In the first part of an exclusive interview, Scandinavian Tobacco Group (STG) CEO Niels Frederiksen discussed how his company has built popular tobacco brands like Macanudo, CAO, Borkum Riff, Captain Black and well-over 200 others across several categories [read more here]. Now Frederiksen reveals how STG will continue to innovate and grow in today’s regulatory environment–even without the help of “new” products.

Beyond New Cigars
Now that FDA regulation has made new cigar launches more difficult, cigar companies are seeking other ways to answer the “What’s new?” question that many consumers first ask when they enter their favorite cigar shop. General Cigar Company, and STG as a whole, are responding to that challenge with creative approaches to engaging with both retailers and consumers, says Frederiksen, activating new strategies to continue to energize the cigar industry.

“Regulation has driven the need for increased connectivity with consumers and has made creativity and innovation important pillars of success,” he remarks. “In a category driven by personal interactions, our brand ambassadors are forging long-lasting ties with retailers and consumers, and our brands are growing as a result. Our brand teams are flexing their marketing muscles to deliver innovative packaging formats and exciting merchandising initiatives to support the retail community, all in a manner which complies with applicable regulations. We are also focused on evaluating our processes and inventories to drive efficiencies throughout the company, which frees up resources needed to drive excitement in the category.”

In other words, STG’s brand ambassadors are visiting more shops and spending more time with the retailers and their staffs to educate them about premium cigars, thus adding value to not only STG’s brands but also to the entire industry by enhancing consumer experiences. STG’s sales team is also empowered to work with each retailer on an individual basis to maximize his or her bottom line. There is also the company’s Five Star program in which STG provides retailers with margin enhancement on core brands and provides a full calendar of promotional programs, including merchandising and point-of-sale materials to increase consumer awareness. The company also has a dedicated team of brand ambassadors to host in-store and out-of-store events.

“We recently made a significant commitment to increase our consumer connectivity by expanding our brand ambassador team to six ambassadors,” Frederiksen says. “Our team traverses the country, and in the case of some brands, the globe, interacting with cigar lovers in-store and at events to deliver tailored and impactful experiences with our brands. This effort is helping to pay dividends for us, as brands across our entire portfolio are enjoying marked growth.”

Future Forecast
While the regulatory environment throughout most of the world might seem ready to kill the premium cigar industry, Frederiksen insists that the future is far from bleak. The Cigar Association of America’s recently released data on 2017’s premium handmade cigar imports into the U.S.—330 million, the most premium cigar imports in 20 years—bears witness to the overall health of the industry. With challenges come opportunities, and STG will be among the first to capitalize on them.

“We expect the industry to be stable, with slight growth over the next five years, and there is absolutely reason for optimism,” Frederiksen says. “The driving force behind our optimistic view is the resilience of our retailers and consumers. Cigars will always face regulation; however, we have an extremely passionate base of cigar lovers who are willing to adapt their smoking occasions. We will be there to support their passion, and will continue to support our brands and drive innovation in the category. Our resources and capabilities will allow us to serve both the retailer and consumer in more customized and more impactful ways than ever before. We are committed to delivering the utmost excitement to retailers, along with great moments to smokers. And we are on track to fulfill our mission to ensure a bright future for the category. Rest assured, STG will light the way.”

This story first appeared in the May/June 2018 issue of Tobacco Businessmagazine. Members of the tobacco industry are eligible for a complimentary subscription to our magazine. Click here for details.

– By Stephen A. Ross, senior editor of Tobacco Business Magazine. Photos by Justin Hummerston.