It’s a vape new world

Entirely new markets don’t come along very often. Slightly more commonly they are a development of an existing one – so it was, that smartphones revolutionised the planet after cellphones had already been in general use for over a decade (and telephones for over a century), just as online gaming quickly began to do away with boxed PC games on store shelves once the internet had reached a certain speed of connection.

The e-cig category – or rather the vape, heat-not-burn (HNB)/tobacco heating products (THPs) and next-gen category – bears that sort of relation to tobacco. It hasn’t killed the cigarette market, of course but it has transformed it and is slowly forcing it from centre-stage.

No such birth, no such massive change, is entirely easy or straight-forward. After an explosive spurt out of the blocks, the last couple of years have seen headwinds slowing vape down just a little. For example, there was the fake scandal about vapes fatally poisoning people, which turned out only to be cannabis pushers mixing in deadly chemicals with illegal liquids sold under-the-counter. But that didn’t stop the media spreading panic and turning people off vaping.

And vape suffered, not only from the cannabis-hoax. Many voices were raised in countries such as the USA and India, claiming that vaping in itself was unhealthy, sometimes even more unhealthy than cigarette smoking. This misinformation helped to get e-cigs and vaping products completely banned in certain territories, forcing many ex-smokers back onto tobacco in a tragic public health net loss.

Luckily sanity prevailed in the UK and the huge relative difference in risk – with vape being between just one to ten per cent as dangerous as smoking, according to Public Health England (PHE) – has meant that health policy here has tolerated and even actively encouraged British smokers to switch to far less harmful vape products.

The Europe-wide menthol ban from last May was a fillip for vape, with many dismayed smokers giving it a try for the first time. But also, many tobacco brands imaginatively and successfully – it must be said – launched legal work-arounds and new products to keep the menthol taste of tobacco alive even after the ban, and retain their tobacco customers.

Then came the big one: the pandemic and lockdown. In its wisdom, the government decreed that saving smokers’ lives came second to saving … well, we’re not sure, but vape shops were classified as non-essential (unlike DIY and liquor stores, for example) and forced to close. That was a blow for the burgeoning vape market, but a side effect was to speed up the market for vape and next gen products in the convenience channel.

Independent store-owners, who had already been dipping their toes in the calming and profitable liquids of planet vape, suddenly found themselves inundated with custom from wandering vapers whose high-street supplier was without warning shut down.

Some of the demand went online as vape specialists quickly adapted to the new lockdown situation; but at a local level, it proved easy and convenient for vapers to visit their nearby independent store, and the convenience channel responded.

In other words, it has been a variable year for vape – although the category itself is still in healthy growth. The vaping category was worth £278 million last year in traditional retail, with growth of 22 per cent year on year, making it a key profit driver for retailers, according to IRI Market Place.

The vape industry itself is developing in terms of innovation and sophistication, with some great new products and concepts coming on-line during the past 12 months. But where is it all heading and what can we expect? Reader, read on …

A stormy sea speeds the ships

In the UK, according to Philip Morris Limited (PML), makers of heat-not-burn phenomenon IQOS, a majority of retailers (59 per cent) believe they are seeing more customers looking for smoke-free products as part of New Year’s resolution to move away from cigarettes, than before. Most retailers (70 per cent) say they feel “very prepared” in offering smoke-free products as an alternative to cigarettes – many have learned about the vape category “on the job” as the lockdown has driven new customers to them, and many have benefitted from the help of vape producers’ educational help online and in the field (if only virtually in recent months).

What has become clear is that the quality and breadth of knowledge a retailer has – especially when new vape customers ask for advice – makes a big difference to sales success and repeat visits.

At the moment some vapers are ex-smokers and many vapers also smoke – as if quitting cigarettes is often a process rather than a simple break from the old tobacco habit to the new vape, or HNB, or nicotine pouch.

It is perhaps for this reason PML’s research found that in addition to ease of purchase, retailers believe their customers want an alternative that provides the closest experience to smoking a cigarette. And that is just what has been happening in NPD this year, with IQOS spreading more widely and rival HNB system Ploom being launched last autumn by JTI.

HNB, that started off a couple of years ago as an exotic and rare example among non-smoking alternatives, has now rapidly found acceptance among those who relish the taste and sensation of proper tobacco, but no longer want the cancerous chemicals present in cigarette smoke.

In fact, over half of retailers (52 per cent) now stock heated tobacco products, which is an incredible change over such a short period. It is interesting that the favourite flavours of vapers, especially those who were not dedicated smokers, tend towards the sweet and fruity end of the taste spectrum, indicating that there might be a large and distinct market for HNB among ex-smokers who tried and then dropped vape at the beginning – just as there is a big market for vapourists who never really had much time for tobacco.

