A big market and a big challenge – and with the right steps taken, now potentially big rewards too.
Scandinavian Tobacco Group was faced with a declining market amid excise increases and more demand in the Value for Money segment, where its offering was not the strongest. Furthermore, the organisation was not operating as effectively as it could – the market trends were not new, but it had not succeeded in addressing them.
Alci Debieuvre was appointed Country Director of STG France in May 2019, and a new strategy was put in place aiming to gain market share through a combination of winning in the Value for Money segment, increasing the effectiveness of the sales organisation and pricing. This is already showing benefits, with a decline in market share now stopped and an increase targeted, which will be further helped by the integration of Royal Agio Cigars.
“We needed to be more focused and accountable and to define the right strategy. Success is more people accountable for results, understanding the business and focusing on execution,” Debieuvre says. “We should not be afraid of the challenge and give people the focus they need to succeed.”
Fuelling the Growth
The transformational Fuelling the Growth programme initiated in 2018, aims to increase shareholder value by raising earnings capability, driving efficiencies and stimulating market share growth.
Scandinavian Tobacco Group’s commercial push in France is part of that and has played a key role in turning around the overall performance of the Machine-Made Cigars Division. The overall aim is to defend the market leading position and to improve market share in 2020, despite further excise tax increases.
“France was too focused on its own organisation without the wider Group perspective. It’s an example of exactly why we needed to do Fuelling the Growth,” says Jurjan Klep, President and Senior Vice President, Machine-Made Cigars Division. “We had market trends that were against our strengths, and we did not have a very agile organisation, and very little capacity to respond.”
A key point to address was the mindset of the French organisation, which was isolated from headquarters and hence not utilising Scandinavian Tobacco Group’s full resources. Now, the team is international and can take advantage of skills, experience and best practice from across the organisation, while key performance indicators (KPIs) are standardised across the in-country team and the division.
Incentives for sales reps have been changed to increase the focus on performance and everything is supported by data, with weekly sales reports in France based on standardised reporting, to which everyone has access so they can chart progress.
An important initiative was the launch of the Gold brand to strengthen the position in machine-made cigars, with aggressive price positioning. The first results have been promising, with volume growth of 35% and an increase in market share to 2.6% with no impact on sales of the Café Crème/Signature brands.
“We have one of the best brands in terms of Value for Money and need to grow dramatically in terms of distribution and volume,” Debieuvre says.
A Playbook has been launched to track the initiatives in the commercial push, based on an outline of what the company needs to sell and how it should sell it, and the data show that market share is starting to increase. It is a multiple initiative that enables execution of the right activities, smart pricing and salesforce effectiveness, so the company can meet the demands of the French customers and consumers with the right portfolio.
“I don’t think we are there yet. There is still plenty of work to do,” Klep says. “We have stopped the bleeding, in terms of years of decline, and we are slowly starting to look upwards. With the addition of the brand portfolio of Agio, we are in a very strong position that should enable us to win and to become the undisputed leader in the market”.