PURSUING NEW GROWTH The modernisation of the online platforms is being implemented in 17 workstreams, such as Personalized Marketing, Website Redesigns and Consumer Profiling. The five business units will address the unique preferences of the eight distinct consumer segments and their purchasing patterns, reinforcing existing strengths while also allowing the pursuit of new growth. Smaller business units are helping to unlock capital to fund those objectives the Thompson Cigar Auction website has been shut down, customers migrated to CigarBid Auctions and marketing efforts optimised in the Pipes and Cigars business, which is experiencing a declining market. Responsive websites have been launched for Thompson Cigar, Cigars International and CIGAR.com.com, which has also been redesigned with a premium look and feel and personalized product recommendations driven by artificial intelligence. company profile 2021 company profile 2021 Its about increasing customer reach and increasing share of wallet, Zdan says. The overall aim is to deliver an exceptional consumer experience by digitalizing, improving user experience, introducing more personalization and adding more value in terms of loyalty. We test new digital experiences with a small segment of our consumers to ensure changes are well received, Smelko says. Overall, were seeing positive results and we have learned some lessons along the way, but thats what allows us to serve our consumers even better in the future. The results are already showing. All of the key performance indicators are positive month-over-month and there has been a drastic change, with significant consumer migration to the online channel. From March until the end of 2020, NAO&R saw significant growth coming from these initiatives, and more is yet to come. CHRISTIAN GRØNBECH VICE PRESIDENT COMMERCIAL EXCELLENCE MICHAEL SEIER PETERSEN INTERNATIONAL CHANNEL DEVELOPMENT MANAGER HOW TO SELL CIGARS IN A PANDEMIC Create clear propositions and brand delineation between NAO&R business units and competitors scandinavian tobacco group Win market share and reach new consumers, especially younger, premium smokers 18 Protect profitability and focus on higher margin segments COVID-19 restrictions meant customer visits were out. So Scandinavian Tobacco Groups sales reps switched to the telephone it took some time getting used to, but the result has been increasing market share. S ales reps are used to life on the road in the car, visiting customers, day in and day out. But not in a pandemic. Many stores closed and those which were open implemented social distancing. Either way, there was no time or space for retailers to speak to Scandinavian Tobacco Group reps when queues of customers stretched out the door. In a quick and effective adaption to the new COVID-19 reality, tele sales proved an effective addition in Scandinavian Tobacco Groups key European markets and the results are clear. The switch came with challenges, but by implementing tele sales rapidly and ironing out issues as they came up, the European team successfully contributed to increasing market share, a key method of driving sustainable profit in machine- rolled cigars across categories. The combined market share in the largest European markets (France, Belgium, the Netherlands, UK, Germany, Spain and Italy) was 33.3% in the second quarter of 2020, versus 32.7% in the first quarter. Firstly, its about people and our sales force keeping everyone safe and also engaged and motivated in this unknown situation. And then its about agility and scandinavian tobacco group THE MODERNISATION HAS HAS THREE OVERARCHING BUSINESS OBJECTIVES The overall aim is to deliver an exceptional consumer experience by digitalizing, improving user experience, introducing more personalization and adding more value in terms of loyalty. Continues 19 OUR MUST- WIN BATTLE STORIES A TRANSFORMATION TO LEAD BUSINESS GROWTH P. 16 HOW TO SELL CIGARS IN A PANDEMIC P. 19 INTEGRATION THE KEY INGREDIENT FOR A SUCCESSFUL ACQUISITION P. 21 KEEP IT SIMPLE P. 24 PLANNING THE UNPLANNABLE P. 26 company profile 2021 company profile 2021 CONTENTS WELCOME 2020 has been an extraordinary year with COVID-19 changing our lives fundamentally and creating unprecedented challenges for businesses. PAGE 04 A TRANSFORMATION TO LEAD