In fact, the taste preferences break down as fruit (27 per cent), menthol (21 per cent) and tobacco (16 per cent).

Incidentally, vanishingly few young people who have never smoked, begin vaping: it appears the fruity vapers are the smokers who never really liked smoking but simply had an addiction they have now kicked.

The delicious spread of vape

The new year combined with the pandemic has changed the map of UK vaping. It is thought that when the lockdown was first imposed last March, up to 400,000 smokers initially quit the habit. Unfortunately, the decision to close vape shops may well have led some of those quitters to relapse, as VPZ boss Doug Mutter explained to us:

“We have been consistent in our arguments since the pandemic began that vaping retailers are essential services, and our own data showed smoking rates increased during the last lockdown, when vape shops were closed,” he said. “We now face another lockdown with the same restrictions as in March 2020 – which we know will result in thousands of would-be vapers, turning back to smoking.”

However, research PML commissioned from KAM Media suggests that the new year has at least impelled smokers to once again give alternatives a trial.

What’s more, BAT’s Vype vaping brand has undertaken to study the spread of vaping across the UK, discovering where it has most taken hold and where it is most normalised among both vapers and non-vapers (in terms of acceptance). This paints an interesting picture of the spread and development of this still-new technology and suggests the pattern of its further development.

For example, Vype uncovered a range of cities with positive sentiments towards the vapers of the population (adults in Brighton were least affected by others vaping around them, with 43 per cent of those asked saying bother them). This suggests widespread acceptance of vaping, at a time when tolerance of traditional smoking continues to swing hard in the other direction.

Belfast also showed that it was a very Vape-tolerant city, with the largest population of vaping ex-smokers, together with by Glasgow, both at 21 per cent – so the geographical spread of vaping is wide, with Liverpool being the home of the nation’s longest-standing vapers, with almost two thirds (58 per cent) saying they have vaped for three years or more,and a third saying that they vaped at work. And Manchester is not far behind, at 39 per cent.

But it is not only in the north of the country, with its industrial heritage and so more working class (meaning more smokers – or now ex-smokers) where vaping has taken firm root. Plymouth is the most recent to have taken up the healthier vape habit, while Cardiff is king of the mid-vape populations with more (72 per cent of vapers) having been enjoying it for between one and two years.

The Vype survey also discovered that London spent more on vaping than anywhere else, although the population is also much larger and skews younger, which could explain the difference. Yet Leeds has most vape shops per mile at a whopping 18 and London only 13, although the importance of brick and mortar in that channel has been partly supplanted by online sales over the past year.

“it’s great to see that the biggest reason adult nicotine consumers are turning to vape products is that they are looking for a smoke-free alternative, followed by the fact they enjoy the taste,” concluded Aftab Saleem, Head of E-commerce, UK&I at Vype.

And now, more customers than before are looking for smoke-free products as part of their New Year’s resolutions to move away from cigarettes, the KAM Media survey revealed.

Almost two thirds of retailers believed that in the last few years, more of their customers had been looking for less harmful alternatives to cigarettes, and over a third (38 per cent) expected a further increase in their customers seeking vape, HNB and next-gen solutions in 2021.

It was very encouraging that 70 per cent thought they were “very prepared” for the post-new year demand, and it was widely accepted (by 60per cent of store-owners) that training staff to educate and give advice on the alternatives was vital to securing and keeping new vape customers.

PML’s Kate O’Dowd, Head of Commercial Planning UK & Ireland, said: “Without question quitting tobacco and nicotine usage completely is the best option any smoker can make. Of those that cannot or will not quit, the New Year offers adult smokers an opportunity to make a better choice. With over a third of retailers expecting demand for smoke-free products to increase in 2021, stocking a range of alternatives, like IQOS – the UK’s number one smoke-free product – will be key in helping adult smokers move away from cigarettes for good.”

Age of the pod/nic salts

“The Logic brand was worth £34 million last year, in traditional retail, with growth of 39.4 per cent year on year,” says Nick Geens, Head of Logic and Reduced Risk Products at JTI, and it is true that as the market has matured and pulled in more consumers, that the pod-mod revolution has truly taken hold.

Whereas the early days of vaping resembled the early days of flying, with many odd-looking contraptions and (not odd-looking) enthusiasts, with coils and tanks and what-not – and those folks are more than ever still there, of course – it was inevitable that as the market for vape and other tobacco alternatives grew, more mainstream demand for uniformity and convenience would develop among the average vape consumer.

