The American cigar market has been a strong one for European cigar giant Scandinavian Tobacco Group A/S (STG). The Denmark company, the parent of General Cigar Co., reported strong third-quarter earnings today, which the company said was a direct result of higher cigar sales, particularly handmade cigars sold in the United States.
Net sales for STG were up 23.4 percent in the third quarter of 2020, rising from 1.8 billion Danish kroner ($287.1 million) in the same period for 2019 to 2.2 billion ($354.1 million). Net profits more than doubled, from 172 million kroner ($27.3 million) to 356 million ($56.5 million).
For the first nine months of 2020, STG’s net sales were up 21.2 percent to 5 billion kroner ($793 million). Last year, the company had revenues of 6.9 billion kroner ($1.1 billion).
“The changes in consumer behavior following the outbreak of the Covid-19 pandemic in the second quarter of 2020 have continued with high tobacco consumption across product categories and markets,” the company wrote in a statement announcing the earnings. “In addition to increasing demand for handmade cigars in the U.S., sales of pipe tobacco and fine-cut tobacco have performed better in several markets.”
The demand for handmade cigars is so high that STG has been concerned about making enough of them, and the company has fewer cigars on hand than normal. “Inventories throughout the supply-chain were reduced in recent months. However, production output has increased and inventory levels are expected to normalize early next year assuming no material disruptions and lock-down throughout the supply-chain,” the company reported.
STG owns such handmade cigar brands as La Gloria Cubana, CAO and Macanudo. In addition, the company also makes such machine-made cigars as Henri Wintermans, pipe tobacco that includes the Captain Black brand, and fine-cut tobacco sold under the name Bugler and others. STG also owns Cigars International, the major online cigar retailer with brick-and-mortar locations in the U.S.
STG is in the process of integrating Royal Agio, which it acquired in January for $235 million. That’s a long-term process, one that STG says won’t be complete until 2022.