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 Towards 2025 - which we presented to the Groups 11,000 employees in 2020. The strategy renews and revises the Groups ambition and vision - and sets a clear direction for the next five years with five focused must-win battles and a set of defined values to support us in being our very best. Rolling Towards 2025 cements our focus on cigars and will ultimately enable us to become a larger company, to grow EBITDA and create outstanding cash generation for ourselves and our shareholders. scandinavian tobacco group Organised around a vision of being the undisputed, global leader, Rolling Towards 2025 will allow Scandinavian Tobacco Group to become a stronger, more simplified, and more attractive company to work for and do business with. 14 SHARPENED FOCUS For over 250 years, Scandinavian Tobacco Group have been makers of rituals. We have honed our craft to make rituals: premium products and experiences to our consumers cemented by textures, flavors, and aromas. Past achievements has brought the Group to where it is today, and will serve as a guide forward. However, in order to grow and outperform competitors in an industry with declining volumes we continually need to sharpen our strategic focus on the products, processes, and consumer experiences that really make a difference. Scandinavian Tobacco Groups new strategy Rolling Towards 2025 will do exactly that. UNDISPUTED GLOBAL LEADER Rolling Towards 2025 will allow Scandinavian Tobacco Group to become a stronger, more simplified, and more attractive company to work for and do business with. Our common purpose will unite Scandinavian Tobacco Group across brands, products and markets. It will give a new perspective on why we exists and provide guidance on how we conduct business and how we can strengthen the experience we offer to our consumers. As we organise ourselves around a vision of being the undisputed, global leader in cigars we sharpen our focus on cigars, handmade as well as machine-rolled. This is where we will strengthen our business and pursue future investments. We will have strong returns from our other categories such as pipe tobacco and fine cut, yet cigars are our primary focus going forward and the first thing we need to succeed with to accelerate growth and value creation. FIVE MUST-WIN BATTLES Rolling Towards 2025 is based on five must-win battles the focus areas we need to succeed with by 2025 to reach our ambition of becoming a bigger and more profitable company with outstanding cash generation for our shareholders. OUR MUST-WIN BATTLES Our five must-win battles represent our key priorities and dictate the prioritisation of time and resources. GROW OUR HANDMADE CIGAR BUSINESS DRIVE SUSTAINABLE PROFIT GROWTH IN MACHINE-ROLLED CIGARS SIMPLIFY EVERYTHING WE DO INTEGRATE NEW MERGERS AND ACQUISITIONS EMBRACE A PERFORMANCE CULTURE scandinavian tobacco group R olling Towards 2025 is the natural next step in the development and professionalisation of Scandinavian Tobacco Group. 15 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