BUSINESS GROWTH Scandinavian Tobacco Groups North America Online & R company profile 2021 WELCOME A GLOBAL LEADER IN CIGARS 2020 was yet another transformative year. We accelerated the modernisation of our company, announced the biggest acquisition in the history of our Group and launched a new strategy, Rolling Towards 2025. NIELS FREDERIKSEN President and CEO 2 These articles will give you a sense of the hard work, dedication and innovation of our employees, whose efforts are enabling us to overcome the unprecedented circumstances we are working in around the world, to create value for the company, our employees and shareholders. I hope you enjoy the read company profile 2021 company profile 2021 OUR VALUE CHAIN 1 2 IT STARTS WITH A SEED All tobacco starts with a seed. The development of a tobacco plant depends on factors such as soil, sun, rain, position of the leaf on the tobacco plant and the time of harvesting. Our cultivation activities take p NET SALES 8,006 DKK million EBITDA BEFORE SPECIAL ITEMS 6.6% Organic growth DKK million Organic Growth DKK million Organic growth DKK million 16% 6,000 4% 1,500 8% 4,000 0% 1,000 0% 2,000 -4% 500 -8% 0 2018 2019 -16% 2018 2019 FREE CASH FLOW BEFORE ACQUISITIONS NET PROFI company profile 2021 OUR BRANDS AND PRODUCTS FINE-CUT TOBACCO Our handmade cigars are rolled at our sites in three of the worlds most significant tobacco-growing countries: the Dominican Republic, Honduras and Nicaragua. Our fine-cut tobacco is predominantly manufactured at our site in Holstebro In the course of 2020, we conducted a review of Scandinavian Tobacco Groups corporate strategy. The result was a new company profile 2021 company profile 2021 OUR STRATEGY PURPOSE VISION CRAFT THE RITUALS THAT MAKE US MORE BE THE UNDISPUTED, GLOBAL LEADER IN CIGARS updated strategy Rolling company profile 2021 company profile 2021 Were bringing together responsiveness, design, loyalty and personalization to create an overall unique proposition, which is more sophisticated and provides a better consumer experience CASSANDRA SMELKO, DIRECTOR STRATEGY AND TRANSFORMATION, NORTH AMERICA PURSUING NEW GROWTH The modernisation of the online platforms is being implemented in 17 workstreams, such as Personalized Marketing, Website Redesigns and Consumer Profiling. The five business units will address the unique preferences of the eight distinct consumer segments and their purchasing pa Sometimes being bold can bring you more value than discussing the nitty gritty details for months and then you find the answer but by then the question has changed. This is where we are trying to make a difference and show we can move fast and increase share in market and volume. company profile 2 Scandinavian Tobacco Group aims to grow, strengthen its brand portfolio and leverage its costs through successful mergers and acquisitions, and the integration of its largest acquisition to date Agio Cigars, a leading European company with 3,200 employees bodes well for the future. In fact, as Sen EMPOWERMENT AND AGILITY Data has become less transparent and processes have become more complicated as Scandinavian Tobacco Group has expanded through acquisition of familyowned companies, each using its own legacy system and data structures. The overall aim of these processes and structures is the Across three continents, 14 production facilities and above 6,500 employees, the efforts of the Operations team have made Scandinavian Tobacco Group an industry leader in how to tackle the pandemic and ensure safe working conditions all while increasing production at the same time. The companys fac company profile 2021 company profile 2021 2 BLEND OUR STRENGTHS OUR VALUES OUR PEOPLE TARAN SALABSKY DIRECTOR OF CREATIVE OPERATIONS Each individual throughout the Group has a unique skillset and perspective. Sharing these skillsets has been key to our past successes and will be instrumental in RETAIL EXPANSION During 2020, we opened three new cigar Super-stores in the US; in Fort Worth, Texas and Tampa and Lutz, Florida. In 2020, we adopted our first CSR strategy focusing on four areas, each with its own defined ambitions, activities and goals. Those focus areas are: PEOPLE & COMMUNITI SCANDINAVIAN TOBACCO GROUP A/S Sandtoften 9 2820 Gentofte Denmark CVR 31 08 01 85 Make www.st-group.com