Asian Trader believes, and has been saying since at least last summer when we held our first Vape Conference, that the UK is entering the Age of the Pod. When vape first arrived it came in the shape of cig-alikes – which Nikos Tsagkaropoulos, head of Insight-driven Business Development at BAT UK, reveals is still an enormously popular category – and the company’s long-established Ten Motives brand remains easily the best-seller with a leading share within this segment.
That was quickly followed by e-liquids and the open-tank technology of the new wave of vape enthusiasts.
It was not immediately apparent how important vaping was for the future health of the nation, however, according to nearly all major public health bodies in the UK, including Public Health England, vaping is around 95% less harmful than smoking.
More than 80,000 people a year die in the UK from smoking-related diseases and whilst vapour products are not risk free, it is clear that they offer adult smokers a potentially much less risky alternative and that can only be a good thing.
That was something Asian Trader felt the independent sector could get behind, quite apart from the profits to be made as tobacco sales declined. Now vaping is seen by the health authorities and government in the UK and many ex-smokers as offering a significant step forward in harm reduction.
The tobacco companies certainly think so, and are steaming full ahead with their vaping programmes and products, none more so than BAT.
The pod revolution
The key element in moving vapour to the mainstream, such that an average smoker could become familiar and happy with the convenience and quality of a vape product and choose it easily over old-fashioned cigarettes, was to develop the right product. That turned out to be the vape pod.
Simple to charge, to use, and to refill, also pocket-size and stylish, pod technology has accelerated in its development over the past few years. The idea was to encourage customers to pick up a pod or refills, “the same way you buy your cigarettes,” as Nikos puts it.
The market is now at a stage where routine use of pods is on the cusp of being the new normal in vaping –helping adult smokers switch at ever-greater rates.
Vype has more than 77,000 weekly customers in Traditional Retail.
The missing ingredient is no longer the pod but what the pod and device sits in and how it is presented to the consumer. The final heave which will establish pods as the go-to product for most vapers, smokers and ex-smokers will look like this: an attractive, amenable and versatile, modular gantry that communicates quality as well as convenience to potential consumers.
We are here to talk to Nikos about BAT UK’s market-leading Vype brand – as well as their other vapour products –but even more than that, BAT UK’s roll-out of its new Vype gantry designed for independent retailers. Could it be the game changer that puts pods – and especially Vype– at the leading edge of the vape market?
“What the independent retailers have not done yet as much as the organised key accounts is to invest in the [vapour] category,” Nikos explains. “So far, they have taken it on board but not to the fullest extent and without really having a good display solution with which to show and merchandise their products.”
Nikos says what this means is that consumers enter a store, look at the vaping range, and leave unimpressed: “Very often it just doesn’t look great because it is sporadically-placed around the cashier, around the gantry and other random places in the store.This is a problem because consumers want to see credibility in anything that they buy.”
He knows that if consumers visit a bigger store – a Tesco or a Sainsburys, a “key account” store – they will see the category professionally merchandised, next to where combustible products are, in a logical, like-for-like comparison.
“It is not the same in independent stores, and this is where we step in,” he says. There are many suppliers and often they offer their own gantries, but there is no consumer-friendly, recognisable standard. The race is now on to be the definitive display and BAT UK is determined to take the crown.
“We offer the gantry solution so we can allow the retailer to credibly demonstrate the merchandise and the category, which will then increase the awareness of the store as a seller of vaping products,” Nikos emphasises. “It looks very professional, well-designed and high-quality – which helps increase immediately the levels of credibility and the willingness of a consumer to buy from this shop.”
It is good to meet a businessman who takes aesthetics seriously, and Nikos clearly adores the clean, sophisticated tech aura of the Vype gantries, which certainly have high-tech design cues, and are far from a boring functional piece of storage.
“The aesthetics are extremely important,” says Nikos, “especially when we are talking about new categories. And to us, aesthetics imply quality. It means that, basically, you feel confident when you are shopping from a high-quality display, and from well-established brands.”
BAT UK has decided that the independent channel is key for the pod revolution that is taking place, and Nikos explains why with persuasive coherence.
“Let me take it from the top. I will start with the point that we know a major source of business for vaping products is adult smokers that want to switch,” he says. “If you look into the numbers, about half of the sales of combustibles take place in independent stores and about half in organised key accounts [the supermarket chains]. So, if you were to split the market into two, you would see it is fifty-fifty.”
That means half the potential source of the new vape business market sits within independents. “If you were to do the same exercise for vaping products, you would see that about 27-28% is sitting within independents, and about 73-75% is within organised key accounts.”
What is important is that 40% plus difference, which lies waiting for indies to take advantage of: “This tells me that there is a fantastic opportunity for independent retailers to look into this category more closely and attract adult smokers as potential new users of potentially reduced-risk products into their stores, because they have the footfall there,” says Nikos.
“There are two types of consumers: the adult smokers that the retailer could encourage in and the existing vapour product users that are everywhere and shop everywhere already, who would buy it from the store if they found it there. But they would never buy it from the store if they never found it there.”
The brand’s the thing
Nikos has been with BAT UK for the last two years, which coincides with Vype winning the award for Vaping Product of the Year two years in a row, 2018 and 2019 with Vype’s best-selling product families: Vype ePen 3 in 2018 and Vype ePod in 2019.
Next to convenience, trusted branding and safety are the elements that will guarantee the pod revolution. “The fact is that the majority of closed systems are provided by businesses – like BAT UK – that put a huge amount of resources into research and development and all the quality assurance behind it, so that the consumer can rely on the quality of the product,” says Nikos, as opposed to “an open liquid system and some unknown e-liquids developed by an anonymous third party that you can find on the market, all without the benefits of BAT’s world-class UK based R&D facilities which our products benefit from.”
