Sweden_Market_Audit-_Camel_Snus

I. Camel Snus® The snus market is well known to the Scandinavian markets, the United States tried its first batch of snus in 2009. Snus is moist, ground up tobacco in various flavors. It is commonly used under the upper lip. Two variants of snus include ordinary (pouch) and portion (loose). These products are an effective in the initiative for a smoke-free and cleaner environment. They also are considered a tobacco product that will lessen one’s chances of cancer, opposed to cigarette-smoking. The Swedish market holds a market share of 34.9% for smokeless tobacco users in 2009. According to survey of ‘Nicotine and Tobacco Research’ snus use is present in 24% of males and 3% in female. The overall tobacco market is 68.2% domestically owned; however, American products are considered a novelty in Swedish Culture, therefore the differentiation of American snus should strike significant interest (Datamonitor). 1. Relative advantages are that the general population of Sweden are snus users and continues to grow. The current smokeless-tobacco market has wide selection of brands and Camel will allow for an added benefit of a new flavors. 2. Compatibility of a relatively new snus brand in the market would be greatly welcomed due to the country’s level of acceptance of new products and ideas. The brand aligns with the current market’s standards, and tastes 3. Complexity, on a cultural level, is unrestricted to adaptability of new norms and customs. The product requires a slight switching cost based on the comparable product offerings within the current market and a slightly higher price. 4. Trialability of a new product is expected in a new market. The price will be discounted for a time and packaging, flavor and styles will be adjusted to the market it is directed. Consumer decision-making for new products are affected by four different social interaction processes: personal interaction, point of sale (POS) media exposure, social pressure, and network externality [illicit trade]. These will be discussed later. 5. Observeability of the product bases itself upon the culture and often times the social perspective of the brand, peer usage, and cultural tendency for acceptance to divergences of new products and features. B. Major problems are present, where the market itself is open to product differentiation. Limited advertising bans are in place from the government of Sweden, but the repeal is prospectively near due to lobbying Swedish health official. There is high volume of domestic, well established brands in the market currently (Local). II. The Market A. The Camel brand is an American brand which has spread to Europe, first as a cigarette, now as snus for the following reasons: The cigarette market in Sweden is dwindling because the rise is health awareness, heightened tax, bans & restrictions on smoking in all public and work places in 2005, ban on advertising & promotion, age restrictions, and warning labels in 1993 (Jansson). However, snus is becoming wide-spread to the market, according to health officials, it is due to a slim risk of cancer and it’s effective and growing for use in smoking cessation. 1. Geographical regions with lesser population concentration have retail outlets for convenience or non-durable goods. Popular locations for sales of these goods are in supermarkets and tobacco specialty stores. According to EU regulation, Swedish snus can only be purchased in Sweden, yet not illegal in other EU states. 2. Transportation and communication are widely available to the general consumer, freely accessible through local providers (CIA). 3. Consumer buying habits a) Average daily consumption is 11-12 grams for pouched snus and 29-32 grams for loose snus. The typical duration of use of each pouch/portion was 60-70 minutes. The average snus users will consume 19 grams of the product daily and the popular (pouch) snus comes in 24 or 45 gram containers (Oxford). b) This product is addictive in nature and appeals to the consumer appeal in flavor, smell, peer approval, and often used in smoking cessation. The product contains pasteurized tobacco, water, pouch materials, flavors, sodium carbonate, and sodium chloride. The differences are that American snus uses other processes that are undesirable to Swedish tastes (also comes in ‘white’ portions). Uniform to other Swedish brands, they use a round metal can (Camel). c) Shopping patterns for snus varies, however the average user uses almost a whole container in a day. In the study, ‘Patterns and behaviors of snus consumption’, Sweden consumers have responded that in their average purchasing >39% try other brands regularly. The research brought about the majority (95.9%) of respondents used their main brand ≥50% of the time, 80.9% reported using their main brand ≥75% or more of the time. Overall, the average 61.2% of respondent’s purchased their main brand most all the time (Oxford). 