see it through,” says Eva Ramos, Marketing gaining market share.
Manager, Spain & Portugal.
Yulia Lyusina
“What’s happening now in Spain is we’re
SVP Strategy, Transformation and Sustainability
“It was a market opportunity we, as a hitting a milestone for our performance.
company, could capture with the right The focus on winning segments is paying Laurie Ræbild
products at the right time.” off,” says Peter Schønheyder-Vitek, VP Head of Sustainability and previous Director
Group Project’s Portfolio Management Office
Brand Marketing.
PRIORITIES FOR EUROPE BRANDED
GROWING MARKET SHARE IN SPAIN
ACCELERATE
PRICING
A DISCIPLINED AND
Brand portfolio covering all segments
Competitive sales force
SIMPLIFY
FOCUSED APPROACH
Adapting to legislation
PORTFOLIO
Brand name change for Café Crème to Signature
WIN THE KEY
TO M&A
CUSTOMERS
~9% ~7% ~3%
WIN IN WINNING
SEGMENTS Scandinavian Tobacco Group aims to be the best acquirer and integrator in
scandinavian tobacco group
scandinavian tobacco group
the industry. Part of this is a new M&A Playbook, which defines guidelines
market share market share market share around future acquisitions – from selecting targets through to eventual
integration – to ensure these create the maximum value for the company.
Other brands also contribute to market share
24 Continues 25company profile 2022
company profile 2022
2010 2011 2013 2014 2018 2019 2020 2021
SCANDINAVIAN
TOBACCO GROUP LANE
THE FOUR STEPS IN
THE M&A PLAYBOOK
SCREENING NEGOTIATIONS
Select the right targets, understand How these are conducted in
value and calculate price the most efficient way
T
he completion of Scandinavian acquisitions and help ensure these create The acquisition of Agio Cigars, for €210 Both deals created an approximate return
Tobacco Group’s acquisition of the maximum value for the company. million, brought a good geographic fit, on invested capital of 20%. DEAL EXECUTION INTEGRATION
Agio Cigars in 2020 was far from complementary brands and enabled Ensuring the process is as Combining the companies while
the start of the process. Or its end. “We want to be more disciplined and utilisation of excess capacity. It was a With this proven M&A strategy, seamless and straightforward continuing to conduct business
focused in how we do M&A and the major acquisition that brought significant Scandinavian Tobacco Group has both as possible as normal
Agio Cigars, the largest acquisition in Playbook is a way of helping us to become cost savings and allowed us to enhance the capacity and appetite for further
Scandinavian Tobacco Group’s history, the best integrator in the industry. To our capabilities in machine-rolled cigars. acquisitions and there are further
had been on the radar screen for several create best value for shareholders, we opportunities. The M&A Playbook now
years. Its business had been screened should follow structured processes sets out a structured and disciplined to people, culture and unique capabilities” looking back we can see where we need to
for how it could create value if acquired, and adding analytical and strategic approach from strategic screening through says Laurie Ræbild, Head of Sustainability improve for next time,” says Lyusina. “With
including synergies, creating scale and a perspectives and learnings from previous negotiations and deal execution to and previous Director Group Project’s this Playbook we now have a detailed
strong portfolio that was complementary acquisitions as we go,” says Yulia Lyusina, integration planning and implementation. Portfolio Management Office. plan of how to run acquisitions, with four
to the Group’s. When the conditions and SVP Strategy and Transformation. basic sections and depth and details that
We’ve worked hard to
price were right, the deal was completed, “We’ve worked hard to align on the END TO END THINKING can be adapted according to the actual
align on the objectives and
scandinavian tobacco group
scandinavian tobacco group
paving the way for the equally critical IMPROVING ALL THE TIME objectives and criteria for why we want to One thing the Playbook does not set out acquisition and the complexity.
process of integration. Scandinavian Tobacco Group aims to be criteria for why we want do M&A in our three commercial divisions is timing or frequency of acquisitions –
the undisputed global leader in cigars and in which categories. We are clarifying rather, these need to be the right target “We often acquire strong brands and
Bringing all these elements together and has a proven track record in M&A. to do M&A in our three objectives and defining strategic criteria and at the right time. Agio Cigars, for companies with deep and respected
into a single, best-practice playbook is Most recently, the 2018 acquisition of commercial divisions and for our target companies – essentially, example, was on the radar screen for years heritage, and it’s important for us to help
a key element in Scandinavian Tobacco Thompson Cigar for USD 62 million defining which companies we should go before the acquisition actually took place. protect this heritage and craftsmanship.