First came disposable e-cigs, many of which remain very popular, and then the development of the click-to-fill pod technology began to advance apace, and Vype, blu, Juul, Logic and all the other (now) market leaders began to fight for shelf-space in the nation’s convenience stores: the pod wars were here. Even now, many great new brands are arriving on the scene just as other (such as nic-inhaler Voke) depart. nzo Vape has for example, has just announced a major foray into the convenience sector, securing listing agreements with Nisa and Costcutter.

“Closed tank devices, or pod mods, are currently the fastest growing vaping segment in the UK, as well as the biggest segment within the category for value sales,” says Geens.

“Vapers are looking for convenient and easy-to-use devices that they can experiment with in terms of flavours and strengths to find the right fit. Our premium pod device, Logic Compact, offers a convenient and modern alternative to traditional vaping products.”

Combining ease-of-use tech with the ever-better range of flavours being developed for the mainstream vape market – not least, after May, new menthol variants – and the consolidation of market growth was baked-in no matter how stiff the headwinds.

What became clear, and was quickly responded to by manufacturers, was the fact that migrating smokers wanted more than just the fruity taste enjoyed by early vape enthusiasts (who almost by definition were not the die-hard tobacco lovers arriving more recently).

Many who tried vaping missed the “hit at the back of the throat” that a concentrated pull of nicotine-infused smoke would give them when they really needed it: step forward nic-salts, a method of infusing vape liquid with a form of nicotine that would be absorbed into the bloodstream much more quickly than with earlier, more standard vapes. This high-strength but still safer development made vaping OK for dedicated tobacco fans. (Smoke not nicotine is the killer in cigarettes, so the lack of ignition in vape allows nicotine do its thing relatively harmlessly.)

As Nick Geens puts it, “Offering a smoother and more intense flavour delivery, more vapers are seeking an enriched vaping experience, and nicotine salts do just that.

Don’t burn it, heat it!

It was a little-known fact that elsewhere in the world (chiefly in Asia and the Far East) the vast majority of “vapers” were in fact heat-not-burners. The technology had never been taken seriously by the UK market, not because the producers felt there would be no demand, but simply that the evolution of the here had started with e-gigs and continued through vape, and those products were selling very nicely, thank you.

But Philip Morris International (PMI, parent company of PML), famous for its huge research spend, was behind the scenes developing its IQOS HNB technology, with its tobacco HEETS sticks, looking like stubby little mini-cigs, that heated up without burning, but delivered a much more cigarette-like experience.

PMI had in fact made its own resolution a few years earlier to go completely smoke-free – but importantly, not tobacco-free – and the smoker-friendly HNB phenomenon hit the market a couple of years back, at around the same time that nic-salts were also beginning to appear.

This is no surprise in retrospect, because the market was widening itself beyond the early vapers and trying to attract ever more hard-core smokers: just like nic-salts, HNB was the perfect tech to wean them off cancerous smoke without giving up the cig experience.

Now, after pod wars, we have HNB products commencing battle! The Korean KT&G Partners’ lil Hybrid device has recently arrived in the UK (distributed by PML), joining the fast-spreading IQOS.

Meanwhile, JTI have addressed the new HNB avenue with the launch of Ploom S, “a heated-tobacco device offering existing adult smokers an alternative but familiar tobacco experience by heating tobacco instead of burning it,” according to Geens. It has its own patent EVO sticks and a shorter charge, longer puff time than the earlier IQOS – so no doubt we will now be in an arms-race as companies vie with each other to woo the consumer. “It is predicted that by 2025 there will be nearly one million Heated Tobacco users nationwide and that traditional retail will contribute to two thirds (67 per cent) of this volume,” adds Geens.

The EVO tobacco sticks are available in four different flavours with an RRP of £4.50

• Bronze – full flavoured tobacco for a rich and intense experience
• Sepia – smooth and rounded tobacco for a well-balanced Ploom experience
• Emerald – classic tobacco infused with cooling menthol for a refreshing sensation
• Purple – classic tobacco infused with berry and cooling menthol for a fruity and refreshing sensation

BAT initially showed little interest in HNB in the UK even thought it had launched its glo HNB brand in Japan as long ago as 2016. We always thought it was only a matter of time before the product was brought to market here and that BAT was playing the long game – trialling glo in a more mature HNB market while observing how things were developing here (and remembering that the pioneers were always the ones with arrows in their backs!) glo is now advancing across Europe perhaps towards these shores, and Imperial Tobacco has its Pulze in the wings – or rather, still in Japan.

The pouch and CBD potential

What will 2021 come to be known as “the year of …”?

