OUR MUST-WIN BATTLES STORIES - A TRANSFORMATION TO LEAD BUSINESS - Scandinavian ...
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OUR MUST- WIN BATTLES STORIES
A TRANSFORMATION HOW TO SELL CIGARS INTEGRATION – THE KEEP IT SIMPLE PLANNING THE
TO LEAD BUSINESS IN A PANDEMIC KEY INGREDIENT FOR A P. 24 UNPLANNABLE
GROWTH P. 19 SUCCESSFUL ACQUISITION P. 26
P. 16 P. 21
CONTENTS
company profile 2021
company profile 2021
WELCOME
2020 has been an extraordinary year with
COVID-19 changing our lives fundamentally
and creating unprecedented challenges
for businesses.
PAGE 04
A TRANSFORMATION TO LEAD BUSINESS GROWTH
Scandinavian Tobacco Group’s North America Online & Retail (NAO&R) Division is tackling headwinds
with a modernisation and upgrades of the online platforms. This has already accounted for a significant
part of the business’ year over year growth, with more to come. PAGE 16
04 Welcome INTEGRATION – THE KEY
07 Who we are INGREDIENT FOR A SUCCESSFUL
08 Our value chain ACQUISITION
10 Financial performance 2020 The acquisition of Agio Cigars is the largest in the history of
Scandinavian Tobacco Group. Once the deal was closed in
12 Our brands and products 2020, the priority became integrating quickly to efficiently
add value to the combined business.
14 Our strategy PAGE 21
OUR MUST-WIN BATTLES STORIES
16 transformation to lead business
A
growth KEEP IT SIMPLE
Scandinavian Tobacco Group’s financial processes work on
19
How to sell cigars in a pandemic
12 separate enterprise resource planning (ERP) systems.
21 I ntegration – the key ingredient for a Streamlining this and moving to a single system will make
tasks, such as integrating acquisitions, simpler and free up
successful acquisition time for people to focus on other business activities. PAGE 24
24 Keep it simple
26 Planning the unplannable
OUR VALUES -
28 Our values - our people 1 EMPOWER WITH PASSION OUR PEOPLE
scandinavian tobacco group
scandinavian tobacco group
SEAN WILLIAMS
30 Corporate social responsibility BRAND AMBASSADOR COHIBA Our four values provide the framework
for what we should expect from ourselves
30 Our management and each other, every day. PAGE 28
Image
31 Stay up to date
2 3
company profile 2021
WELCOME
A GLOBAL LEADER
IN CIGARS
2020 was yet another transformative year. We accelerated
the modernisation of our company, announced the biggest
acquisition in the history of our Group and launched a new
strategy, Rolling Towards 2025.
NIELS FREDERIKSEN
President and CEO
2
020 has been an extraordinary continue to deliver on our promise to our The must-win battles are the theme for this
year with COVID-19 changing our consumers and customers. 2021 edition of the Scandinavian Tobacco
lives fundamentally and creating Group Company Profile Brochure. We have
unprecedented challenges for businesses. Part of our response is a new strategy, sought out examples of how different parts
Rolling Towards 2025, to sharpen our focus of our business are pursuing and delivering
Scandinavian Tobacco Group has on cigars and thus enable the company to on these objectives to give a sense of the
scandinavian tobacco group
successfully responded to COVID-19 and grow. This represents an evolution rather strategy in action and the progress being
been able to keep employees safe while than a revolution for the company. The made.
delivering on our promise to our consumers strategy is based on five must-win battles –
and customers. We are working diligently the focus areas where we need to succeed You can read about the modernisation of
around the world to mitigate the impact to reach our ambition of becoming a bigger our online channels, which will fuel the
of the pandemic and keep the business and more profitable company. These will growth of our online and retail division
moving forward. I have been encouraged guide us in the right direction and result in in the US; the quick and effective use of
by the dedication of our employees and the outstanding cash-generation for ourselves tele sales in machine-rolled cigars for key
4 resilience of our business, which allow us to and our shareholders. European markets, helping us to adapt Continues
company profile 2021
company profile 2021
to COVID-19; and the progress being These articles will give you a sense of the
made with the integration of the largest hard work, dedication and innovation of
WHO WE ARE
acquisition in Scandinavian Tobacco our employees, whose efforts are enabling
Group’s recent history, Agio Cigars. There us to overcome the unprecedented
Part of our response is
are further examples of our strategy in circumstances we are working in around a new strategy, Rolling
action with a simplification of finance the world, to create value – for the Towards 2025, to sharpen
processes for greater efficiency, and company, our employees and shareholders.
how our operations team has excelled our focus on cigars and
in implementing COVID-19 measures to I hope you enjoy the read. thus enable the company
enhance our performance culture.
to grow.
Organised around a vision of being the undisputed, global
leader in cigars, Rolling Towards 2025 will allow Scandinavian
Tobacco Group to become a stronger, more simplified, and more
attractive company to work for and do business with.