in which categories
Group’s ambition to be the best acquirer strengthened the Group’s position in the for and why. Our aim is to create value that Now it’s real end to end thinking and all
and integratory in the industry. The M&A US online channel and created significant surpasses value of individual companies “The acquisition and integration of Agio under one must-win battle, from start to
26 Playbook defines guidelines around future synergies and value. and integrate in the best way with respect Cigars has been very successful but finish.” 27company profile 2022
company profile 2022
across the organisation, from Spring 2023
with full implementation expected in
2024-25.
ERP As a cross-functional and cross-divisional
project, ONEProcess will involve
employees and resources from almost
all areas of the organisation. Adopting
the newest technologies in the market
Rolling
and best-in-class standards will create
opportunities for employees to learn new
Towards KENNETH MESSERSCHMID
skills and increase their competencies.
2025
CIO
enabler for the execution of the Rolling expanded, we have ended up with It has been a natural
Towards 2025 strategy. The programme multiple IT systems that harmonised
will unite the current 12 ERP systems across our company” says Rasmus evolution that as
and will harmonise and simplify core Vienberg, Head of Information Scandinavian Tobacco Group
business processes, improve quality of Management.
global master data and create a robust
has expanded, we have
compliance and control environment. “It’s always daunting for a business to ended up with multiple IT
look at this journey, but everyone knows systems that harmonised
SAP is the best fit with regards to that the result – creating one global way
functionality and best-practice processes, of doing core aspects of your work – is a across our company
has a proven footprint and provides the huge benefit and will leave us with huge
strongest implementation partners. benefits in our hands for better decision
making. A pre-requisite for being a success
Once implemented, this will simplify and is that we focus on the business aspect
standardise critical business processes and improving the processes and data that
and data, particularly in commercial, people depend on.” “Today, we sometimes spend more time
SEEKING THE SINGLE
production, supply chain and finance discussing what is the right dataset rather
departments – essentially reducing time REAL TIME DATA than how to act on the data – essentially,
spent on determining quality of data An ERP application is the IT backbone in we’re debating what is the truth, because
and providing a better and faster basis supporting an organisation’s processes, we have information coming from so many
for taking informed business decisions, and any change to such application will different systems,” says Messerschmidt.
TRUTH
supporting growth, simplification and impact the entire organisation. Work “In future with ONEProcess, we’ll be able
integration of future acquisitions. on ONEProcess has been underway to make faster and better decisions based
since March 2020 to ensure business on real time data, across markets and
“It has been a natural evolution that preparation. Work will continue through products, and this will also contribute
as Scandinavian Tobacco Group has 2022 in preparation for roll-out, in waves greatly to our bold M&A agenda.”
A new ERP platform will bring the whole of Scandinavian
Tobacco Group together on a single IT system. This business
ONEPROCESS AIMS TO
ADDRESS THREE KEY GAPS IN
transformation will provide better processes and data, supporting
growth, simplification and integration of future acquisitions.
HOW THE BUSINESS WORKS
E
very decision is taking longer “For many years Scandinavian Tobacco inherited these companies’ IT systems,
than it should. With 12 legacy ERP Group has been under investing in IT, and leaving a fragmented landscape where Standardised processes and ways of working in one
scandinavian tobacco group
scandinavian tobacco group
systems of business management now we have to catch up,” says Kenneth different parts of the company operate on integrated ERP platform
software, data is generated and recorded Messerschmidt, Chief Information different systems.
differently all across Scandinavian Officer. “We need to invest to make our IT
Tobacco Group. It’s a result of how the landscape modern, to simplify it and to ONE GLOBAL WAY OF WORKING
Real time and comparable data across divisions
company has grown. Now is the logical really be able to support global processes, ONEProcess is the largest IT investment
moment to unite these systems to simplify standardise and use best practices.” in the history of Scandinavian Tobacco and geographies
processes and improve the quality of data Group. It is a significant business RASMUS VIENBERG
Head of Information Management
used for business decisions. Scandinavian Tobacco Group has carried transformation and a new global ERP
28 out five acquisitions since 2016. It has platform, provided by SAP, will be a key Automation of labour-intensive tasks 29company profile 2022
company profile 2022
with 1.14 in 2020, and handmade cigar together to achieve that goal every day.