4. Distribution of Camel snus products is limited through tariff by EU regulation. The three large smokeless-tobacco producers: JTI Sweden AB (JTI), British American Tobacco Sweden AB (BAT) and Philip Morris AB (PMI) were the main players in 2009. However the manufacturers are often use joint ventures for manufacturing and distribution. The major two major ventures JTI Snus AB (Japan Tobacco International) and Swedish Match AB (joint venture of PMI and Scandinavian Tobacco Group), who currently distributes various tobacco products varieties to Sweden and around the world. Swedish Camel Snus is made at the JTI Sweden factory in Vårgårda, Sweden (Swedish Match). a) Distribution takes place from two distribution centers (Stockholm and Gothenburg) to around 12,000 stores, in principle enabling complete coverage of the Swedish retail sector. All major tobacco companies in the market are customers of Swedish Match, which gives the distribution company a strong position in the tobacco segment. b) The manufacturing, processing, storage and distribution of smokeless tobacco are highly regulated in Sweden. According to Swedish authorities, the health-risks are significantly lower when the Swedish methods of tobacco pasteurization, however, the American method is to allow tobacco natural fermentation, which has shown to cause oral cancer (Local) 5. Advertising and Promotion is almost non-existent for the EU states, however, Sweden is a slight exception. Sweden is not under EU regulation, rather they lifted their smokeless tobacco ban as a public health concern, in hopes consumers will use a safer form of tobacco (Appendix Tobacco act of 1993). a) Advertising media used to reach potential consumer is nearly non-existent. However, the use of snus for cessation reasons and as a lowered cancer risk, the government has been petitioned the lifting of the advertising bans since 2009. However, Sweden companies host a few E-commerce snus e-stores [Snus World Wide AB]. In the past, these stores have been rigorously shutdown because of the EU tobacco advertising bans. Still snus can be widely purchased on non-EU country’s e-stores (Local). 6. Customary markups for imported snus are and as a consumer tax of 614 SEK per kilo (1.35 SEK/gram). B. Compare and Contrast your product and the competitors product 1. Direct competitors are likely other American segments of snus products. These brands are former cigarette brands that have been considered failures in the European/Swedish markets due to harsh advertising bans and health concerns. Another segment of competition in the Swedish market is the domestic snus brands that have been the established image since before 2007 when American snus was introduced. However, the culture is open to new concepts outside of domestic markets. a) The direct competitors have been derived from Europe’s supposedly failed cigarette brands, which are Marlboro, Pall Mall, and Lucky Strike. The largest competition Are the domestic brands, one the most popular being ‘General’. b) These products are similar in nature of the content, but have slight differences feature and segment of the market. Marlboro uses a variation of the product that appeals to about 12% of snus users who. Contents comprised of 6 pouch portions. The product use is intended for dual use with cigarette smoking. It has less than half of the nicotine of Camel snus, uses only two consistent flavors common to the brand (Oxford). Pall Mall comes in both regular and white portion styles. It is documented that its marketing was intended toward youth-oriented cigarette and failed in the market after its release in 2006. No other information was available. Lucky Strike (Tier 1 cigarette brand) was also launched in 2006 and was a failure due to the market placement where snus is not usually purchased (Bars and restaurants in upscale regions of Stockholm). This brand showed a (.0004%) market share according to tax estimates end 2006. General bread is the popular leading Swedish snus; both regular and white portion styles- approx. 