OUR MUST-WIN BATTLES
STORIES
1
1 1
1
GROW OUR HANDMADE CIGAR BUSINESS
A transformation to lead business growth 7
2
7
DRIVE SUSTAINABLE PROFIT GROWTH
2 IN MACHINE-ROLLED CIGARS
How to sell cigars in a pandemic 4
1
2
INTEGRATE NEW MERGERS AND ACQUISITIONS
3 Integration – the key ingredient for a successful
acquisition
SIMPLIFY EVERYTHING WE DO
4 Keep it simple
Sales companies Retail stores Main offices Manufacturing facilities
EMBRACE A PERFORMANCE CULTURE
5 MARKETS WHERE WE EMPLOYEES LEADING
scandinavian tobacco group
scandinavian tobacco group
Planning the unplannable
SELL OUR PRODUCTS WORLDWIDE BRANDS
~ 100 11,000
Read the articles on page 16-27
6 7
company profile 2021
company profile 2021
OUR VALUE CHAIN
1
2 WE PURCHASE RAW TOBACCO
We purchase raw tobacco from the majority of all tobacco
growing countries. Tobaccos used for cigars, pipe tobacco and
IT STARTS WITH A SEED fine-cut tobacco are not the same. More than two thirds of
All tobacco starts with a seed. The development of a tobacco the raw tobacco market for pipe tobacco and fine-cut tobacco
plant depends on factors such as soil, sun, rain, position of is handled by three large wholesalers, whereas tobacco for
the leaf on the tobacco plant and the time of harvesting. cigars is purchased from a number of smaller suppliers.
Our cultivation activities take place within Caribbean
Cigar Holdings Group, in which we own a 20% stake.
4
5
3
WE SELL IN AROUND 100 COUNTRIES
We have sales companies in 14 countries
throughout Europe, the US, Canada and Australia
and we sell our products in around 100 countries
via wholesalers, distributors and a variety of
scandinavian tobacco group
scandinavian tobacco group
OUR PRODUCTION SETUP IS GLOBAL supermarkets and retail stores including our own.
We have a global supply chain with 14 manufacturing
sites. Production is strategically located close IN THE US WE SELL ONLINE TO CONSUMERS
to both tobacco growers and the consumers. The market for catalogue and online sales to consumers is
Handmade cigars are produced in the Dominican growing in the US. On average, approx. 80,000 packages are
Republic, Honduras and Nicaragua, while machine- shipped weekly to American consumers from our distribution
rolled cigars are produced primarily in Europe, centre in Bethlehem, Pennsylvania. We own and operate
the Dominican Republic and Indonesia. Pipe seven retail stores in Pennsylvania, Texas and Florida.
8 tobacco and fine-cut are produced in Denmark. 9
company profile 2021
company profile 2021
FINANCIAL NET SALES BY DIVISION
PERFORMANCE 2020
NET SALES EBITDA BEFORE SPECIAL ITEMS
NORTH AMERICA
ONLINE & RETAIL
8,006 6.6% 1,826 14.0% 33%
2,662 DKKm Division North America Online & Retail includes direct
DKK million Organic growth DKK million Organic growth
to consumer sales of all product categories sold via the
online, catalogue and retail channel in North America.
DKK million Organic Growth DKK million Organic Growth
8,000 8% 2,000 16%
6,000 4% 1,500 8%
4,000 0% 1,000 0%
2,000 -4% 500 -8%
0 -8% 0 -16%
NORTH AMERICA BRANDED
2017 2018 2019 2020 2017 2018 2019 2020
Division North America Branded & Rest of World in-
32%
FREE CASH FLOW BEFORE NET PROFIT cludes sales of all product categories to wholesalers and
ACQUISITIONS distributors that supply retail in US, Canada, Australia,
New Zealand, International Sales (Norway, Finland, 2,527 DKKm
1,394 661
Switzerland, Israel and Russia), Asia, Global Travel Retail
and contract manufacturing for third parties.
DKK million DKK million
1,500 900
1,000 600
500 300
0
2017 2018 2019 2020
0
2017 2018 2019 2020
EUROPE BRANDED
35%
Division Europe Branded includes sales of all product
categories to wholesalers, distributors and direct
scandinavian tobacco group
scandinavian tobacco group
to retail in Germany, Denmark, Sweden, France,
2,817 DKKm Italy, Belgium, the Netherlands, Luxembourg,
TO BROWSE THROUGH ALL OF OUR FINANCIAL NUMBERS, GO TO
Spain, Portugal, as well as the UK & Ireland.
WWW.ST-GROUP.COM/ANNUALREPORT2020
10 11
company profile 2021
OUR BRANDS AND
PIPE TOBACCO
Our pipe tobacco is predominantly produced at our site in
Assens, Denmark. Our facility in Assens remains one of the
PRODUCTS
largest manufacturers of traditional pipe tobacco globally.
HANDMADE CIGARS FINE-CUT TOBACCO
Our handmade cigars are rolled at our sites in three of Our fine-cut tobacco is predominantly
the world’s most significant tobacco-growing countries: manufactured at our site in Holstebro, Denmark.
the Dominican Republic, Honduras and Nicaragua.
