Have a very Merry Vape-mas

This is not of course a Christmas buying guide, but it is remarkable just how quickly the vape industry is growing at present.

An authentic cigarette experience without most of the health dangers is perfect to lure smokers who remain unseduced by the appeal of vape, and it appears to be working: the Heated Tobacco category, for example, was worth £83 million until Q2 2022 in Traditional Retail, with a massive growth of 43.6 per cent. Vape in general is advancing technically to satisfy more ex-smokers than before.

With traditional tobacco products in a secular and slow decline, and a massive drop in young smokers – who, if they would want to try nicotine of any description, now turn to vape instead of combustibles – it is imperative that retailers who have not yet taken advantage of this vibrant sector (there are a few, we have heard), should do so right now.

Those retailers who have already realised the turnover and great margins that vape and next gen can bring, should really be thinking of expanding their non-combustible footprint to take further advantage of this enormous ongoing social change.

Heating up

Another good thing for retailers in this surging e-cig and vape market is that competition between suppliers is heating up, meaning great deals are available.

“There is no doubt that competition in the smoke-free category is heating up,” says Kate O’Dowd, Head of Commercial Planning UK & Ireland at Philip Morris Limited.

She can see there is a race between convenience retailers and large multiples to switch adult smokers to alternative products. O’Dowd says that the sheer speed at which manufacturers and their brands are developing and commercialising the most innovative products to meet growing demand, means that everyone is feeling the heat.

“We can see from the data how this competition is shifting the landscape, by challenging the dominance of traditional categories and accelerating the pace of change. For instance, if we look at heat-not-burn – a relative newcomer to the UK market – we see a category growing at over twice the speed of the e-cigarette category, which launched at least a decade earlier.

The upshot is not so much pitting products against each other, “but rather providing smokers with a greater choice of alternatives that enables them to switch away from cigarettes, if they can’t or won’t quit completely.”

C-stores are perfectly placed to take advantage of this, probably much more so than the lumbering mults, and as the season of fresh resolutions approaches, it’s the perfect time to punt the consumer with offers to improve their health – and their enjoyment of their formerly unhealthy pastime.

Mark McGuinness, Marketing Director at JTI UK, likewise waxes enthusiastic about the fortunes of heated tobacco next gen products (or HNB – heat not burn – devices).

“The heated tobacco category has been rapidly growing in popularity over the past few years and currently, the category is worth £91 million in Traditional Retail,” which means it is up £7million or already about eight per cent since the previous annualised figure from May this year. He says that by 2025, it is estimated the category will be worth £250 million, with 66 per cent of consumers buying through traditional retail.

“Building on our growing presence in the evolving heated tobacco category and responding to the needs of existing adult smokers and vapers, we have recently announced the launch of a new and enhanced device, Ploom X. Representing the next generation of heated tobacco, it offers existing adult smokers an alternative but familiar experience by heating tobacco instead of burning it.

“Thanks to significant technological upgrades, this smaller and more compact device has a more consistent nicotine delivery and an enhanced flavour sensation. It also has a longer session time of up to five minutes and the ability to use more EVO Tobacco Sticks per charge.

“This is just another step in the evolution of the Ploom brand, with improved technology that offers a truly unique experience for customers. We’re looking forward to providing retailers with the opportunity to capitalise on the market through this new and exciting product.”

Making a connection

Kate O’Dowd explains how indies can beat the multiples on e-cigs sales

• Build connections with adult customers who smoke

The convenience sector should be a destination for adult smokers on their journey to becoming smoke-free. Retailers must move beyond transactional-based relationships and build connections, so they can offer advice and support that is trustworthy and actionable.

• Bridge the knowledge gap

Retailers must take responsibility for their learning to close the knowledge gap and become a credible source of information. They must gain comprehensive knowledge of smoke-free categories, brands, and products – including the benefits and relative risks compared to smoking – to ensure recommendations are made based on individual needs and preferences.

• Set up retail environments that are easy to navigate

Stores must accommodate customers by making the point of sale easy to navigate, so decisions can be made at, or away from, the countertop.

• Encourage collaboration with the local retailer community

Collaboration is key to accelerating the journey to a smoke-free future. Retailers should seek best practice from other local retailers and be able to direct customers to nearby stores if their preferred smoke-free product isn’t available.

• Embrace a smoke-free future

As customers shift towards the smoke-free category, retailers must ensure they’re future-proofing their businesses. The data suggests a phased approach, whereby retailers continue to sell combustible tobacco products whilst they test which smoke-products are effective – and tailor their gantries to suit.

Compete/co-operate

 “To illustrate how competition is being overlooked to achieve this smoke-free goal, we recently commissioned a study of more than 1,400 convenience retailers which found that over two thirds would look beyond local competition and work together to help their community go smoke-free,” says PML’s O’Dowd.

