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 HEATHER ZDAN CHIEF CONSUMER OFFICER scandinavian tobacco group Scandinavian Tobacco Groups North America Online & Retail (NAO&R) Division is tackling headwinds with a modernisation and upgrades of the online platforms. This has already accounted for a significant part of the businesss year over year growth, with more to come. 16 Scandinavian Tobacco Groups premium website for online sales in North America is now responsive for different types of devices, making it simpler for people use on their phones during lunchbreaks, has a higher end look and feel with more lifestyle images of people enjoying the products, a discussion forum with plenty of cigar-related content and a new loyalty programme to reward regular customers. The result is that the site is more premiumized and high-end, says Cassandra Smelko, Director Strategy Transformation, North America. Were bringing together responsiveness, design, loyalty and personalization to create an overall unique proposition, which is more sophisticated and provides a better consumer experience. The overhaul of CIGAR.com is part of the transformation of Scandinavian Tobacco Groups US handmade cigar business, to create new sources of growth in response to a changing market. Handmade cigar volumes have been in a long, slow decline leading up to 2020. The shift in consumers shopping at brick-and-mortar to online had stalled in the category, and competitors have been pursuing aggressive price policies. There are also regulatory and compliance headwinds, such as excise tax, sales tax, shipping restrictions and adult signature requirements. The modernisation of our online platforms represents the largest transformation in the history of the North America Online & Retail Division. In the first half of 2020 we have pursued a number of quick wins and initiatives that lay the foundation for some major, new consumer programmes and we are executing according to plan. says Heather Zdan, Chief Consumer Officer. MORE PERSONAL, MORE LOYALTY The aim of this multi-year strategy initiated in late 2019 which is expected to be fully implemented by the end of 2021, is to increase revenue and EBITDA. Each of the five direct to consumer business units focused on the handmade category will have a more distinct look and feel and a product range, marketing channels, promotion and loyalty schemes which are more differentiated. Four of the business units already exist Cigars International, Thompson Cigar, CigarBid, and CIGAR.com. A new business unit will be introduced with an integrated social and community focus that also fosters an ecommerce retail element. scandinavian tobacco group A TRANSFORMATION TO LEAD BUSINESS GROWTH I f you pay a visit to CIGAR.com, you may notice a few changes encompassed in the transformation. Continues 17 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