output is increasing significantly (see box). Everyone supports it because they can see
it’s working,” says Jahayra Alvarenga Ortiz,
“This is not about one single result Lean Coordinator in Honduras. We immediately see if we
achieved by one person, but rather
are producing fewer cigars
a culture of enhanced performance, The number of cigars manufactured per
achieved by all our employees working hour has risen from 45 in 2017, when kata than we are supposed to,
together. With thousands of people in was introduced, to 53 in 2021. so we can tell something is
production, working together towards the
same goal, we achieve sustainable results.” START WITH SAFETY going on and take action
The starting point is safety, with the key straight away
EVERYONE TOGETHER objective that all employees go home
Lean is a philosophy which aims to provide safe when they finish work and that every
a new way of thinking about organising accident is one too many. From 2017, the
activities to deliver more value to the operations team gathered information,
company and a better experience to its undertook root cause analyses and
customers while eliminating waste. implemented solutions with the eventual
aim of reaching zero accidents. “We immediately see if we are producing
The Macanudo Inspiration White fewer cigars than we are supposed to, so
production example is just one of many This was based on the Lean DNA we can tell something is going on and take
elements in how Scandinavian Tobacco performance management principles, action straight away,” says Alvarenga Ortiz.
Group has used kata – a Lean technique such as ensuring everything has a “Otherwise, you would only know days
based on a four-step plan to determine purpose and is in the correct place, daily afterwards, and only then could you start
an objective, grasp the current condition, meetings on the shop floor with safety as to analyse, look for the cause and solve it.”
define the next target and move towards a first topic and making it highly visible
it – to increase the efficiency of its with information boards throughout the This also helps with quality control while
operations. The approach is centred factory. standardisation – identifying best practice
around the four focus areas so any and extending it across production sites –
potential issues can be spotted and dealt The kata boards include real time has further added to efficiency gains.
with quickly. performance against targets, so everyone
can see progress and any issue slowing “With Lean, we have changed the way we
INCREASING
“Everyone is involved in kata, all the production can be spotted and quickly solve problems and have become more
supervisors and employees working addressed. objective when it comes to detecting the
root cause,” says Gebruers. “Basically,
the way we solve problems now is more
structured.”
EFFICIENCY, TOGETHER
OPERATIONAL HIGHLIGHTS
OVERALL EQUIPMENT EFFECTIVENESS
HANDMADE CIGARS
Scandinavian Tobacco Group has significantly improved production efficiency
45% 74%
in its handmade cigars factories, based on employing techniques from the
Lean business philosophy. It has been achieved with a focus on safety,
improving quality, standardisation and closely monitoring production.
JAHAYRA ALVARENGA ORTIZ
2019 2021 Lean Coordinator in Honduras
T
here was something not quite right customers, as the cigars were not scanning “There are four focus areas in our
about the Macanudo Inspiration properly into their systems for accurate performance culture: safety, customer OVERALL EQUIPMENT EFFECTIVENESS
scandinavian tobacco group
scandinavian tobacco group
White handmade cigars. records of their stock. experience, adherence to schedule and MACHINE-ROLLED CIGARS
efficiency. It is based on Lean techniques,
A customer of the cigars, being The operations team reacted swiftly: a root so we put the structure in place and build
61% 69%
manufactured at Scandinavian Tobacco cause analysis quickly identified variation on it to improve day to day,” says Johan
Group’s factory in Honduras, had in how the UPC codes were being printed, Gebruers, Head of QEHS and Lean.
highlighted incorrect information on the resulting in some working as usual and
universal product code (UPC), the line of others not scanning – an issue that was Safety performance is improving, with the
numbers which appears below a product’s quickly fixed. total recorded injury frequency rate per JOHAN GEBRUERS
30 barcode. This was creating issues for 200,000 hours at 0.46 in 2021, compared 2019 2021 Head of QEHS and Lean 31TEA ON THE PATIO
company profile 2022
company profile 2022
#1
RITUALS
Ritual
LAUREL TILLEY
BRAND AMBASSADOR MACANUDO, US
“My favorite time of the day is in the morning. There is
nothing better for me than waking up early, especially on a
THAT MAKE
nice day, going out to my patio, getting a cup of tea and a
good book just starting the day fresh. It is something about
a fresh, bright shiny day that is so wonderful. I love being
able to be completely in my zone with my book and relax.”
