Niels Frederiksen is newly appointed CEO. We asked him to outline our Group's DNA.
He was appointed only a few weeks ago. Niels Frederiksen is new CEO of Scandinavian Tobacco Group, but he has worked for the Group for 15 years. He was one of the architects of the company’s strategy, instrumental in the merger and integration with Swedish Match, and most recently Vice President for the company’s supply chain. Now, he’s settling into the corner office.
“I’m bringing my humidor and I would like to bring more of our products into my office. My office doesn’t have to be a showroom, but we have so many beautiful products that I am proud of. When you see, smell and touch them, it brings out the passion. Only then does one understand that no two products are the same. Each product brings with it years of history, from a seed is sown, to a cigar is rolled, or to pipe and fine-cut tobacco are cut and blended.”
Niels Frederiksen also brings his old desk to his new office. It’s big enough, but still smaller than most CEO desks. It’s light-colored wood and was designed by an architect.
“I just like it. It is good craftsmanship.”
THE INVOLVEMENT IS OVERWHELMING
There are very few Scandinavian Tobacco Group locations that Niels has not visited. When he travels, he meets people that live and breathe tobacco.
“We’re in the market for niche products. They don’t take up a lot of space in many people’s lives, but they play an enormous part in the lives of our consumers. Their involvement in cigars and pipe tobacco is overwhelming. I seek this passion out when I travel. When I find a cigar bar, I go there. I rarely tell people where I work, unless I’m asked. Instead, I listen to what people tell me.”
“Club Macanudo in New York is always part of my itinerary. It is our very own cigar bar and it is full of regulars and people passing through the city. Last time I was there, I spoke with a man who’d moved to New York without knowing one single person there. Today, most of his recent friendships evolve around the club. The same phenomenon is seen at our Cigars International Super-Store in Pennsylvania and at our Danish tobacco shop in Copenhagen not far from where I live. The same passion is found at the annual CigarFest hosted by Cigars International in the Pocono Mountains of Pennsylvania. The passion found there can’t be described. One needs to see for oneself.”
WE SHARE OUR PASSION
“It’s great to see that our consumers’ passion for our products is mirrored in the people who produce the tobacco. From seed to cigar, the focus of our partners and employees is in on the details.” Careful attention is paid to circumstance: How are the tobacco plants developing? Is the tobacco drying the way we want it to? Is it fermenting in an optimal way? Which blend is the most exquisite?
Is the tobacco rolled to create the perfect draw? In other parts of the company, people are ensuring consistent taste despite the differences in each tobacco harvest. Two to three years of work with the different tobaccos and a wealth of details all come together in a moment of enjoyment for the smoker.
“Our job is to create moments of great enjoyment for smokers. We are well-positioned for the job. We operate in several special categories and have always bought tobacco from all over the world – including places in which the batches are small but incredibly interesting. Recently, we created a cigar with tobacco from the Amazon Jungle and more is on its way. Our work in special categories gives us access to more tobacco and an increased understanding of tobacco, the possibilities and the differences. General Cigar sells the Amazon tobacco cigar in the US market. The success has been overwhelming.”
IT’S OUR DNA
“We believe in brands and invest a lot of effort in developing some of the world’s strongest brands within their categories. But above everything else, we believe in quality. It may sound pretentious, but we believe that our consumers can taste the difference between premium quality and quality that is ‘less great’. We also believe that the next exciting tobacco product is just waiting to be invented. We want to be the ones to invent it on the basis of our broad knowledge and insight into special categories. The key to new taste experiences is to be found in the tobacco. This belief and knowledge does not make us unique, but it’s our company trademark and part of our DNA.”
Cigar and pipe tobacco volumes are declining, but not much. And the decline is mostly felt in the European key markets in which Scandinavian Tobacco Group used to be the strongest.
“Yes, volumes are declining, but their value is relatively stable. We are not the only ones to see this trend. Our situation is comparable to that of beer, newspapers and even milk in Northern Europe. The total markets for these products are also dropping.”
“Some people prefer working in a growth industry, but in my opinion, it is more important to work with something that you’re passionate about. Our employees are extremely engaged and our consumers are very dedicated to our products. This sparks something in me. Our line of work would only be frustrating if we couldn’t see opportunities to do better and to expand. We see these opportunities. Six years ago, we were a medium-size, primarily Northern European, company. Today, we are a global market leader in cigars and pipe tobacco. Our presence is divided equally between North America and Europe and our sales in the rest of the world are growing. We are growing in new categories and segments. It is not easy, but it is challenging and fun.”
“We share our current challenge with many other companies. We need to ensure continued moderate growth, increase earnings and reduce the working capital. In some areas, we are just like most other companies. But there is one area in which we are different. Our aim is not to create more smokers. We don’t work to increase the total tobacco market. This is something that we are very firm about. But our opportunities are still great. We are big within the niche products cigars, pipe tobacco and fine cut. In the long term, our big potential lies in developing products that can get a share of the 98% of the tobacco market which is dominated by cigarettes today. Exploiting this potential lies in understanding the preferences of our future smokers and employing our knowledge of tobacco in new ways. Medium-term, our job is to find pockets of growth in our current markets, to conquer new markets and to consolidate through acquisitions. A prerequisite for this is an efficient supply chain. And to keep on being an attractive place to work.”
The most recent employee engagement survey from 2014 shows that the engagement of Scandinavian Tobacco Group’s employees is high and in several areas it is at par with the best-performing FMCG companies in the world.
“Our company is about people. It is about understanding and challenging the moments that our consumers demand and that our products can give them. We will achieve our target. I think that we all want to do better each day and that we can all contribute. Every day, we are on our way to an even better place.”