Cigar Sales Decrease at Scandinavian Tobacco Group

Cigar Sales Decrease at Scandinavian Tobacco Group

Cigar sales—both handmade and machine-made—were down in 2017 at Scandinavian Tobacco Group, the parent of General Cigar Co., maker of Macanudo, La Gloria Cubana and a host of other cigars.

“2017 was a difficult year for the group,” wrote STG chairman Nigel Northridge in the company’s annual report. Net sales were down 4.2 percent, to 6.5 billion Danish kroner ($1.1 billion) and gross profit was down 4 percent, to 3.1 billion kroner ($513 million).

Machine-made cigar sales, the company’s largest business segment, fell by nearly 4 percent, to 2.5 billion kroner ($413 million). Sales of handmade cigars were down considerably more, dropping 7 percent, from 2.1 billion kroner ($347 million) to 1.9 billion ($318 million). It was the first time in more than 10 years, said STG, that its handmade cigar sales went down.

Machine-made cigars account for 39 percent of STG sales, and 41 percent of the company’s gross profits. Handmade cigars account for 30 percent of sales, and just over one-quarter of company profits.

In the U.S. market, the world’s largest, STG sold more than 300 million cigars, a volume drop of 1.8 percent. The poor performance was blamed on the company’s massive cigar retail company, Cigars International. Creating a new IT strategy at the online retailer early in the year went awry, causing problems that impacted sales and profits. STG said the performance of Cigars International improved “quarter by quarter,” and that the company now has “a fully scalable and well-functioning IT system.”

In January, STG announced it was acquiring another major online cigar retailer, Tampa, Florida’s Thompson and Co.

STG also makes pipe tobacco and fine cut tobacco, segments that were also down in sales.

STG brands include Macanudo and CAO, the non-Cuban versions of Cohiba, La Gloria Cubana, Punch, Partagas and Hoyo de Monterrey; machine-made cigar brands such as Café Crème and Henri Wintermans; and Captain Black and Borkum Riff pipe tobaccos.