US MORE
#2
Ritual GARDENING
YURI GUILLEN MADERA
PROCESSING AND CIGAR MAKING, DOMINICAN REPUBLIC
“My ritual takes place in the afternoon. When I get home
after a challenging day at work, I water my garden and
make sure the flowers have all they need. After wetting the
garden, I sit on the couch to read a book or magazine then
light up a cigar while my wife makes coffee. Between the
At Scandinavian Tobacco Group, we’ve always believed cigar, coffee and reading, followed by the music of the birds,
in the power of rituals, and for over 250 years, we’ve my day begins to settle down for a well-deserved rest.”
honed our craft to make premium products that break
us out of routine. We are makers of rituals that enable
us to see beyond the present towards a better future.
#3
Ritual A WALK FOR BALANCE
MARK RENARD
INTERNATIONAL MARKETING MANAGER, THE NETHERLANDS
“My daily ritual to start the day full of energy and taking on each
challenge ahead is to have a short walk with my now two-year-
old daughter. We talk about the things we see outside, and with
working from home so much it’s an active start of the day and
provides a good balance for me. It’s this simple, personal ritual
that makes a great impact, which I pursue as well at work.”
#4
Ritual START FULL OF ENERGY
ANNE KØLLE
HEAD OF GROWTH INCUBATOR, DENMARK
scandinavian tobacco group
scandinavian tobacco group
“I always start my day full of energy! Most days, I wake up before
the alarm goes off at 05:30am and either head straight to the gym
or go for a walk outside. That way I feel energised and prepared
for the day ahead. When I return, I wake up my son and prepare
breakfast for us. Then we eat together and sit and talk for 15
minutes before leaving in opposite directions for a busy day.”
32 33STAY UP TO DATE
company profile 2022
company profile 2022
EXECUTIVE MANAGEMENT
AND EXECUTIVE BOARD
The Executive Management consists of our CEO and CFO.
The day-to-day operations of our Group are
managed by the Executive Board.
FOLLOW US ON LINKEDIN CORPORATE WEBSITE
linkedin.com/company/scandinavian-tobacco-group Visit our website if you want the full story about our
business, our brands, our tobacco and our people.
www.st-group.com
EXPANDING OUR SUPER STORES
Scandinavian Tobacco Group owns
and operates 7 cigar super stores in
Pennsylvania, Texas and Florida. We
intend to invest further in our retail
expansion and will open 6-8 super stores
over the next two to three years.
Hamburg, PA The Colony, TX
3 4 5 2 1 7 6 8
Fort Worth, TX Tampa, FL Lutz, FL
1 3 5 7
NIELS FREDERIKSEN GRAHAM CUNNINGHAM SARAH SANTOS RÉGIS BROERSMA
PRESIDENT AND CEO CHIEF SUPPLY CHAIN OFFICER PRESIDENT AND SENIOR VICE PRESIDENT AND SENIOR VICE
PRESIDENT, NORTH AMERICA PRESIDENT, NORTH AMERICA
ONLINE & RETAIL DIVISION BRANDED & ROW DIVISION 2000 2007 2012 2018 2020 2022
scandinavian tobacco group
scandinavian tobacco group
2 4 6 8
BETHLEHEM BETHLEHEM HAMBURG THE COLONY FORT WORTH SAN ANTONIO
MARIANNE RØRSLEV BOCK JURJAN KLEP YULIA LYUSINA HANNE BERG
PA RETAIL STORE PA SUPER STORE PA SUPER STORE TX SUPER STORE TX, SUPER STORE TX
EXECUTIVE VICE PRESIDENT PRESIDENT AND SENIOR VICE SENIOR VICE PRESIDENT, SENIOR VICE PRESIDENT
OPENED OPENED OPENED OPENED OPENED
AND CFO PRESIDENT, EUROPE BRANDED STRATEGY AND AND CHRO
DIVISION TRANSFORMATION
LUTZ AND TAMPA,
FL, SUPER STORES
OPENED
34 35SCANDINAVIAN TOBACCO GROUP A/S Sandtoften 9 2820 Gentofte Denmark www.st-group.com CVR 31 08 01 85
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