Eurobrands AB

Eurobrands has set out to become the leading independent manufacturer and distributor of alternatives to traditional tobacco products in northern Europe. As smoking is generally on the decline and people are concerned about their health, a market for alternatives to traditional tobacco products has opened up.

  • Introduction

    "as a pawn we like to be the one that take the first step into this challenge"Lars Danielsson, CEO

    Eurobrands was formed in 2012 after investing in and acquiring a majority share part of Swedish XQS AB (“Excuse”). XQS AB produced and marketed nicotine free snuff for the Swedish market. Since the acquisition Eurobrands has developed the market to encompass Northern Europe as well as USA. 

    Since the acquisition Eurobrands has subsequently searched for other opportunities within the alternative tobacco segment and has identified several underdeveloped market segments as well as opportunities for growth. With little or hardly any human or financial capital bound in production facilities we enjoy the freedom to quickly act, react and to catch opportunities as they arise. Our product strategy, Finding – Creating and/or Developing, is depending on this fact and is deeply imbedded in our Company DNA.

    Eurobrands is well positioned to capitalise from the growth of the new alternative tobacco market. The company has during its short existence made steady progress and have the necessary set-up to be able to capitalise on available opportunities.

    Under our current strategy we focus on three main segments, 1) tobacco free snus (XQS), 2) expanding our webshop (cigge.se) and retail chain (cigge.se|store) catering for users of e-cigarettes and 3) developing a brand in the liquid segment for e-cigarettes.

    MISSION
    Eurobrands, through its brands, manufacture, market and distribute a wide range of high quality and safe alternative products to traditional tobacco based products.

    VISION

    • To become the market leading distributor of e-cigarettes and liquids in Europe.
    • To establish a strong market position for XQS in Europe and USA and grow the brand to encompass more products and segments.
    • To launch and establish a new brand within the e-cigarette segment (white-label).

    Objectives and Investment allocation – cigge.se and cigge.se|store

    • Increase liquidity to manage growth and to speed up the establishment of the new shop-in-shop concept cigge.se|store
    • Develop the organization to meet the growing on-line demand as well as to be able to support new cigge.se|store resellers/dealers.
    • Fund increased marketing activities and establish the se brand across northern Europe.
    • Update the existing e-platform and e-shop.
    • Enable acquisitions in line with the consolidation growth-strategy.

    Objectives and Investment allocation – XQS

    • Increase marketing to further develop our positions on the Nordic and American markets.
    • Develop a range of e-cigarette liquids to be marketed via se and cigge.se|store
    Value Tracker
  • Management

    Management of the company

    Petter Strömberg | COO

    Mr. Strömberg started his first company at the age of 19 in the leisure boating industry and has been actively pursuing a career ever since. He has held senior positions such as CEO of a Norwegian industrial company with an annual turnover of 5 million Euro and Chief Operating Officer for Cellpoint, listed on the Stockholm Stock Exchange. Mr. Strömberg was one of the founders of Eurobrands in 2012 and was appointed COO of XQS.

    “I believe one of my strengths is the ability to see “the big picture” and the opportunities therein. My career has mostly been around sales and my challenge now is to build the team that will take Eurobrands and our products to a new level and become a serious contender in this rapidly expanding market segment. I believe the progress we have made so far, with limited resources, is proof of concept and that we have found a way to market that is profitable.”

    Board of Directors

    Lars Danielsson | CEO and Director of the board

    Mr. Danielsson has an extensive background in Marketing from both Sweden and Internationally. In Sweden he has been Executive Marketing Director for a Staffing Agency as well as a Flooring Brand – Walk on Wood AB. With placement in Indianapolis Mr. Danielsson was employed by Centillion Inc. as Sales Director for the Nordic countries, Germany and UK.

    He was one of the two original founders of XQS when the company took its first steps in a small village in northern Sweden and has stayed with the company ever since. Now, part of a larger organization, Mr. Danielsson has taken the roll as CEO

    “To shoulder the responsibility to lead Eurobrands is a natural step which I am happy to accept. The challenge to lead this entrepreneurial organization in growth is a challenge but I am very confident in our ability to deliver on our high set goals.”

    Andreas Eriksson | Chairman of the Board

    Only 34 years of age Mr. Eriksson has an impressive career so far. While attending University he started his own company in the leisure boat industry and among else earned the agency for two US brands, Stingray and Crowline. After graduation he was employed by Länsförsäkringar (a prominent Swedish Bank and Insurance company) where he is now area Director.

    “Still a fairly young man I have the energy and hunger to be part of building a new company to which I am highly motivated. When the opportunity was presented to me I needed no time to think. Eurobrands AB is well managed and now only needs focus and commitment to strategy which is two areas where I believe I can contribute. The tobacco free segment is growing fast and we have the opportunity to become a leading player although we are only at the beginning of a fantastic journey.