Here, he is talking about the colourful but less widespread culture of the vape-store, where a regular smoker looking to change to vapour might not feel they would fit in. It’s the combination of product and merchandising that’s the charm for indies, communicating the essential messages that will result in a sale to a regular consumer rather than a maven or an enthusiast – and that regular consumer is of course the real mass-market.
“So, the major elements of success are convenience, trust and safety. These elements together make closed systems a success.” Nikos sums up, “now happily the pod category is growing and there has been high levels of penetration among adult nicotine consumers.”
Which means now is the time to strike with the new gantry offer.
On the one hand the pandemic and lockdown has put a kink in everybody’s plans, and the vape advance might have been slowed a bit. On the other, says Nikos, BAT UK has pivoted swiftly and adapted to new conditions.
“We are very proud of our field force and what they can do in-store to help retailers and consumers alike,” he says, before surveying the effects of the lockdown. “We transformed our field force into a telesales force during lockdown! They were given a lot of technology, a lot of reporting insights and a lot of ways to communicate with retailers with all the tech of pdfs, gifs, email messaging, CRM campaigns – to deliver the message to retailers, as well as getting on the phone with them and explaining the deals that we have available and how we can serve them remotely.”
Over the past few months,then, BAT UK has been preparing the ground for what comes next – the physical installation of the new gantry offers across the country. The lockdown did at least allow time to plan and prepare: “It gave us the opportunity to explain to our retailers the idea behind these modules, these gantries, and plant the seed, and now we’re actually ready to implement and install them. We started installations in June” says Nikos.
Another way in which the lockdown has changed things – at least for the Convenience channel and its vape enterprises – is that the high street vape stores have been out of action, “because they were not considered ‘essential’ according to the formal definition,” Nikos points out.
“They only reopened in mid-June, so vapers who physically shopped for their products had to find an alternative, and we saw that a lot of customers went into the independent stores to find their vaping products.”
That was a great opportunity for independent retailers to demonstrate that they have a credible enough offer in their stores to support the advanced vapers who usually shop in specialist stores. It appears this has been the case, and with the watchword being “retention” now that the shops are all open again, something needs to seal and cement the recent new vapour custom enjoyed by the indies – which brings us back to BAT UK’s new gantries.
I want one now!
Nikos says the advantage of BAT UK’s modular vape gantry is that there is a format to suit every size of store.
“We understand that not all shops are the same,” he avers. “You could take the average convenience store in London, for example, and it will be very small with limited space around, compared with somewhere less dense around the country, where you would have a lot more space to invest in, and accordingly more opportunities for a bigger gantry and a bigger display solution.”
This led to the development of a range of gantries, from two different four-module models, complete with LCD screens, to two-module tower-builds and several choices of single module counter-top or wall-mounted examples.
“The way that it will work for a retailer would be to get our fantastic gantry into the store and have the option to use 40% of their new display to list any competitor products they might have, if they have any. The remaining 60% of space will be for our brands.”
“Anything that has more than five shelves is open to the competition,” says Nikos. “I think at the end of the day we are not the only company out there. I believe we are the biggest and the best – at least this is what the Product of the Year awards would indicate for Vype ePod and ePen3 – but we obviously understand that retailers have other brands in their stores, and we are happy for them to use our merchandising solutions to build credibility for these product as well.”
I remark that it seems a most far-sighted strategy for the market – BAT UK sees itself prospering long-term in the vapour sector – not just with pods but also with its Ten Motives e-cigs and its Cirro open-tank system, both enjoying bespoke accommodation on the gantries along with the Vype ePod and the ePen3.
“What we would like to mention is the fact that BAT UK will invest in your store, to get the gantry and to get the product as well.” Nikos enthuses, when we discuss this long-term view. “So eligible retailers would qualify for free installation, get the unit itself which is high-quality and quite expensive also free of charge, and potentially a minimum range of our Vype products to merchandise for an initial period.”
And it is happening right now: “We have complete market coverage and are not focussed on particular locations. We have our field-force across the country and we are rolling out across the UK as we speak, with an end-target of having installed all the gantries by mid- to end-September.”
Cigarette sales are falling at around three per cent per year, and tobacco accounts for an average 34 per cent of sales in the Convenience channel – so it’s lucky that rising vapour sales are more than compensating for it.
Having experienced the recent menthol tobacco ban, and the lockdown period with so many people changing their shopping habits to a more local framework (Convenience sales are up over 40% during the period), we are at an inflexion point in the vape category – a point that BAT UK has fully taken on board. “We are selling much more in the Convenience channel: people did not want to travel further away than they needed, or to visit the bigger stores,” says Nikos.
“In my opinion, it is not only about recruiting new adult vapers through your store who were smokers before,” he continues. “Of course this is a big source for the business and retailers should have that in mind. But there is another element: as we have said, there are 77,000 Vype consumers out in the market every day – and they shop everywhere. They are an opportunity for any retailer with the right solution in store, to get them to buy from his or her store instead of elsewhere.”
There is a lot of potential custom just waiting to be tapped – with the right product and the right merchandising by alert retailers.
“We want to invest in long-term relationships and long-term business with these retailers,” concludes Nikos. “We invest in the businesses of eligible retailers because we know that great display solutions lead to more consumers,to more repeat sales and eventually higher rates of sales and increased footfall in-store. We have seen this with the 2,000 gantries we already have in the market and we clearly see how this is of mutual benefit to both parties. I am extremely confident we can grow and share more of this success in the coming months and I would encourage any retailer out there to get in touch with us to discuss how we can further develop our partnership.”
Retailers may get in in touch by emailing to [email protected] or register here their interest and the BAT UK representative will come to the store and provide with more information about the firm’s vaping category solution.