Folks who don’t follow the cigar industry might be wondering what’s going on with all these Swedish and Scandinavian tobacco manufacturers, but make no mistake, this is big news for the cigar world.
In 2000, Swedish Match purchased a majority stake in General Cigar, makers of Macanudo, Cohiba, Punch, Partagas, Hoyo de Monterrey and La Gloria Cubana in the U.S. market. Over in Denmark, the Scandinavian Tobacco company was dominating the world market for pipe tobacco while simultaneously operating as the second-largest cigar producer on the planet, running the well-known CAO International brand among others.
Business analysts have made a number of interesting observations, including pointing out that the merger makes a takeover of Swedish Match more likely. The analyst also notes that the recent business maneuvering will allow the company to pursue its efforts in growing the smokeless tobacco market (which we still think is kind of gross).
Scandinavian Tobacco will own 51% of the new venture, while Swedish match gets the minority stake at 49%. Swedish Match will also receive 30 million Euros ($41 million) in cash as part of the deal. The two companies have a combined 13,600 employees in over 20 countries around the globe.
This year has seen several mergers between growing premium cigar companies, including Gurkha (Beach Cigar Group) merging with Cojimar and Rocky Patel joining forces with United Tobacco. The cigar industry faces a unique set of challenges and opportunities, and it makes sense that this trend of corporate consolidation will continue for the forseeable future.
What will this mean for average cigar smokers like you and I? In all likelihood, not a whole lot. The combined power of these two companies means they can offer products at a more competitive price point to adapt to these challenging economic times, so cheaper cigars could be a benefit, though it is by no means guaranteed. While the cigar market continues to show conflicting signs of both growth and contraction, this merged company will also be focusing on the expanding markets of snüs and smokeless tobacco. Add to that the fact that Swedish Match’s U.S. premium cigar operations were not included in the merger, and this story becomes much more compelling to businessmen than your average smoker. Still, it’s interesting to watch the unstoppable economic force of globilization taking over the tobacco industry.