    Therese Wennstrom | Director

    Mrs. Wennstrom has and long career within the restaurant- and hotel industry. She has also held many senior positions from other companies, where ICA (Sweden’s largest retail chain) is one of them.

    “On the board I represent the largest shareholder– Electric Mountains. I believe, being a woman, I can contribute with other views that might not otherwise be considered. Eurobrands strategy for growth and the plans to list the company is for me personally very exciting to be part of.

  • Market

    Both the snus and the e-cigarette segment are subject to legislative debate at various levels across the globe. Pending the outcome of these discussions the future markets for Eurobrands can come to change. It can be safe to assume that the nicotine-free range of products will not be affected by new legislation whereas products containing nicotine could be.

    Europe – XQS and cigge.se

    XQS is sold and distributed in the Nordic countries and USA. As snus is a unique Nordic product the company does not foresee any future growth in markets outside these countries, with the exception of USA, in the near future. Our market position as a niche brand is strong and slowly growing with the gradual market growth – consumers looking for alternatives to tobacco and nicotine based products. Sales of XQS in Sweden and Norway are done in collaboration with Bonver Entertainment Group AB, and distribution covers the entire Nordic region. In Finland XQS Trading OY handles the distribution and sales of Eurobrands products.

    cigge.se has since the start in 2014 enjoyed a steady growth and the latest sales figures are showing no signs of slowing down. cigge.se sells and distributes e-cigarettes (equipment and liquids) in Sweden and Norway and the company believe that these markets together with Finland and Denmark will continue to be our main markets in the near future. Products from www.cigge.se are distributed from our distribution centre in Borlänge to customers throughout northern Europe. Our strongest markets are Sweden and Norway.

    USA – XQS

    XQS was launched in the state of California in 2012 and has since enjoyed a steady growth. XQS is marketed and distributed by our American partner Smokey Mountain Chew Inc. To realise its full potential in USA the company needs to increase its marketing investments to achieve a higher market penetration.

    Market Insights – The global tobacco market

    Cigarettes are the single largest segment of the global tobacco market, accounting for about 90 percent of all tobacco consumption. (1) For a few large global tobacco companies, cigarettes form the majority of their sales and profits. Over the past ten years, cigarette consumption has generally declined in developed countries, while it has continued to increase in many emerging markets (1). Other types of smoke tobacco products on the global tobacco market include fine cut tobacco / rolling tobacco, cigars and pipe tobacco. Smokeless tobacco products mainly consist of various types of chewing tobacco, Swedish snuff, American snuff, moist snuff, nasal snuff and non-traditional product formats such as "dissolvables" (dissolvable products).

    The global tobacco market is affected by the increasing number of restrictions and rules as a result of governments and other regulatory bodies and non-profit organizations strive to reduce tobacco consumption, particularly cigarette consumption. These regulations, coupled with fiscal measures have an impact on tobacco farming, tobacco production, availability of products, packaging and labelling, consumer prices, and where products may be consumed.

    These restrictions inform Eurobrands’ focus on healthier and more affordable options. Non-smoking tobacco is a relatively minor part of the tobacco category compared to the much larger cigarette category. Smokeless tobacco is consumed in different types and shapes in many parts of the world. In Scandinavia, Swedish snuff is the dominant type of non-smoking tobacco. In the US, Swedish snuff is a small but growing segment, while American snuff and chewing tobacco dominate in non-smoking tobacco. In other parts of the world, including India and some countries in Africa and Asia, consume local variations of the oral and nasal tobacco products. In the EU and some other countries, Swedish snuff and other tobacco products for oral use, which are not intended to be chewed, are prohibited, while it is permissible to sell chewing tobacco products.

    The trends are clear, people today want to be healthier and the majority are looking for affordable products. In recent times, there has been explosive growth of e-cigarettes and accessories in many parts of the world.

    Source: Euromonitor

    Market Insights – Nicotine Free Snuff

    Eurobrands’ main markets for nicotine free snuff is the Nordic countries and the United States. Both the Nordic snuff market and the US market for Swedish and American snuff is growing in volume. The total market for both Swedish and American snuff is approximately 1.7 billion cans per year, including tobacco snuff. The American snuff market accounts for about 1.4 billion cans. (2) and the Scandinavian market amounts to +325 million cans. Both the Norwegian and Swedish market has grown in volume in 2013. (2)

    The nicotine-free market is based directly on the traditional tobacco snuff sales, as most who use nicotine free snuff come from having used tobacco snuff. The total market for nicotine free snuff in Sweden in 2013 was approximately 4 million cans. Eurobrands’ brand XQS is one of the leading brands in the Scandinavian and American markets with a volume of approximately 1 million cans.

