In his annual media address, Davidoff CEO Hans-Kristian
Hoejsgaard gave a fascinating insight into the world’s leading
manufacturer of cigars. Significantly, he said that despite further legal
constraints on tobacco consumption in Europe and Russia and the anti-corruption
measures in China, which affect the sale of luxury goods, the
company expects the turnover in its core business will continue to grow and
profits will continue to improve in the current fiscal year. The buoyant travel-retail
business will play a part in this growth.
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| Oettinger Davidoff CEO Hans-Kristian Hoejsgaard |
Here’s what he said (edited version):
“In the fiscal year 2013, Oettinger Davidoff AG, the world’s
leading manufacturer of premium cigars, has consolidated its global market
position and, despite the market environment being difficult at times, has
successfully gained in market share again. The group’s turnover fell by 2% to
CHF1.206bn as a result of divestment in the non-core business.
“In contrast, almost 40m own-brand cigars were produced for
the first time in the history of Oettinger Davidoff, an increase of 24%
compared to the previous year. This was supported by the extraordinarily
successful launch of the Davidoff Nicaragua, a premium cigar made of Nicaraguan
tobaccos.
“Despite further legal constraints on tobacco consumption
in Europe and Russia and the state anti-corruption measures in China, which
have an effect on the sale of luxury goods, Oettinger Davidoff AG anticipates
that the turnover in its core business will continue to grow and profits will
continue to improve in the current fiscal year 2014. This is particularly
possible in light of growing demand in Asia, the US, in the travel-retail and
duty-free sector, further anticipated market share gains in Europe and because
of new products that suit the tastes of cigar enthusiasts worldwide. The most
successful fiscal year in the history of the Davidoff brand.
The most successful year in the history of Davidoff
“The strategic focus on our core business in cigars,
which was introduced in 2012, can already be seen to have had an effect in the
last fiscal year, particularly in the growth of the Davidoff brand sales
figures in 2013. This last year has therefore been the most successful year in
the history of Davidoff, with a 14% increase in our global sales of the
Davidoff brand in the second half of the year.
“With a 4.6% growth in turnover, Oettinger Davidoff AG
achieved an outstanding result in all of the brands that it distributes, despite
the fact that the European market declined by 5%. In the US, too, sales
increased by 6.2% in a total market that is experiencing modest growth. As a
result, Oettinger Davidoff AG has gained in market share in both Europe and in
the US, the two largest and most important markets.
“In contrast, growth in Asia was put under considerable
strain in China, the largest sales market in Asia, with the introduction of
restrictive state regulations on luxury products.
“Oettinger Davidoff AG registered an impressive growth in
its premium Davidoff brand, with 18% growth in the US and 11%-plus growth in
Europe, as well as 7%-plus in the travel-retail and duty-free market, which is
also of global strategic importance. Duty-free shops also represent an
attractive off-shore market for over 100m Chinese tourists and Oettinger
Davidoff AG profited from this with its numerous and increasing number of
duty-free shops.
Changing
consumption habits in Europe and record results in the US
“Increasing international legal restrictions in almost
all markets have an effect on market behaviour. For example, the seasonal
demand in consumption has changed, primarily in Europe. People are smoking more
in summer than they used to. A clear trend towards shorter cigars has also
become evident. Finally, it is apparent that in the 28 to 40 age group, a
premium cigar is increasingly being seen as an indulgent treat just as much as
a good glass of wine or good food.
“The Davidoff Nicaragua line, launched in this past year,
has grown to be a unique success story in the recent history of the company. It
immediately met the taste of a passionate cigar community across the continent.
This is the most successful product launch since the redirection of the company
after it withdrew from Cuba in 1989. At times, demand outstripped budgeted
production by almost double, which caused temporary supply bottlenecks. This
extraordinary success and the relaunch of the Camacho cigar, which has a long
tradition in the US, has contributed to Oettinger Davidoff experiencing the
most successful year in its 25-year history in North America.
“In the past year the company has consolidated its
wholesale business in Switzerland into one company, established its own branches
in Austria and Russia in the tobacco sector, initiated the takeover of its
former trading partner in Spain and expanded sales and distribution in Central
Asia and Africa.
“Within the framework of the retail concept announced the
year before last, shops in Tokyo and Seoul and at airports in Hong Kong, Taipei
and JFK in New York, among others, were adapted to the new design and brand
image. A number of product and marketing initiatives were also eventually
reflected in the final quarter of 2013 in turnover that experienced
considerable growth, and the Davidoff brand achieved gains in market share in a
declining total market.
Cultural
initiatives
“Finally, with a comprehensive revision of its corporate
image and the dynamic development of its partnership with Art Basel, Oettinger
Davidoff has finally honed its profile as a globally active, socially
responsible company. In addition to collaboration at trade fairs in Basel,
Miami Beach and Hong Kong, the partnership with Art Basel involves a global
cultural project called the Davidoff Art Initiative. The Davidoff Art
Initiative supports contemporary art and artists in the Caribbean, strengthens
art institutions in the Dominican Republic, shares knowledge and expertise
about contemporary art, and fosters cultural exchange between the Caribbean and
the rest of the world.
“At the centre of the Davidoff Art Initiative is
Oettinger Davidoff AG’s ambition to give something back to the cultural
community of the Dominican Republic, which is home to a large proportion of
production and many of the company’s employees, by promoting and focusing on
the art and culture of the Caribbean and building on the company’s longstanding
commitment to arts, crafts, community and quality. The four global programme areas
of the Davidoff Art Initiative are: Davidoff Art Residency, Davidoff Art
Dialogues, Davidoff Art Grants and Davidoff Art Editions. Recently, the
foundation was laid for the Davidoff Art Residency at the Dominican Altos de
Chavón School of Design in La Romana. Every year from 2015 onwards, the
residency will invite five international artists to spend three months at the
School of Design.
Ambitious outlook
“I aim to continue increasing the turnover of the core
business at Oettinger Davidoff AG in the current year. With a strong, two-figure
percentage growth, the Davidoff brand laid the foundation for a successful
fiscal year 2014 in the first five months. In order to promote the planned
growth, substantial investments will be made both this year and next year in
launching new brands and relaunching existing brands with high growth potential
and in developing the existing product range.
“The introduction of the Camacho cigar, having already
been very successful in the US, to Europe is symbolic of this investment, as is
the launch of the first Davidoff vintage cigar made in 2002, the most expensive
cigar produced by Davidoff to date. New Davidoff flagship stores will be opened
in Frankfurt, New York and Kuala Lumpur in 2014, a separate company will be
established in Spain, and in Dubai a dedicated office will be put into service
in recognition of the growing significance of this
region. In addition, over 200 Davidoff shops-in-shops
will have been opened around the world by the end of this year. The global
sales network of Oettinger Davidoff will experience substantial expansion as a
result.
“The new production record also reflects Oettinger
Davidoff’s confidence in the potential of the global market for premium
Davidoff cigars.”