MACHINE-ROLLED ACCESSORIES AND CONTRACT
CIGARS MANUFACTURING
The production of the binder and wrapper for our Our accessories and contract manufacturing (ACM) category
machine-rolled cigars is carried out in Indonesia, Sri Lanka comprises four sub-categories: contract manufacturing,
and the Dominican Republic whereas the automated cigar sales of fire products, accessories, matches and licenses.
production takes place in Belgium, the Netherlands and the US.
scandinavian tobacco group
12
company profile 2021
company profile 2021
OUR STRATEGY PURPOSE VISION
CRAFT THE RITUALS THAT BE THE UNDISPUTED,
In the course of 2020, we conducted a review of Scandinavian MAKE US MORE GLOBAL LEADER IN CIGARS
Tobacco Group’s corporate strategy. The result was a new
updated strategy – Rolling Towards 2025 - which we
presented to the Group’s 11,000 employees in 2020.
OUR MUST-WIN BATTLES
R
olling Towards 2025 is the natural SHARPENED FOCUS Our common purpose will unite
next step in the development For over 250 years, Scandinavian Tobacco Scandinavian Tobacco Group across
and professionalisation of Group have been makers of rituals. We brands, products and markets. It will give
Scandinavian Tobacco Group. have honed our craft to make rituals: a new perspective on why we exists and Our five must-win battles represent our key priorities and
premium products and experiences to our provide guidance on how we conduct
dictate the prioritisation of time and resources.
The strategy renews and revises the consumers cemented by textures, flavors, business and how we can strengthen the
Group’s ambition and vision - and sets a and aromas. experience we offer to our consumers.
clear direction for the next five years with
five focused must-win battles and a set of Past achievements has brought the As we organise ourselves around a vision
defined values to support us in being our Group to where it is today, and will serve of being the undisputed, global leader
very best. as a guide forward. However, in order in cigars we sharpen our focus on cigars,
to grow and outperform competitors in handmade as well as machine-rolled.
Rolling Towards 2025 cements our focus an industry with declining volumes we This is where we will strengthen our
on cigars and will ultimately enable us to continually need to sharpen our strategic business and pursue future investments.
become a larger company, to grow focus on the products, processes, and We will have strong returns from our other
EBITDA and create outstanding cash consumer experiences that really make a categories such as pipe tobacco and fine
generation for ourselves and our difference. Scandinavian Tobacco Group’s cut, yet cigars are our primary focus going
shareholders. new strategy Rolling Towards 2025 will forward and the first thing we need to
do exactly that. succeed with to accelerate growth and GROW OUR DRIVE SUSTAINABLE INTEGRATE
Organised around a vision of being the value creation. HANDMADE CIGAR PROFIT GROWTH IN NEW MERGERS AND
undisputed, global leader, Rolling Towards UNDISPUTED GLOBAL LEADER BUSINESS MACHINE-ROLLED ACQUISITIONS
2025 will allow Scandinavian Tobacco Rolling Towards 2025 will allow FIVE MUST-WIN BATTLES CIGARS
Group to become a stronger, more Scandinavian Tobacco Group to become Rolling Towards 2025 is based on
simplified, and more attractive company a stronger, more simplified, and more five must-win battles – the focus areas we
to work for and do business with. attractive company to work for and do need to succeed with by 2025 to reach our
business with. ambition of becoming a bigger and more
profitable company with outstanding cash
generation for our shareholders.
scandinavian tobacco group
scandinavian tobacco group
SIMPLIFY EVERYTHING EMBRACE A
WE DO PERFORMANCE CULTURE
14 15
company profile 2021
company profile 2021
We’re bringing together
responsiveness, design,
loyalty and personalization
to create an overall unique
proposition, which is
more sophisticated and
provides a better consumer
experience
CASSANDRA SMELKO,
DIRECTOR STRATEGY AND
TRANSFORMATION, NORTH AMERICA
HEATHER ZDAN
CHIEF CONSUMER OFFICER
I
f you pay a visit to CIGAR.com, been pursuing aggressive price policies.
A TRANSFORMATION
you may notice a few changes There are also regulatory and compliance
encompassed in the transformation. headwinds, such as excise tax, sales tax,
shipping restrictions and adult signature
Scandinavian Tobacco Group’s premium requirements.
website for online sales in North America
TO LEAD BUSINESS
is now responsive for different types of “The modernisation of our online
devices, making it simpler for people platforms represents the largest
use on their phones during lunchbreaks, transformation in the history of the
has a higher end look and feel with more North America Online & Retail Division.
lifestyle images of people enjoying the In the first half of 2020 we have pursued
GROWTH
products, a discussion forum with plenty a number of quick wins and initiatives
of cigar-related content and a new loyalty that lay the foundation for some major,
programme to reward regular customers. new consumer programmes and we are
“The result is that the site is more executing according to plan.” says Heather
premiumized and high-end,” says Zdan, Chief Consumer Officer.
Cassandra Smelko, Director Strategy
Transformation, North America. “We’re MORE PERSONAL, MORE LOYALTY
bringing together responsiveness, design, The aim of this multi-year strategy
loyalty and personalization to create initiated in late 2019 which is expected to
an overall unique proposition, which is be fully implemented by the end of 2021,
Scandinavian Tobacco Group’s North America Online & Retail (NAO&R)
more sophisticated and provides a better is to increase revenue and EBITDA. Each
Division is tackling headwinds with a modernisation and upgrades consumer experience.” of the five direct to consumer business
of the online platforms. This has already accounted for a significant units focused on the handmade category
part of the business’s year over year growth, with more to come. The overhaul of CIGAR.com is part of the will have a more distinct look and feel
transformation of Scandinavian Tobacco and a product range, marketing channels,
scandinavian tobacco group
scandinavian tobacco group
Group’s US handmade cigar business, to promotion and loyalty schemes which are
create new sources of growth in response more differentiated.
to a changing market.