    Sweden is Scandinavia's and Europe's largest market for snuff, both per capita and in total. Nicotine free snuff has, in recent years, been stable at sales of about 140 million. (2) It excludes e-commerce which accounts for approximately 5-10% of the market which would mean that the total market in Sweden snuff is worth about 150 million crowns. Health Trends that are prevailing makes us believe that the segment nicotine free snuff will increase in the near future. A survey by the Swedish County Council in Dalarna shows that about half of those who use tobacco snuff want to stop that. (3)

    Norway is the country where tobacco snuff sales are increasing the most in the world. As the traditional tobacco snuff increases, the demand for nicotine-free snuff is rising. The price level of XQS products attracts the Norwegian snuff users, when the price of regular snuff is very high mainly due to high tobacco taxes. In Norway 12% of men and about 2% of women, use snuff daily. (4)

    Finland, is prohibiting the sale of tobacco snuff, but the Finns may bring snuff in to the country from Sweden for their own personal use. Nicotine free snuff may be sold but not marketed. This will make the availability itself contribute to increased sales and not be entirely based on the number of people who use tobacco snuff. In Finland 5% of all men use snuff daily. Young men aged 25-34 use snuff the most (13%). snuff use among women is very uncommon in Finland. (4)

    The United States is one of the world's largest snuff countries, but it is American snuff that dominates. Smokey Mountain Chew INC sells XQS under thier own brand. The vast majority of sales are made through e-commerce but it is also sold in stores around the United States. XQS has the most of the nicotine free Swedish snuff in the US market. The US market has great potential and increases the Swedish tobacco snuff in the US and partly is XQs distribution during expansion.

    Market Insights – E-cigarettes

    The market for e-cigarettes is mainly aimed at the countries where people are smoking traditional tobacco cigarettes. E-cigarettes give the user a smoking experience very similar to tobacco smoke and may contain nicotine in various strengths. This leads to the consumer continuing to get their nicotine needs satisfied, but does not need to inhale the dangerous tobacco smoke. E-cigarettes target audiences throughout the world, and is a huge market. In Sweden, about 10% of all men smokes tobacco cigarettes. The corresponding figure for women is 12%. (4)

    In 2013, sales of the relatively new product were about 15 billion worldwide, and for Europe about 6 billion. Sales of E-cigarettes have doubled annually. It is assumed that by 2017 sales will be 70 billion. (5)

    British American Tobacco, which is one of the world's largest tobacco companies, only entered the market for e-cigarettes at the end of 2013, and lags far behind its competitors. The same applies to the Swedish tobacco giant, Swedish Match, that does not even develop a product for this market. The buying has already started to take place and will likely continue to occur. For instance, US Blue Ecigs was bought for 100 million dollars by Lorillard, a traditional tobacco company.

    We see Europe as a very attractive market. Here, there is not any clear market leaders, unlike in the US, where the two leading brands between them have about 65% of the market. The European market is thus more open and accessible. The cause is probably the ambiguity that surrounds the legislation in the EU.

    In Sweden, E-cigarettes are very new and there are not any leading brands, which controls the market. However, there is increasing consumer interest and sales rise continuously. Today we are active in the Nordic market where our market is based on those consumers who currently smoke tobacco cigarettes. In 2013 there was an average of about 15% of the population in the Nordic countries who smoked. (4)

    The Norwegian market is very small, as there is a direct prohibition against e-cigarettes with nicotine. The marketing of products that imitate tobacco is banned. Tobacco is very expensive in Norway. Consequently, the interest in e-cigarettes is very large. The Norwegian price structure makes imports from Sweden very attractive. Today, we see no direct leading player in Norway. Media reports, however, suggest that interest in the product is so great that consumers want to do it legally with nicotine. Leading researchers in Norway have shown that it is highly likely that sales of e-cigarettes with nicotine in Norwegian stores will be legalised within a few years. (6)

    When tobacco snuff may not be sold in the country, smoking is significantly larger than in Sweden and Norway, which means that the market for E-cigarettes is greater there than in the other Nordic countries. Although marketing must not be done, the products can be displayed in stores. Generally in Scandinavia the tobacco tax is high, but currently e-cigarette are not subject to tax, making them a much less expensive option and, therefore, of interest to large parts of the audience.

