Scandinavian Tobacco Group opened its 2025 Capital Markets Day by situating the event within a decade-long corporate journey that began with the company’s listing on the Copenhagen Stock Exchange. Over that period, the group returned more than DKK 9 billion to shareholders through dividends and share buybacks and built a larger, more profitable global cigar and tobacco business. Against this backdrop, management introduced Focus 2030, a new long-term strategy built around sharper prioritization, simplification, and a shift toward higher-value categories. The strategy is designed not only to reverse the decline in earnings experienced between 2023 and 2025 but also to position the company for profitable, sustainable value creation well beyond 2030.
The CEO emphasized that Focus 2030 rests on a clearer sense of organizational purpose—“crafting the rituals that make us more”—and on a realistic assessment of how the external environment has changed. The global economy today is marked by higher geopolitical uncertainty and a reconfiguration of global trade flows, with regulatory pressures rising unevenly across markets and categories. Tobacco and nicotine consumers have broader product choices than ever before, while next-generation categories continue to reshape competitive dynamics. As a result, the company must concentrate resources on areas where it has the strongest capabilities and the largest right to win. This includes fewer but larger power brands, tighter portfolios, and a more consumer-centric commercial model supported by investment in digitalization, analytics, and people.
Management provided an unvarnished account of past performance. Since 2020, net sales increased by DKK 1.1 billion, driven largely by acquisitions, growth enablers such as retail expansion, international handmade cigars, and nicotine pouches, as well as tactical pricing. Yet margins declined from their pandemic-era peak in 2021. A combination of unfavorable product and market mix, operational challenges, factory closures in Europe, and complexity added through the Agio integration and SAP rollout weighed on profitability. Volume declines, broadly affecting the global industry, added pressure. Free cash flow and ROIC fell short of expectations, while returns failed to keep pace with peers. Despite these issues, the company returned over DKK 5 billion to shareholders during the past strategy period.
The largest single drag on earnings was the machine-rolled cigar category, which represents a major part of the group’s foundation alongside smoking tobacco. Market share declines stemmed from more intense price competition, incorrect pricing decisions that compressed margins and shrank the profit pool, supply chain disruptions linked to integration difficulties and the SAP rollout, and the fact that STG historically held its strongest positions in the most structurally declining segments. Nevertheless, the company retains a market-leading position in Europe, and management asserts that with the right focus, this business can be stabilized and returned to sustainable profitability.
Focus 2030 Strategy is built around three strategic priorities:
Strategic Priority I: Stablise Machine-rolled Cigars
The first priority is to stabilize the machine-rolled cigar business through sharper focus on four power brands -Panter, Signature, Mehari’s, and La Paz – which already account for roughly 60% of volume and 50% of net sales. These brands span value to premium offerings and have broad consumer reach. Over time, the wider portfolio will be consolidated into these four lines. Selected regional hero brands, such as Gold and Macanudo in Belgium, remain important for their high margins but will be managed with discipline. The commercial strategy now centers on Spain and France as priority markets due to their strategic size, regulatory stability, and strong route-to-market positions. Belgium and the U.K. are geared toward maximizing profitability through pricing and simplification, while Germany, Italy and the Netherlands will follow a balanced margin-volume approach.
The company plans to increase market share by two percentage points across the seven core European markets, beginning with halting erosion and progressing toward share gains. Simplification is essential: half of all SKUs deliver only 5% of volume and even less of sales and gross profit. Rationalizing formats, blends, pack sizes, and brands is expected to release operational capacity, improve supply reliability, and support more effective pricing. Early signs are promising; for example, Signature grew 1.5 percentage points in Spain and 0.5 percentage points in France during the first nine months of 2025, largely due to stronger activation, distribution, and pricing initiatives. The operational environment should also improve now that the SAP rollout in Europe is complete, allowing the business to refocus on execution rather than system stabilization.
Strategic Priority II: Grow Hand-made Cigars
The second strategic priority is to fully unlock growth in handmade cigars. STG is already a market leader in the U.S. and globally, with 13% U.S. market share in its owned brands. The U.S. represents roughly 70% of global handmade cigar consumption and is therefore the essential battleground. While the category experienced COVID-driven volatility—double-digit growth during the pandemic followed by a mid-single-digit decline—management expects long-term declines to normalize at 1–2% annually, similar to pre-COVID trends. Within this environment, significant share gains are available given the fragmentation of the category, where only a few brands exceed a 1% share individually.
STG will again concentrate on four power brands—Macanudo, CAO, Cohiba, and Alec Bradley—which together represent 45% of handmade cigar net sales but only 5% of the total U.S. market. The opportunity lies in integrating the group’s unique ecosystem: wholesale distribution, leading online platforms, and a fast-expanding physical retail presence, soon to total 15 superstores. All three channels will be aligned around brand-led growth, consistent positioning, and common KPIs. The company intends to grow its U.S. handmade market share by two percentage points, rising from 13% to 15% during the strategy period.
Manufacturing investments will support this growth. Production capabilities will be tailored for value segments, where efficiency is crucial, and for premium segments, where craftsmanship and luxury drive consumer preference. International markets will adopt the same strategy used in the U.S., benefiting from portfolio simplification and the power brand approach. Management is confident that handmade cigars can deliver sustained growth in both volume and value and become an even more profitable engine for the Group.
