Scandinavian Tobacco Group: A Tale of Two

“It’s now almost 10 years ago, we listed Scandinavian Tobacco Group on the Copenhagen Stock Exchange. And in those 10 years, we returned more than DKK 9 billion to our shareholders through dividends and share buybacks. And we’ve built an even larger and more profitable company. And going forward, STG remains committed to deliver attractive shareholder returns through exactly the same mechanism, dividends and share buybacks as we’ve done for the past 10 years.” - Niels Frederiksen, CEO, STG, 2025 Capital Markets Day

Buying tobacco in Havana for “La Natividad” Cigar Factory, circa 1920.

Scandinavian Tobacco Group’s 2025 Capital Markets Day was in no way as lengthy as the last, back in 2023. Held on November 20th, the number of presenters measured roughly half, as did the number of slides they ran through. Revealing the next phase of the company’s strategy, management aimed to instill confidence through concise actions. However, despite its compressed nature, the event’s pages wove the makings of a novel. It was a tale of two different worlds.

The first world is one of legacy products. Handmade cigars, machine-rolled cigars, and smoking and pipe tobacco range in price from affordable to aspirational; the process of making each differs in skill, labor, and time intensity; the ritual of use spans from everyday staple to occasional indulgence. Heritage and tradition have largely triumphed over attempted innovation.

The second world is that of next-gen products, in which STG has focused entirely on nicotine pouches. While the company has achieved a respectable degree of success in a narrow frame through well-timed acquisitions, this world is moving much faster than the first. It lacks the hallmark aspect of artisanal craft. Production, distribution, retail, and consumption are quickly evolving, creating a far more dynamic environment.

The opportunities in each of these worlds have been immense. However, the timing of Scandinavian Tobacco Group’s actions has mounted to aggressive, compounding costs before benefits have been realized. Notes capturing these developments, with titles such as Elusive, Wider, Stretched, Racked, Washed, have not hidden from the challenges facing the group. With the group’s strategy extended to 2030, will a forced recalibration lead to redemption?