She explains that competition can be a fantastic driver – “even more so if the efforts involved lead to something meaningful, such as delivering a smoke-free future. With manufacturers bringing better products to market and more retailers than ever before broadening their smoke-free offering, I truly believe we can help millions of adult smokers make a better choice.”

O’Dowd adds that affordability is a growing concern among many adult smokers in the UK and that the best option for anyone is to quit tobacco and nicotine products completely. But if they don’t, then she says switching to IQOS Originals Duo could work out far cheaper in the long run, with 20 HEETS costing £5 RRP – less than half the average price of a pack of 20 cigarettes. That is not a bad rule of thumb when comparing traditional and next-gen nicotine products.

She points out that Philip Morris International is delivering a multi-category portfolio of smoke-free products – including heat-not-burn, e-vapor and oral smokeless – in a variety of usage, taste, price and technology options intended to accelerate the delivery of a smoke-free future.

“Far more importantly” adds O’Dowd, “we see a category eating into the market share of cigarettes and other combustible products. HEETS, tobacco sticks designed for exclusive use with IQOS, the UK’s number one heat-not-burn product, account for more than six per cent market share of the total industry sales volume for Heated Tobacco Units (HTU) and cigarette sales in London.

Imperial’s Head of Consumer Marketing UK&I, Tom Gully, underlines the fact that the vape market is continually expanding as more consumers seek out alternative nicotine solutions. “In the UK alone,” he says, “the category is now worth around £1.2bn and is expected to reach £1.47bn in the next three years, with around 35 per cent of current vaping volume sales taking place in the convenience channel. The number of vapers in the UK has grown by three per cent over the last year to 3.6m, so it’s clear that there will be continued demand from consumers for vaping products. To tap into this rising trend, retailers need to ensure they are dedicating sufficient space in store for vaping products and stocking the right range for their customer base.”

Co-operation as well as competition helps here, as the drive to go smokeless increases profits and health all round: “There is a strong appetite for retailers to work more collaboratively at a community-level to enable better access to smoke-free alternatives,” says O’Dowd. “This willingness to cooperate includes knowledge sharing, with retailers seeing the value of understanding what alternatives are being purchased at a competitor’s store, presumably to prioritise and maintain inventories at levels that meet demand.”

JTI’s Top Tips for Heated Tobacco

Gemma Bateson says that to get ahead in the heating-up market for heated tobacco products, bear in mind the following:

• Ensure consistent product availability: The category is in growth as more and more existing adult smokers look for an alternative but familiar tobacco experience in the form of heated tobacco products. Therefore, it is important that retailers always maintain good stock levels.

• Have devices readily available for in-store demonstrations: We recommend that accredited retailers have demonstration devices available so that consumers can observe the simplicity of the device and feel fully informed before buying the product.

• Knowledge is key: Having up-to-date knowledge on the latest products and category updates, is key to offering a good level of customer service. To confidently talk about the category and products available, retailers and their staff should use all the platforms available to them – including JTI’s trade website.

Get it now!

Philip Morris Limited has commenced the roll-out of IQOS Originals Duo, a revamped and renamed version of IQOS 3 Duo to indirect retail channels in the UK. Kate O’Dowd says that as part of the IQOS portfolio, IQOS Originals Duo “combines revamped design features with Philip Morris Internationals’ time-tested, unique, and patented heat control technology, which uses a flat wide ceramic blade to heat tobacco from the inside, delivering a real tobacco taste and satisfaction—backed by six years of scientific research and development.”

Fully compatible with existing HEETS tobacco sticks, IQOS Originals Duo will begin replacing IQOS 3 Duo, with no buy-back or product swapping necessary. The new stock will filter through naturally, although retailers will be able to order the new kits via PML’s Digital Trade Engagement Platform from December. With an RRP of £39, IQOS Originals Duo will be sold as a kit, consisting of the iconic two-piece device – with a compact and lightweight holder – and two packs of HEETS.

Meanwhile Alastair Williams, Country Director at Scandinavian Tobacco Group UK, reveals that the company is forging ahead in the tobacco-free nicotine sector with a typically Scandi-style new product: “We’ve recently announced our entrance into the fast-growing nicotine pouch category with the introduction of our first ever non-tobacco product,” he reveals.

Originating from Sweden, the home of snus and most nicotine pouches, STRÖM (which is Swedish for stream / flow) is a premium nicotine pouch which is inspired by its Scandinavian heritage. “Launching in three flavours (Fresh Mint, Minty Orange and Juicy Berry), STRÖM has been available to retailers across Manchester for a six-month trial period from October (and until March), before being rolled out to other cities across the UK throughout 2023 and beyond.”

