Oettinger Davidoff Group Expanding Core Cigar Business Segment

Source from:  Tobacco Asia  09/29/2013

The globally active Basel-based Oettinger Davidoff Group (ODG), a world-wide leader in the premium cigar business, has resolutely implemented its strategy, defined in the previous year, of focusing on the core cigar business in 2012. This is reflected in the figures for the previous business year. Sales of its own brands of cigars increased by over 5% compared to the previous year. All major markets grew. But with around 20%, the USA was the growth vehicle in 2012. Asia and global travel retail and duty free also posted strong growth. The Davidoff market share in the premium cigar segment amounts to approximately 8% world-wide. Oettinger Davidoff Group has continued to grow in its core business segment of cigars. However, the Group's turnover slightly decreased from CHF1.29 billion (US$1.37) to CHF1.23 billion (-4.5% compared to the previous year) due to the divestment of activities outside the core business segments, in particular the petrol station shop segment and the restructuring of the distribution and wholesale business segment. In the context of these divestments, the workforce also decreased by nearly 3% worldwide, to 3,590 employees. The firm's own cigar production was cut back due to the high level of stocks and amounted to 31.2 million units in the past year (previous year 34.4 million).

In light of these developments the organizational and structural measures introduced have also had a positive impact on profitability and liquidity.

"We are very satisfied with the progress made in strengthening our core business during the past year", commented president and c.e.o. Hans-Kristian Hoejsgaard with regard to the 2012 results. "However, the implementation of the strategic realignment of ODG is not yet completed. As a result, the Group will become smaller in terms of turnover, but will be clearly strengthened in terms of its earning power and positioning as a global market leader for premium cigars".

The product strategy has also been adapted as part of the strategic realignment of Oettinger Davidoff Group. The transition from a "branded house", which primarily focused on the Davidoff brand, to a "house of brands", which includes the flagship brands Camacho and Zino Platinum, as well as important international brands such as AVO and Griffin's, opens new geographic markets and access to additional customers for the company.

The beginning of cigar production from prime Nicaraguan tobaccos constitutes an additional milestone in the history of the Oettinger Davidoff Group, after Davidoff already very successfully launched the Puro d'Oro range, consisting of strong, purely Dominican tobaccos in 2010. The newly-created Davidoff Nicaragua will be launched in July 2013, initially in three formats in the USA and then worldwide, in September. It will complement Davidoff's existing range of products, which is dominated by Dominican tobaccos, with stronger Nicaraguan tobaccos. Davidoff Nicaragua is an essential step in the expansion into new areas and for the positioning of Davidoff as a brand and not as a territory.

Global network

The further expansion of the worldwide presence of the products as part of the "crop-to-shop" strategy was also a high priority during the past year. After the investment-intensive modernization of the Swiss flagship stores at Basel, Zurich-City, and Zurich Airports, as well as Lucerne, and new stores at Hong Kong and Taipei airports were opened. The same renovation concept will be implemented in the cities of Frankfurt, Tokyo, Geneva and Brussels. The centerpiece of these flagship stores is a large walk-in humidor, in combination with a cigar lounge wherever possible. The number of Davidoff cigar lounges is growing, not least due to the increasing bans on smoking in public places. Davidoff now has a dense worldwide network of locations with flagship stores depositaries and lounges in over 150 countries and thus enjoys a steadily improving proximity to cigar lovers the world over.

Large growth potential in Asia

As part of its expansion strategy, Oettinger Davidoff Group has founded additional branches in Austria and Russia with strong local partners during the past year. While the Austrian market is traditionally among the top ten Davidoff markets when measured by its market share, the Russian cigar market still offers a high potential for development. In addition to the 55 already existing cigar shops in various Russian cities, Oettinger Davidoff Group is also planning to open new flagship stores in Moscow, St. Petersburg, Yekaterinburg and Krasnodar, as well as additional shops and lounges. There is also extraordinary potential for Oettinger Davidoff Group in Asia and in particular in China, whose cigar market is growing by 20 % annually, albeit from a still low level.

Successful partnership with ART Basel

The association between Davidoff and last year's Art Basel exhibition, which was held in Basel, Miami Beach and Hong Kong, proved to be a complete success. As part of this collaboration, a cultural program entitled the "Davidoff Art Initiative" was launched, which aims to promote art and artists from the Dominican Republic – the home of Davidoff cigars. Its key component is a residency program which, every year, will enable five artists from the Dominican Republic to visit a major international art city for several months. For the first time, the initiative made workshops and studios available to these "Artists in Residence", in New York, Berlin and Beijing. Two additional partners are still being evaluated. At the same time, international artists may apply for a stay in the Davidoff Residency in the Dominican Republic. Additional pillars of this program are Davidoff "Grants", "Dialogues" and "Editions". A newly founded "International Art Advisory Council" supports the implementation of the Davidoff Art Initiative program.

A confident outlook

As a privately held company, the Oettinger Davidoff Group pursues a strategy aimed at continuity, substance and long-term success. In the implementation of this strategy, the complete vertical integration crop-to-shop of the cigar business – in particular its premium Davidoff brand – is of great significance because it enables tight control of the quality of the products and services. This constitutes a significant competitive advantage in the premium segment and in particular in the segment with cigars as natural products. As before, Oettinger Davidoff Group wishes to actively participate in the further consolidation of the premium cigar market. The continuous expansion of its global market presence and the innovative enlargement of the product portfolio should continue to ensure growth in the premium cigar segment in the coming years. Oettinger Davidoff Group is very confident that it can further build on its strong position in the mature markets and, in particular, profit at an above-average rate from the strong growth of the Asian markets. Enditem