Four of the business units already exist
Handmade cigar volumes have been in – Cigars International, Thompson Cigar,
a long, slow decline leading up to 2020. CigarBid, and CIGAR.com. A new business
The shift in consumers shopping at unit will be introduced with an integrated
brick-and-mortar to online had stalled social and community focus that also
16 in the category, and competitors have fosters an ecommerce retail element. Continues 17
company profile 2021
company profile 2021
“It’s about increasing customer reach has been shut down, customers migrated “We test new digital experiences with a
and increasing share of wallet,” Zdan to CigarBid Auctions and marketing small segment of our consumers to ensure
says. “The overall aim is to deliver an efforts optimised in the Pipes and Cigars changes are well received,” Smelko says.
exceptional consumer experience by business, which is experiencing a declining “Overall, we’re seeing positive results and
digitalizing, improving user experience, market. Responsive websites have been we have learned some lessons along the
introducing more personalization and launched for Thompson Cigar, Cigars way, but that’s what allows us to serve our
adding more value in terms of loyalty.” International and CIGAR.com.com, which consumers even better in the future.”
has also been redesigned with a premium
PURSUING NEW GROWTH look and feel and personalized product
The modernisation of the online platforms recommendations driven by artificial
is being implemented in 17 workstreams, intelligence.
such as Personalized Marketing, Website
Redesigns and Consumer Profiling. The The results are already showing. All of the
five business units will address the unique key performance indicators are positive
preferences of the eight distinct consumer month-over-month and there has been a
segments and their purchasing patterns, drastic change, with significant consumer
reinforcing existing strengths while also migration to the online channel. From
allowing the pursuit of new growth. March until the end of 2020, NAO&R saw
Smaller business units are helping to significant growth coming from these
unlock capital to fund those objectives initiatives, and more is yet to come. CHRISTIAN GRØNBECH
VICE PRESIDENT COMMERCIAL
– the Thompson Cigar Auction website EXCELLENCE
MICHAEL SEIER PETERSEN
INTERNATIONAL CHANNEL
DEVELOPMENT MANAGER
HOW TO SELL CIGARS
The overall aim is to deliver
an exceptional consumer
experience by digitalizing,
THE MODERNISATION HAS improving user experience,
IN A PANDEMIC
HAS THREE OVERARCHING introducing more
BUSINESS OBJECTIVES personalization and adding
more value in terms
of loyalty.
Create clear propositions and brand
delineation between NAO&R business
units and competitors COVID-19 restrictions meant customer visits were out. So Scandinavian
Tobacco Group’s sales reps switched to the telephone – it took some time
Win market share and reach new getting used to, but the result has been increasing market share.
consumers, especially younger,
premium smokers
S
ales reps are used to life on In a quick and effective adaption to the rolled cigars across categories. The
the road – in the car, visiting new COVID-19 reality, tele sales proved combined market share in the largest
Protect profitability and focus on customers, day in and day out. an effective addition in Scandinavian European markets (France, Belgium, the
higher margin segments But not in a pandemic. Tobacco Group’s key European markets – Netherlands, UK, Germany, Spain and
scandinavian tobacco group
scandinavian tobacco group
and the results are clear. Italy) was 33.3% in the second quarter of
Many stores closed and those which were 2020, versus 32.7% in the first quarter.
open implemented social distancing. The switch came with challenges, but
Either way, there was no time or space for by implementing tele sales rapidly and “Firstly, it’s about people and our sales
retailers to speak to Scandinavian Tobacco ironing out issues as they came up, the force – keeping everyone safe and also
Group reps when queues of customers European team successfully contributed engaged and motivated in this unknown
stretched out the door. to increasing market share, a key method situation. And then it’s about agility and
of driving sustainable profit in machine-
18 Continues 19company profile 2021
company profile 2021
moving fast, so we have a discussion THE FRENCH MARKET
about what to do but each one ends
2.7%
with an action plan that we implement
and refine as we go,” says Regis Pelerin,
Marketing Activation Manager for France
and Italy.
“Sometimes being bold can bring you more
points increase in market
value than discussing the nitty gritty details
share in France in May
for months – and then you find the answer
but by then the question has changed. This
is where we are trying to make a difference
and show we can move fast and increase
share in market and volume.”
WEEKEND WONDER
On Thursday 12 March, International
Channel Development Manager
Michael Seier Petersen and Competence
Development & Implementation Manager LAURIE RÆBILD
Peter Brüggemann were appointed to of hoarding, and to avoid out of stock LEARN AND GO AGAIN DIRECTOR TRANSFORMATION
MANAGEMENT OFFICE
lead a COVID-19 taskforce. They had to situations. Further to ensure customers Of course, the first challenge was to keep
be ready to brief Scandinavian Tobacco bought Scandinavian Tobacco Group people safe. The second was, experienced JURJAN KLEP
Group’s markets on Monday 16 March on products to provide cash flow, which is reps had no idea of how to interact with PRESIDENT AND SENIOR VICE PRESIDENT
how they were going to handle the coming even more important in a crisis. their contacts by phone, including some of EUROPE BRANDED DIVISION
lockdowns across Europe. the usual best performers.