In fact, 2023 could prove to be The Year of the Pouch, as its widening market appears to be challenging even heated tobacco in terms of popularity, as Bruce Terry, Portfolio Brand Manager at JTI UK, confirms.

“The 100 per cent tobacco-free nicotine pouch category is growing at a phenomenal rate and is now worth £15.9 million a year in the Convenience and Independent channel,” he says. “Perfect for ‘on-the-go’ lifestyles, we know these discrete pouches appeal to existing adult smokers and vapers who find themselves in situations where they cannot, or do not want to, smoke or vape – making them a must-stock for convenience retailers.”

JTI’s award-winning Nordic Spirit recently expanded its portfolio with the launch of a new (award-winning!) Spearmint flavour, and a new Extra-Strong nicotine strength for Bergamot Wildberry. “The new launches are both available in an Extra-Strong strength to reflect the growing demand for stronger variants in the nicotine pouch category,” Terry confirms, and who does not love extra-strong mints?

Meanwhile at Imperial Tobacco, Tom Gully describes the continued rocket-like ascent of the pod-mods. He says that recent figures show the pre-filled pods category now to be worth around a whopping £558m, with the e-liquids category worth £355m.

“This provides a huge sales opportunity for retailers,” he says. “To effectively tap into this opportunity, retailers need to ensure they are selling a wide range of pre-filled pods and e-liquids in a variety of flavours and nicotine strengths, including nicsalts like myblu Intense, to ensure they have products on offer that can attract and meet the needs of different customers.  Menthol is the most popular myblu flavour, followed by flavours in the earthy and fruity flavour categories, so we’d highly recommend stocking a range in line with these particular flavour categories.

He adds that recent data shows both closed pod systems and basic open systems remain popular choices for vapers, accounting for 70 per cent of the total UK vaping market size in 2022 (35 per cent closed pod systems / 35 per cent open systems). But although these devices account for a large majority of the share, he is also seeing significant growth in the disposables category, which is currently worth around £132m and makes up 10 per cent of the market share – up from 5 per cent in 2021. The big increase in sales of e-cigarettes has been notable, and perhaps testifies to the numbers of new ex- or almost ex-smokers entering the vape category, who go for what looks familiar to them.

“Retailers should ensure they review their range regularly and prioritise stocking the brands that cater to these fast-moving trends in order to remain current and maximise sales,” says Gully. “With this in mind, we’d recommend stocking a range of leading closed pod systems, like myblu, and compatible liquidpods to take advantage of this growing demand for pod mod devices.”

In the end, and overall, vapers tend to enjoy premium e-liquids and are more than willing to pay more for them because higher-quality ingredients lead to higher quality e-liquid and a better tasting product, says JTI’s McGuinness. At the same time, these products demand knowledgeable and enthusiastic staff to describe and recommend them.

This festive season, bearing in mind that the cost-of-living crisis brings the shopper need for “accessible luxury” into focus, premium products in the vape and next gen category offer retailers an opportunity to upsell a high-margin product. Often at  half the price of traditional tobacco, and with much more retailer profit, vape heated tobacco and next gen is a winning combination.

JTI’s top tips to boost sales of nicotine pouches 

Bruce Terry says that there are valuable and specific steps you can take if you want to win with nic pouches 

• Follow the Perfect Store Framework: This year, JTI launched its Perfect Store Framework – a “how-to” guide to generating product awareness in-store, enticing new customers, and boosting sales in the nicotine pouch category.  Retailers can find out more by visiting JTI Advance or by speaking to their JTI business adviser.

• Establish clear product visibility: Give the category a clear ‘home’ by displaying nicotine pouches on a back wall solution with heated tobacco and vaping devices, so the customer has a visible choice of nicotine products based on their preferences.

• Attract customers with an eye-catching counter display: For nicotine pouches, JTI offers POS category solutions to suit stores of all shapes and sizes that retailers can take advantage of to boost their pouch sales, including countertop display solutions.

• Ensure consistent product availability: As well as stocking a full range of products, it is important that retailers always maintain good stock levels, so that customers always have choice available to them. Retailers should also observe seasonal trends and busy periods, for example, keep your nicotine pouch range particularly strong in the summer months when demand is highest. In addition, clear signposting aids consumer navigation of the category.

• Offer a range of products to meet all nicotine pouch needs: It is vital for retailers to offer a broad variety to their customers. We’d advise stocking a variety of strengths within the mint option in particular, as nicotine pouch users will likely move from regular to strong and extra-strong within this popular flavour. Retailers should also stock different variants within the higher strength segment, as this is likely to remain the most popular choice for customers.