If we were betting people, about which perish the thought, we might have a little flutter on a budding trend that has been a lockdown sensation, although not necessarily because of the lockdown – it might just be random timing.

That new trend is, in fact, a venerable Swedish tradition, popular forever among everyone from students to old men (and women) in that neck of Scandinavia: snus.

Tobacco-free nicotine pouches developed from the woodsman’s habit of sticking a “chug” of tobacco under the lip while sawing logs in sub-zero temperatures (your pipe would keep going out). But over a long period, the acid in tobacco juice can erode the jawbone, and so nicotine pouches were developed, along the same lines as HNB-thinking: enjoy the hitbut don’t suffer the tobacco-related health damage.

“The nicotine pouch category is now worth £7.4 million a year,” says Geens.“This growing market shows no signs of slowing down and will be a key product this year, as adult consumers look for convenient products that can be used when smoking or vaping might not be possible. JTI’s Nordic Spirit range is the UK’s No. 1 nicotine pouch brand and is available in a variety of flavours and strengths.”

Nordic Spirit has really taken off this year, as people realise the wonder of tobacco-free pouches: they are a “fire and forget” device. Once in place in the mouth, you can get on with your life and the body simply forgets about needing a nic-fix. As the Swedes long knew, it’s the perfect method to use when quitting cigarettes. As more people in the UK want to quit, but don’t want to have to disappear from their Zoom screens for a quick vape, nic pouches might just be the perfectly elegant and satisfying solution. Pouches get the job done – invisibly!

The UK market for pouches opened with JTI’s runaway success Nordic Spirit brand. That has now been joined by new entrants including the Swedish Lyft and BAT’s Velo, with more pouches on the way. Are they the new chewing gum?

Paola Midence, brand and trade manager at Swedish match recently talked to us about the company’s Zyn brand and why 2021 will be a big year for the nicotine pouch market.

“The tobacco market has been in transformation since the advent of e-cigarettes and nicotine pouches is the continuation of this progression,” she says.

“The nicotine pouch market is still very small in the UK and one challenge for us will be to ‘spread the gospel’ around the category and how it fits alongside the current tobacco and nicotine market. Our ZYN brand has been developed to target current users of tobacco and nicotine, but we have limited means to explain to our consumers the intricacies of the category due to current regulations on tobacco advertising. But again, revised regulation may change that. It is clear that we have a big job ahead of us to educate UK consumers about this new category.”

For Paola, the manner in which the government chooses to take advantage of its new freedom from EU regulations is key to the fortunes of the pouch market – and that goes for the vape, HNB and next-gen market on the whole, especially in terms of loosening up advertising restrictions – which could be easily argued for in terms of a net health gain, especially with the NHS under pressure as it currently is.

“Given the UK’s commitment to tobacco harm reduction, we hope that we will be able to provide truthful information to our consumers about the relative risk of the nicotine pouches in the not-too-distant future in order for UK to achieve its ambitious Smoke-free 2030 goal,” says Paola.

Finally, as if this colourful parade of innovation has not yet sated your appetite, there is another product category promising further development in the next-gen market, as BAT unveils its new CBD-infused vaping device, VUSE CBD Zone. A pilot launch in convenience stores in Manchester has already begun, with the firm potentially launching nationwide later in the year.

The company says it is the first “truly global” vaping manufacturer to launch a CBD device and is part of its stated ambition to launch products that move its portfolio “beyond nicotine”.

VUSE CBD Zone is available in three e-liquid flavours: mint, mango, and berry. The product comes in two strengths – 50mg and 100mg.

Announcing the launch, Fredrik Svensson, general manager at BAT UK & Ireland, said: “With the rollout of VUSE CBD Zone in Manchester, our unique multi-category portfolio now, for the first time, offers products that go beyond nicotine. As the UK market leader in vaping, we are proud to be launching our new high quality VUSE CBD Zone range, which has been developed using BAT’s unrivalled global vaping leadership.

“CBD vaping is a new category for us, and we will be using this pilot launch to gain key learnings about consumer and retailer experiences, combined with our extensive expertise and knowledge of vaping, to help inform plans for a potential nationwide roll-out of VUSE CBD Zone later in the year.”

The fortunes of the e-cigs, vape, HNB and next-gen category have been something of a curate’s egg during lockdown – good in parts. But the steadily growing and resilient demand for the products, the innovation – such as the new disposable filter Edge Hybrid device that seeks to bridge the gap between vape and the cig sensation offered by HNB – and the eventual lifting of pandemic restrictions, all point towards a healthy increase in the coming year. Stock up on the best-sellers now and above all, carry on educating yourselves and your customers.