27 widely accepted domestic brands (SnusCentral). c) Generally, all packaging is similar in nature, the more prestigious brands are packaged in metal or aluminum tins and non-premium brands are in packaged in plastic. Camel is packaged in disk-shaped tins comprising 25 pouch portions, sealed with tape for freshness. Marlboro snus is packaged in a round, aluminum container. Pall Mall uses what looks to be a red plastic, American-style chew container. Lucky Strike also uses an American-style chew container but looks to be a black plastic. General brand is packaged in black plastic container with a white label (SnusCentral). 2. Competitor Pricing in Sweden is first the domestic brand, which hold a high competitive advantage. Secondly, the imported and/or domestic-made brands are priced much higher. According to Purchasing Power Parody (PPP), it is estimated to cost the consumer buys a domestic brand for around $2, where an American brand would cost about the same- unless imported. C. Market size Japan Tobacco, Philip Morris International and British American Tobacco collectively holding 68.2% share of the total market value (Oxford). 1. The tobacco market in Sweden is worth $2.65 billion, and a 2.4% growth from 2009. Japan Tobacco’s international tobacco segment recorded revenues of $28.1 billion in 2010, a decrease of 15.5% over 2009, among many international tobacco sales regions (Datamonitor). 2. Estimated sales for Camel snus are based on the established basis of the population in 2007 (9,184,000). In 2007, an average of 1.2 million (7.8%) of the population use snus, 831,000 are daily users. Where 20% of people smoke, 12% of them use snus. The men account for 19% (685,000) used snus daily; and of the women, 16 percent smoked daily (686,000) and 4 percent used snus on a daily basis. However, these numbers are constantly growing as the smoking cessation resources are being implemented, and as new snus users are becoming addicted (Oxford). D. Governmental participation in the marketplace 1. Import trade and regional development through government agency relations. An example of this is the ‘Sweden Chamber of Commerce’; they offer member importers the following services: International arbitration, technology resources, an association with trade associations, development cooperation, and resident agents for marketing and distribution. ‘The Swedish Institute’ is a networking organization that includes the perks of women and young leader business programs. They also find members resources as books, literature and information on visiting. Lastly, ‘Open Trade Gate Sweden’ highlights procedures for trade implication and barriers of trade, these resources can be taken advantage of through meeting and seminars for the varieties of trade information (Invest). 2. Regulations that must be followed (see appendix- Tobacco act of 1993). The implications of investing in Sweden’s snus market are broadly advantageous for the consumer and the manufacturer. Camel products are contracted for manufacturing and distribution into European markets through Japan Tobacco International. The British American Tobacco Company first failed with their entrance in the highly saturated Swedish snus market; Luck Strike snus was introduced in 2006 into a section of the market that does not purchase in those selected sales arenas. However, they moved into to congruent markets with Swedish users with Camel snus. Camel snus was first launched in 2006 as a response to the growing popularity of Swedish snus in many parts of the world, due to its health benefits versus cigarettes. Its low pricing has made snus increasingly popular throughout the world. It is primarily marketed to consumers wanting to quit smoking. It is seen as the interesting "newcomer on the scene and the products has been received with satisfactory reviews from long time snus users. They are not able to match the older Swedish brands and their >200 years’ experience in production.   Bibliography "Camel Snus." Tobacco Products. Roswel Park Cancer Institute, Robert Wood Johnson Fundation, & Tobaccoscience.org, 25 June 2009. Web. 8 Apr. 2011. . Datamonitor PLC. Tobacco in Sweden. Rep. no. 0181-0817. Datamonitor360, 18 June 2010. Web. 1 Apr. 2011. . Jansson, Jakob, and Department of Public Health, Karolinska Intitutet. A CRITICAL REVIEW OF THE SWEDISH TOBACCO CONTROL TOOLS. Publication. Blekinge, Sweden: Lund University & Blekinge Institute of Technology, 2005. Print. Local, The- Sweden News in English. "Nicotine Replacement Therapy Sales Soar.", “Sweden takes snus fight to Brussels”. The Local. 24 Jan. 2011. Web. 06 Apr. 2011. , http://www.thelocal.se/32160/20110220 SnusCentral. "Have Cigarette Brands Failed as Snus Brands'" SnusCENTRAL.org. Snus World Wide AB, 19 Aug. 2009. Web. 7 Apr. 2011. .