    Sources

    • Nielsen and Swedish Match estimates
    • http://www.ltdalarna.se/Om-landstinget/Ovriglandstingsverksamhet/ Folkhalsa/ Halsoframjande-halso--och-sjukvard/Levnadsvanor/Tobak/
    • Sweden: Swedish National Institute of Public Health. Norge: Sosial- og helsedirektoratet. Danmark: Sundhedsstyrelsen. Europa (EU 25+ Island, Norge och Schweiz): The European Tobacco Control Report 2007. WHO Regional Office for Europe.
    • Sweden: Swedish National Institute of Public Health. Norge: Sosial- og helsedirektoratet. Danmark: Sundhedsstyrelsen. Europa (EU 25+ Island, Norge och Schweiz): The European Tobacco Control Report 2007. WHO Regional Office for Europe.
    • http://www.forbes.com/sites/natalierobehmed/2013/09/17/e-cigarette-sales-surpass-1-billion-as-big-tobacco-moves-in/
    • http://www.nrk.no/livsstil/_-e-royk-med-nikotin-blir-tillatt-1.11576230

     

  • Products/Services

    Eurobrands’ focus on tobacco-free products is directly related to the traditional tobacco consumption, as consumers seek healthier and more affordable options.

    Proprietary Brands & New Product opportunities

    Today Eurobrands own two brands, XQS and cigge.se. We are currently searching the market for possible partners in developing our own brand within the e-cigarette segment. This route can include both equipment and liquids or just one of them depending on choice of partner/manufacturer. There are many strategic options and choices that must be carefully considered when making our final decision. One very viable option is to concentrate on liquids and make the new liquid assortment a brand extension of XQS. Should the company choose this option (Brand Extension) follows that the liquids need to be nicotine free to be aligned with the existing brand identity, which is both a strength and a limitation.

    Competitive Comparison – XQS

    The undisputable market leader in this segment is Swedish Match with an approximate market share of 70% for their brand Onico. One major challenger is Winnington with their brand Kick Up. They are investing heavily in aggressive marketing and currently their market share is around 20%. The remaining 10% is split equally between XQS, Choice and Qvitt.

    XQS International AB, Manufacture, develop and distribute a tobacco free pouch the manufacturing is in Cebu Philippines and the under the brand XQS the sales are today focused in our home market Sweden and the countries Norway and Finland. The biggest market today is the USA were we manufacture and distribute under as we say “white label” by XQS.

    Our USP’s are; 1) low price 2) unique product with un-packaged snus and 3) we have a flexible manufacturing process enabling us to quickly react and respond to market trends.

    The market for “Swedish pouches” increase every year in the states and USA is the biggest user of “snus“ in the world. Meaning we have a great market to grow into, as of now the products are distributed by one of biggest US sales organisations for tobacco free products.

    In the Scandinavian market XQS today have a market share of 2% and the goal is to have 10% in a period of 3 years.

    2015 was a good year and the company generated positive cash flow. A new agreement with the US distributor, has provided greater revenue to assist the business in its continued development. The Sales in the US has increased 40% since 2014 and we believe this growth will continue.  To increase as planed in Scandinavia we have aggressive market plan that our distributor will apply during 2016-2017

    Competitive Comparison – cigge.se

    In one of the worlds fastest growing markets we have built a strong e-commerce platform for Electronic cigarettes, we have only been on the market since 2014 but we are growing fast and as unlike our our competitors, we are selling a wide range of products with a focus on customer service. We are now building up a retail concept, cigge.se|store that will commence in Sweden, but International appeal. Because the market is growing so rapidly, many people including entrepreneurs see the opportunity, Eurobrand is thus perfectly poised to offer this market (as a Franchisee) the perfect solution.

    European government has now also passed legislation to regulate the e-cigarette market, paving the way for us to further develop our concept.

    Production

    Eurobrands does not own any production facilities of its own. XQS is produced in the Philippines by Swedish Products Philippines Inc. and shipped to Sweden for further distribution.

    Agency

    Thanks to our well developed Nordic distribution network Eurobrands has acquired licence rights for brands such as Playboy, Ragna Rok, Pura (e-cigarettes) for the Nordic market. Given our continued, growth this product segment is expected to grow to include more brands within the near future and thereby solidify our market position as the northern Europe leading player in the fast growing e-cigarette segment.

  • Milestones

    The company is at a very interesting and exciting phase where, if it success, can become a considerable player in a new and quickly developing market segment.

    Important Milestones are:

    •            The new and enhanced webshop solution for cigge.se/cigge.no
    •            The success of the new retail cigge.se|shop concept
    •            The planned brand extension of XQS in to e-liquids
    •            The further market development of XQS in USA
  • Key Data

    Segment Pre- IPO
    Market identifier ECI
    Name Eurobrands AB
    Short name ECI
    Sectors Consumer products
    ISIN TBA
    Currency EUR
    Trade post 0
    Trade start 2013-08-01
    Number of shares 2040000
    Vat number
    Entity number 559190-5995
    Country Sweden
    Instrument type share
    Votes per share 1
    Stock type A
    Address

    Tunavagen 257, 784 63 BORLANGE, SWEDEN