It was clear that people would have to
The focus was on getting customers to work remotely. Sales by telephone was the This required training, regular monitoring
overstock as there was an expectation obvious solution but it posed challenges and sharing of best practice, as everyone
for reps and customers who were used learnt from each other – including basic
INTEGRATION –
to dealing with each other in person. things such as avoiding calls during
This was addressed by providing a script lunchtime for many retailers. Perhaps
that covered the essentials and biweekly most important was regular check ins,
REGIS PELERIN
MARKETING ACTIVATION MANAGER
meetings to assess how best to engage sometimes with a fun theme such as a
FRANCE AND ITALY with customers in this situation, and how competition or a breakfast meeting with
THE KEY INGREDIENT
best to motivate reps who were working a skiing theme, so people didn’t feel
under pressure. isolated from colleagues when working
from home.
“This was something that previously
might have taken us months to discuss Moving from monthly to weekly objectives
FOR A SUCCESSFUL
and implement,” said Christian Grønbech, send a message to sales staff that no
VP Commercial Excellence. “The team one could predict the future, and targets
and market in cooperation here was quite would be adapted as the situation became
fantastic – they implemented new ways of clearer. Achievable volumes were set in
working over a weekend, introduced new coordination with those on the ground,
ACQUISITION
measurements and started to embed it in because it was simply impossible to tell
the organisation. Change is a constant in how retailers would react and orders could
our industry, and when we face it and have differ widely each week.
to react swiftly, we can actually do it.”
“Firstly, sustainable growth is a
By reacting swiftly and clearly and consequence of the right people with the
supporting its sales reps, Scandinavian right equipment and right motivation
Tobacco Group achieved two important – and that meant keeping everyone on
things – increasing market share and board and engaged and motivated in this
launching new products by phone, for unknown situation,” says Petersen. The acquisition of Agio Cigars is the largest in the history of Scandinavian
scandinavian tobacco group
scandinavian tobacco group
the first time. In May, there was a market
share increase in France of 2.7 %-points, “Then it’s about agility. Each discussion Tobacco Group. Once the deal was closed in 2020, the priority became integrating
to 51.2%. should end up with an action plan to show quickly to efficiently add value to the combined business. The process is going
we can move fast and increase share in well, and there are some lessons which can be applied to future acquisitions.
Importantly, market shares grew for the market and volume. You can’t have a plan
top two brands, Signature and Mehari’s 100% ready to go in the current situation –
and the main premium brand La Paz. it’s about execution. Try something and if it
fails, fail fast, learn from it and try again.”
20 Continues 21C
company profile 2021
company profile 2021
RECENT SCANDINAVIAN TOBACCO
losing an acquisition is far from and robust supply chain for the benefit of
the end of the story – in many employees, shareholders, customers and
ways, it’s just the start.
There are three key success consumers.
GROUP ACQUISITIONS
Scandinavian Tobacco Group aims to factors in the Agio Cigars “The blueprint for the new organisation is
grow, strengthen its brand portfolio and integration. Two of these built on the strengths of both companies
leverage its costs through successful
have been achieved:
and on the best practices that have been 2020 Agio Cigars, leading European cigar company.
mergers and acquisitions, and the identified in each,” says Laurie Ræbild,
integration of its largest acquisition to integrating without Director Transformation Management
date – Agio Cigars, a leading European Office.
disrupting the business and
company with 3,200 employees – bodes
well for the future. In fact, as Senior building the organisation “We have involved employees from
2019 Pipe tobacco trademarks and designs from Dunhill Tobacco
Company of London Limited.
Vice President of the Europe Branded around strong skills and both Scandinavian Tobacco Group and
Division Jurjan Klep puts it, the success of Agio Cigars to ensure we get the most
a transaction can only be judged by the capabilities, without losing comprehensive view and fair and equal
key personnel. And the
2018
success of its integration – which is also treatment for both groups. There is a good Peterson Pipe Tobacco, pipe tobacco business of Kapp and
part of the Group’s new strategy. mix of people, with the right experience
third factor, delivering Peterson Limited.
and skills, in key roles in the new
There are three key success factors in synergies, is on track. organisation.”
the Agio Cigars integration. Two of these Thompson Cigar, leading US online cigar retailer.
have been achieved: integrating without DO IT BETTER
disrupting the business and building the Just because the integration is
organisation around strong skills and progressing well, it doesn’t mean the
2014
capabilities, without losing key personnel. team isn’t looking at things that could Verellen, Belgian brand owner and manufacturer of machine-
And the third factor, delivering synergies, be done better in the future. One change
is on track. been completed by the end of 2022, it is that will be a considerable help is that rolled cigars and Torano, a handmade cigar brand.
anticipated that Agio Cigars will contribute Scandinavian Tobacco Group is moving
“Overall, it’s really looking good and adding to an increase in Scandinavian Tobacco to a single enterprise resource planning
value to the business. There are always Group´s EBITDA margin before special (ERP) system, which will make integrating
things you want to do better, and these are items of more than 2%-points, based on different IT systems considerably easier. 2013 PipesandCigars.com, catalogue and online retail business.
