Oettinger Davidoff AG further expanded its global market position in the fiscal year 2016. Strategically, the Basel-based company took a further significant step with the divestment of Contadis AG in its consistent pursuit of and concentration on its core business. The total sales in the fiscal year 2016 increased on a comparable basis by +8.2% to CHF 595 million, with an outstanding growth of 20% of the core brand Davidoff. 2016 saw the completion of the new Camacho factory in Honduras, as well as the acquisition of a majority stake in Bluebell Cigars Asia and a minority stake in China’s Sparkle Roll Cigars Co.
“2016 was a challenging year for the cigar industry as new and costly anti-tobacco legislation was introduced in both the EU and the USA. While we are extremely pleased with the continued double-digit growth of Davidoff and our global market share gains, we did not achieve all our goals for 2016,” comments CEO Hans-Kristian Hoejsgaard regarding the course of business over the past year. With the sale of Contadis’s activities, the turnover of Oettinger Davidoff was reduced by almost half in 2016.
Increasingly complex anti-tobacco legal framework in the EU and the USA
The regulatory requirements will further challenge the industry in the current year in Europe and in the USA. In 2016, additional legal limitations prevailed in the cigar industry. The EU Tobacco Product Directive No. 2 (EU TPD2) took effect on 20 May 2016. Through new packaging specifications, this regulation increased the complexity and compliance requirements, which led to considerable additional costs. This directive changed the regulatory landscape significantly.
In the USA, on 8 August 2016, the new FDA (US Food and Drug Administration) deeming regulation came into effect. This specification, by far the strictest that was ever passed in the USA, is extremely expensive for the industry. It requires authorisation of all products brought onto the market since February 2007, and advance authorisation of new products for market introductions starting on 8 August 2016.
Oettinger Davidoff further emphasises its focus on Asia by founding Davidoff of Geneva Asia, following the acquisition of the majority stake in Bluebell Cigars Asia. With the acquisition of a minority in Sparkle Roll Cigars China, the company invested in the greatest potential market of the future.
Oettinger Davidoff has continued to invest in its crop-to-shop-philosophy. After purchasing tobacco plantations in the Condega region of Nicaragua and in the Jamastrán Valley in Honduras, in 2015 the company purchased a property for building a new cigar factory in Danlí, Honduras, which was inaugurated in January 2017. With this strategic step, the Swiss company responded to the rapidly growing worldwide demand for its key brand Camacho.
Hans-Kristian Hoejsgaard, CEO of Oettinger Davidoff, explains: “It is not only a milestone in the history of our company, but also reflects our global crop-to-shop-philosophy with this extension of the vertical integration of the business. Our investments mirror the strong growth of Camacho over the past five years which saw its global sales double, as well as the needed production capacity to continue expanding Camacho globally. Furthermore, I am particularly glad that we are able to make a substantial contribution to Honduras’ economic and social development by employing over 500 people in Danlí.”
Outlook for 2017
Hans Kristian Hoejsgaard foresees different growth patterns for the prime markets Europe, the USA and Asia. “We expect a challenging and difficult 2017 as new restrictions in our core markets USA and Europe take hold and retailers hold back and await clarity. We are confident that we can continue to gain market share through our strong innovation and global retail footprint,” says Hans-Kristian Hoejsgaard.