Strategic Priority III: Accelerate Nicotine Pouch Business
The third strategic priority is accelerating nicotine pouches, which today account for around 5% of group net sales. The business began as an incubator but is now designated as a core pillar of Focus 2030. Management argues that participation in next-generation nicotine products is essential strategically, particularly since cigarette smokers form a key recruitment base for machine-rolled cigars, and that base is expected to shrink over time. The company has demonstrated strong capabilities in this space, most notably in Sweden where its brand XQS grew from less than 2% share two years ago to over 13% today, making it the number-two brand in the country. XQS is widely recognized for flavor innovation, novelty appeal, and rapid product development. Detailed consumer insights inform four portfolio pillars—Nostalgia, Core, Mint, and Functional—targeted at different motivational segments.
Outside Sweden, the company recently crossed 1% share in the U.K., where it is building scale by leveraging its strong existing position in pipe tobacco and machine-rolled cigars and expanding its sales force to broaden distribution. XQS has also gained traction in Iceland, Norway, Finland, Poland and the Czech Republic through distributor partnerships. In Denmark, the company now holds 1% share from XQS alone, or 4.5% when combined with ACE and GRITT. The overarching objective for nicotine pouches is simple: grow market share across selected focus markets. Sweden is targeted to reach 20% or more by 2030.
The business remains asset-light for now. Gross margins are between 25% and 30%, and the segment is currently EBIT breakeven. The company has invested roughly DKK 250 million in the category, primarily through the XQS acquisition. Insourcing production is not assumed in the base plan but is expected to add 15–20 margin points, equal to approximately DKK 60–80 million based on current scale, should the company later choose to proceed. For now, contract manufacturing continues, with management evaluating insourcing, partnerships, or hybrid models depending on regulatory, commercial, and capacity developments.
2030 Financial Ambitions
Having laid out the three strategic priorities, the CFO detailed the financial ambitions underpinning Focus 2030. STG will measure success through three core KPIs: ROIC, EBIT, and free cash flow. ROIC is central because it reflects the discipline of capital allocation decisions across both organic investments and M&A. The ambition is to achieve at least 11% ROIC by 2030. EBIT was selected instead of EBITDA because it better reflects depreciation, which is crucial given the heavier investment in retail expansion and the possibility of manufacturing investments in nicotine pouches. The company targets EBIT growth at a low single-digit CAGR over the period, supported by strategic initiatives, supply stabilization, power brand focus, retail profitability, and a technology transformation scheduled for completion in early 2027. Depreciation and amortization are expected to run at around 5% of net sales.
The company aims to deliver DKK 1.2 billion in free cash flow by 2030. This will be enabled by incremental EBIT growth, the elimination of DKK 200 million in special items incurred earlier in the transformation, and a normalized investment framework. Annual CapEx is projected at DKK 300–400 million, with DKK 100–150 million earmarked for maintenance and DKK 200–250 million for growth and efficiency projects. CapEx will be lower in 2026 to accelerate deleveraging toward the company’s long-standing leverage target of 2.5x. As of the third quarter of 2025, leverage stood at 2.9x but is expected to moderate in the fourth quarter.
A major change introduced under Focus 2030 is a shift from an annual dividend-growth commitment to a payout-ratio-based dividend policy. Starting in 2026, dividends will be based on a 40–60% payout range, allowing the company to maintain flexibility as it invests behind strategic priorities while still committing to strong shareholder returns. As leverage normalizes toward 2.5x, the company expects renewed capacity for share buybacks, which investors have consistently requested.
Recap: FY25 Financials
Current trading results for 2025 illustrate the near-term challenges the strategy is designed to address. For the first nine months of 2025, organic net sales declined 4% year-on-year, or 2% excluding the discontinued ZYN distribution contract. Full-year net sales are expected to reach DKK 9.1–9.2 billion. The EBITDA margin fell from 22% in 2024 to 19.9% in 2025 due to lower volumes and adverse mix. Free cash flow before acquisitions reached DKK 448 million through nine months, supporting expectations of more than DKK 800 million for the full year. Adjusted EPS for the first nine months was DKK 8.2, with a full-year projection of DKK 10–12.
Recap: STG 2025 Capital Markets Day
Across the full presentation, management emphasized that transformation requires discipline, simplification, and focus. By stabilizing the core machine-rolled and smoking tobacco businesses, accelerating the more attractive handmade cigar segment, and expanding decisively in nicotine pouches, the company believes it can reverse the earnings trend of recent years. Investments in people, data, technology, and supply chain resilience will help deliver a more agile, consumer-centric organization. By 2030, STG envisions a business built on a stable European cigar and smoking tobacco foundation, a larger and more globally relevant U.S.-anchored handmade cigar franchise, and a growing nicotine pouch business with strong brand positions in key markets.
Management closed the day reiterating that Focus 2030 is designed to create a company capable not only of meeting its 2030 financial targets—ROIC of at least 11%, low single-digit EBIT growth, and DKK 1.2 billion in annual free cash flow—but also of sustaining value creation long after the strategy period concludes. The company will continue to communicate progress through future annual reports and investor engagements, with the next major update scheduled for the full-year results announcement.
Download STG 2025 Capital Markets Day presentation