important to learn so we can integrate even estimates of net synergies of DKK 225
better in the future,” Klep says. “We haven’t million. “Each workstream was managed by
seen any disruption in the business – in fact people already in the company, and
we have grown our market share, whereas Integrating Agio Cigars into a new they did a very good job alongside their 2011 Lane Limited, U.S.-based manufacturer and brand owner of
previously with acquisitions there has been company structure – with three divisions, regular duties,” Ræbild says. Having pipe-tobacco, fine-cut tobacco and machine-rolled cigars,
some loss at the start.” fewer sales offices and an optimised professional project managers running
from Reynolds American Inc.
production footprint – shows the each workstream alongside our colleagues
MORE COMPETITIVE AND PROFITABLE adaptability needed to stay competitive would have eased the massive and
The combination of Scandinavian Tobacco in an industry with declining volumes. As structured project work that had to be
Group and Agio Cigars is expected to a result, Scandinavian Tobacco Group is done, as they have direct experience of
deliver substantial cost synergies in sales building a significantly more competitive running complicated cross-functional
and marketing, production and back office and profitable company with a powerful projects that influence and depend on
functions. When the full integration has brand portfolio, strong market positions each other. The Strategy & Transformation
department is taking into account all “Our ambition is to be a great integrator,
these learnings, which will be key drivers and we’re not there yet. It’s very much
RECENT ACQUISITIONS of future M&A. about how we are organised and
simplifying the processes we have. The
Importantly, almost the entire process areas to improve are a fragmented IT
has been carried out remotely due to landscape, complex processes and lack
COVID-19 and the associated challenges of professional project managers and
in communication. Face-to-face meetings by addressing these, we can achieve our
are particularly important when ambition to become the best integrator in
scandinavian tobacco group
scandinavian tobacco group
employees are uncertain of what the the industry,” Klep says, summing up.
future holds, so the successful integration
so far is testament to the adaptability “The positive mindset, team spirit and
of those involved. A dedicated change motivation of the people involved in the
management team, with people on site Agio Cigars integration are making it one
and communicating regularly and often, of the most successful acquisitions in the
could also help with that in the future, history of Scandinavian Tobacco Group,
Ræbild adds. and I would like to thank all our colleagues
22 for their hard work in making this so.” 23company profile 2021
company profile 2021
reported in fixed formats. that are easy to use,” Rutving says. “By
The new Global Financial Services creating transparency and simplicity in
organisation – headed by Rutving, who data structures, we will help business
It becomes so much easier works with Rebecca Chen, Director managers and decision makers to make
for people to navigate in Global Process Owner – aims to ensure the right decisions based on solid data
effective and standardised transactional that we create.”
their responsibility area finance processes across the company.
and we can really empower Standardisation will create a reliable, MAKING IT FUN TO GROW
people to take decisions at single set of data as the basis for sound Standardised processes will make
business decisions and ease the process of integration easier – for instance, by
the lowest level possible. integrating new acquisitions. creating a template which can be followed
In this way, it will provide for similar tasks in all future acquisitions
“It’s about empowerment and agility,” – while still allowing for variations to
much more agility. says Rebecca Chen, Director Global meet specific requirements in particular
Process Owner. “It becomes so much countries within the same overall system.
easier for people to navigate in their
responsibility area and we can really This will assist with the ongoing
empower people to take decisions at the integration of Agio Cigars, a leading
lowest level possible. In this way, it will European company which was acquired in
provide much more agility.” 2020, and its 3,200 employees and provide
REBECCA CHEN a solid foundation for the future.
DIRECTOR GLOBAL PROCESS OWNER EMPOWERMENT AND AGILITY Expenses and office supply are just two
Data has become less transparent and practical examples of the improvements “Every time Scandinavian Tobacco Group
STIG RUTVING
processes have become more complicated that can be expected from this makes an acquisition, we are bombarded
VICE PRESIDENT FINANCIAL SERVICES
as Scandinavian Tobacco Group has transformation, which will pave the way with things we need to do and it’s a lot of
expanded through acquisition of family- for moving to a single, global ERP, called work,” Chen says. “It’s not fun to integrate
owned companies, each using its own One Process Project. a new acquisition with the structure we
legacy system and data structures. have now, as there are so many obstacles
The overall aim of these processes and “My hope is that, with as much and risks we have to manage. Instead, we
structures is the same, but variations automation as possible, we can protect want to make it fun to grow.”
KEEP IT SIMPLE
across locations limits efficiency and the values of the company and ensure that
makes global transparency only possible if we have smooth administrative processes
Scandinavian Tobacco Group’s financial processes work on 12 separate “We will work to increase the ease of use of all
financial administrative processes. Where approvals
enterprise resource planning (ERP) systems. Streamlining this and moving are needed, it should be a simple task popping up
to a single system will make tasks, such as integrating acquisitions, on your phone that only requires a tap of a button,
simpler and free up time for people to focus on other business activities. saving a huge amount of time and administration
across company. We can then use this time to grow
the business and improve efficiency.”
