3. DRIVE M&A
Develop and execute M&A strategy to strengthen our position
The acquisition of Thompson, a leading online retail cigar business in the US, has given Scandinavian Tobacco Group a bigger share of a growing market – and access to many more customers.
Sarah Santos is, by her own admission, a data geek. And Scandinavian Tobacco Group’s acquisition of Thompson and Co. of Tampa, Inc is giving her plenty of information to delve into.
“The biggest asset for a retailer is the customer file. I love looking at the profiles and segmentation – who can we market more to in a more personalised and targeted fashion, who should we stop marketing to, and behaviour on the website to get frequency of purchase and revenue per visit up,” says Santos, Senior Vice President North America Online Business.
The Group’s US retailer Cigars International completed the acquisition of Thompson, a leading online retail cigar business in the US, in 2018. A family-owned business, Thompson was founded in 1915 and based in Tampa, Florida.
The data, which Santos so enjoys looking at, is aggregated in the Cigars International IT system, which produces segmentation across business units and purchasing channels that employees then act upon.
“Thompson’s consumer base is largely distinct from our existing database. That means we can interact with and garner far more insights to better serve consumers in categories where we didn’t have strength previously, but produce products in, such as machine-made cigars,” Santos says.
Thompson & Co., Inc.
A Transformational Deal
Scandinavian Tobacco Group has identified handmade cigars as a growth engine and is looking at ways to invest further. Two out of every three premium cigars are sold in the US and the acquisition of Thompson for USD 62 million further reinforces its US position.
Thompson has annual net sales of about USD 100 million and provides Scandinavian Tobacco Group access to a substantial and attractive customer base, auction and retail websites as well as a retail store and a call centre facility in Tampa, Florida.
With the addition of Thompson, Cigars International can now deliver an unmatched range of premium cigars at the highest level of service to US consumers.
“It’s a good place to start with a large market share, and this is where we’re investing,” says Craig Reynolds, President and Executive Vice President of North America Online & Retail.
“This is not a small deal – it is transformational. It gives us more purchasing power, and more marketing reach, and it enables us to do things we couldn’t do before. The staff at Thompson are really professional, with a lot of experience, and they and the existing team at Cigars International are really pushing forward the integration work.”
Online and catalogue sales of cigars in the US are huge and have grown on average 3% a year since 2008.
Today, two in three cigars worldwide are sold in the US, online or via catalogue. Cigars International sold over 70 million cigars in 2017.
With the acquisition of Thompson, Scandinavian Tobacco Group’s US subsidiary Cigars International now has about half of the market for online cigar sales in the US, some 1 million active online customers and sends about 30 million catalogues annually.
More than 10,000 shipments of cigars and related accessories are distributed daily from the warehouse in Pennsylvania.
That integration of operations started in the second quarter 2018, and Santos too is very pleased with the way the teams have worked together to build a stronger business and overcoming challenges such as moving Thompson onto the Cigars International IT system. Customers should not notice any difference in their service as a result of the acquisition.
The acquisition is expected to deliver material synergies and scale benefits, with the margins of Thompson being lifted over time towards Cigars International’s existing level. Significant cost synergies are also expected, to the benefit of customers and shareholders.
Senior Vice President North America Online Business