TRAIN
TICKET OFFICE
M
SUPPLIES
any incoming invoices and the guidelines may not be simple push to have a purchase order approved
must be printed, approved to find. before the commitment is made, instead
and scanned several times of approving the invoice - and we will TAP TO REGISTER
before appropriately authorized for These are examples of how business automate approvals, where we can guide
payment. This is still a common method leaders with a global responsibility staff through system design, to stay within
of processing invoices in some parts of that span up to 12 enterprise resource policy. HOTEL
Scandinavian Tobacco Group, where planning (ERP) systems need to navigate
scandinavian tobacco group
scandinavian tobacco group
there is no invoice workflow system to differentiated processes and policies, and “We will work to increase the ease of use
TICKET OTHER
support the process. have little system support to ease the of all financial administrative processes. EXPENSES FOOD
administration. Where approvals are needed, it should be
An employee needs to purchase office a simple task popping up on your phone
supply items or incur expenses in “The fact we are still using this kind of that only requires a tap of a button, saving
connection with a business trip. There invoice process was a bit old fashioned,” a huge amount of time and administration
is a policy setting out how this should says Stig Rutving, Vice President Financial across the company. We can then use this
be done and what can be spent, but it Services, who joined Scandinavian time to grow the business and improve EXPENSES
24 may vary from one location to another, Tobacco Group in 2020. “In future, we will efficiency.” 25company profile 2021
company profile 2021
Republic and Honduras, we acted as a were considered on an individual basis,
coach for other non Scandinavian Tobacco as the pandemic was at a different level in
Group factories in Honduras and the different countries. A protocol was in place
Dominican Republic who were struggling as soon as a pandemic was declared, and This has been about facing
with what to do”. thus it was relatively simple to implement into the storm, taking
measures and standardise initiatives
Across three continents, 14 production across factories.
responsibility, looking after
facilities and above 6,500 employees, the our people and ensuring
efforts of the Operations team have made Measures include temperature monitoring,
their safety, while also
Scandinavian Tobacco Group an industry giving people masks – including making
leader in how to tackle the pandemic and reusable masks, when there was a shortage looking after the economy
ensure safe working conditions – all while of certified products – changing production and keeping the business
increasing production at the same time. facility layouts to ensure people are
The company’s factories were the first to distanced and adapting shift patterns to
moving forward, and
reopen in some countries and plans were adapt to curfews. balancing those needs
shared with competitors for how to keep
employees safe. “We redrew our boundary for
responsibility for employees. Traditionally
“It’s important not to drive yourself insane this is at facility gate, but we moved it
looking for the correct answer, because back to the bus they take to work and “It was defined by common sense in many
there isn’t one globally,” says Graham ensured there was hygiene gel at entry cases. We didn’t know too much about the
Cunningham, Chief Supply Chain Officer. and people were sat at a distance,” virus at that stage, but we started to ask
“You have to have a global framework Ferrera says. “This best practice came ourselves, how can we ensure crowded
ROGER FERRERA defining a small number of core principles out of Indonesia and we adapted them areas are safe?”, Ferrara says.
QEHS MANAGER, HANDMADE CIGARS
and then incredible local agility to adapt to for Dominican Republic, Honduras and
what you see in the moment, to mine best Nicaragua. It took just two weeks between The company is now manufacturing
practices and to continually refine as you seeing this best practice in Indonesia and double the amount of handmade cigars
go to improve. To do that, it’s important for using it worldwide.” than at the start of the pandemic. The
employees to help us and tell us what isn’t Operations team has organised that
going well and I’m particularly pleased by OFFERING A RESPITE radical increase in production while
PLANNING THE
the feedback that we received from peer to The response was based on previous keeping people safe – a difficult job but
peer observations across the Operational experience with SARS and MERS, which very rewarding when done well.
footprint. In short, the whole performance meant that Cunningham took the issue of
culture regardless of location or seniority COVID-19 to the Executive Board already “What has been very helpful, during these
is key.” at the turn of the year. Standard seasonal tough times, has been focusing on our
UNPLANNABLE
flu policies were enacted, including purpose,” Cunningham says. “Millions of
NEW BOUNDARIES increasing stock of antibacterial and hand our consumers turn to our products every
The Operations team’s response to gels, and this early work meant Operations day and through their own personal rituals
COVID-19 shows Scandinavian Tobacco was better prepared when the pandemic look for a respite from everything that’s
Group’s performance culture in action. took off. going on around them in the world, and
The company is continuing to make we’re actually quite privileged to be able
the organisation more professional by to offer them that respite.”
embedding a focus on performance into
its global operating model, based on
A focus on performance has enabled Scandinavian Tobacco Group to react accountability, agility, professionalism
and efficiency.
swiftly to COVID-19 in its handmade and machine-rolled cigar factories.
Protocols for safe working were quickly put in place and best practices adopted Embracing a performance culture in this
globally, and production has actually increased to meet rising demand. way will ensure the company is aligned
and moving in the same direction and
ensure consistent improvement in the
W
business and for individuals.
aking up on the morning of they take breaks, and even how they get
1 January, there was no way there at the start of the working day. “This has been about facing into the
Scandinavian Tobacco Group’s storm, taking responsibility, looking after
scandinavian tobacco group
scandinavian tobacco group
Operations team could have planned “We were very agile in our response,” our people and ensuring their safety,
out 2020. says Roger Ferrera, QEHS Manager, while also looking after the economy and
Handmade Cigars. “We defined what GRAHAM CUNNINGHAM keeping the business moving forward, and
The business of producing handmade are we going to do and our references CHIEF SUPPLY CHAIN balancing those needs” Cunningham says.
OFFICER
cigars is particularly disrupted by COVID-19 to know we are doing the correct things,
because of social distancing and hygiene based on information from the Centers Ferrera explains that as soon as the WHO
regulations, which significantly complicate for Disease Control (CDC) and World issued a global alert, a response team was
EMPLOYEES IN THE DOMINICAN
the normal running of factories – where Health Organization (WHO), made it easily formed across all the company’s factories. REPUBLIC CRAFTING HANDMADE
26 people work in relation to each other, how understandable. In fact, in the Dominican There were daily meetings and factories CIGARS 27company profile 2021
company profile 2021
2 BLEND OUR STRENGTHS
OUR VALUES –
TARAN SALABSKY
DIRECTOR OF CREATIVE OPERATIONS
Each individual throughout the Group has
a unique skillset and perspective. Sharing
OUR PEOPLE
these skillsets has been key to our past
successes and will be instrumental in our
future achievements. Thinking strategically,
challenging the status-quo, and creating
ideas brings value when we share and
listen to our colleagues and blend our
strengths. I believe each person brings
something unique to the table and through
collaboration with others we broaden the
To succeed, we need the right culture to ensure that we as an horizon of what is possible for our future.
organisation, as colleagues, and as people, are in sync on how we
do our everyday job. Our four values provide the framework for
what we should expect from ourselves and each other, every day.
3 CULTIVATE COURAGE
OLENA KISHKINA
INTERNATIONAL MARKETING
EXCELLENCE MANAGER
1 2 3 4
Courage is arguably the most important
quality in business if you think about it; other
essential business concepts like leadership,
innovation and sales fade in the absence of
courage. Take away courage, the business
EMPOWER WITH BLEND OUR CULTIVATE LIGHT THE WAY loses its strength and competitive advantage.
Cultivating this competence in the organisation
PASSION STRENGTHS COURAGE FORWARD is about making people comfortable with
taking worthy actions despite the potential
risk. I truly believe that this is one of our key
success enablers on the transformational
journey that our Group is pursuing.
1 EMPOWER WITH PASSION 4 LIGHT THE WAY FORWARD
SEAN WILLIAMS MARK DRAPER
BRAND AMBASSADOR COHIBA DIRECTOR, PUBLIC AFFAIRS AND
CORPORATE SOCIAL RESPONSIBILITY
I believe that if someone truly loves what
they do then they will do it with a sense Whether working with our industry
of pride and ownership. This mindset associations to shape our regulatory
empowers us to take on our roles with environment, or explaining to a financial
scandinavian tobacco group
scandinavian tobacco group
passion. Being empowered with passion for partner how we approach our CSR
me means taking ownership and embracing work, I see regularly that our external
accountability for my role in the success of stakeholders watch our Group carefully
the brand and the overall organisation. and measure our actions against our
values. That is why it is so important
to light the way forward and exercise
leadership, responsibility, and sustainability
in our company and in our industry.
28 29company profile 2021
company profile 2021
CORPORATE SOCIAL RESPONSIBILITY
RETAIL EXPANSION
During 2020, we opened three
new cigar Super-stores in the US;
in Fort Worth, Texas and Tampa
In 2020, we adopted our first CSR strategy focusing on four areas, each and Lutz, Florida.
with its own defined ambitions, activities and goals. Those focus areas are:
PEOPLE & COMMUNITIES PLANET ETHICS GOVERNANCE
How we work with our How we work to ensure How we promote responsible How we embed strong
employees and the sustainable consump- action in our business oversight and transparency
communities where they tion and production and industry in our CSR work
work and live
FOR MORE INFORMATION ABOUT OUR CSR STRATEGY, READ THE FULL REPORT HERE
ST-GROUP.COM/REPORTS
CIGAR SUPER-STORE IN
FORT WORTH, TEXAS
3 4 6 1 2 5 7 8
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CORPORATE WEBSITE
Visit our website if you want the full story
about our business, our brands, our
tobacco and our people. Go to
OUR MANAGEMENT www.st-group.com for more information.
1 3 5 7
scandinavian tobacco group
scandinavian tobacco group
NIELS FREDERIKSEN JURJAN KLEP RÉGIS BROERSMA SARAH SANTOS
PRESIDENT AND CEO PRESIDENT AND SENIOR VICE PRESIDENT AND SENIOR VICE PRESIDENT AND SENIOR VICE
PRESIDENT, EUROPE BRANDED PRESIDENT, NORTH AMERICA PRESIDENT, NORTH AMERICA
2 DIVISION BRANDED & ROW DIVISION ONLINE & RETAIL DIVISION
MARIANNE RØRSLEV BOCK
EXECUTIVE VICE PRESIDENT 4 6 8
AND CFO YULIA LYUSINA HANNE BERG GRAHAM CUNNINGHAM
HEAD OF STRATEGY AND CHRO AND SENIOR VICE CHIEF SUPPLY CHAIN OFFICER
TRANSFORMATION AND SENIOR PRESIDENT
30 VICE PRESIDENT 31SCANDINAVIAN TOBACCO GROUP A/S
Sandtoften 9
2820 Gentofte
Denmark
www.st-group.com
Make®
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