With dozens of product launches and new brands appearing on scene in recent months, the vape and next generation nicotine category is one of the most compelling in convenience today.
From the billions (yes, billions) of dollars invested by the biggest players to the emerging brands that are adding innovation and choice to the nicotine market, suppliers are creating a fast-growing category that provides a long-term solution to industry concerns about declining tobacco sales in the coming decades.
It isn’t only suppliers who are excited about the opportunity that vape presents to the industry – wholesalers are also getting in on the action.
“The vape category has shown tremendous growth and is continually evolving, which makes it a real challenge to get the most out of it,” says Kenton Burchell, trading director at Bestway Wholesale. “We know many retailers struggle with the variance of devices and liquids in the market and also have stock from all sorts of sources, much of it given to them free. This can result in them having an incoherent range or products – particularly devices that become obsolete.”
Despite the challenges, Burchell says that stores are increasingly seeing the profit opportunity in vape and deciding to invest the time and space needed to capitalise.
“Ever more retailers are seeing the benefit in offering a core range of pods and liquids that will satisfy most vapers’ needs. We can see this category continuing to grow as more and more smokers see the health, not to mention financial, benefits of switching to e-cigs from tobacco. More and more retailers also see the profit opportunity that is well worth the investment in time and space in store needed to understand the category and get the most from it.”
Operating during a pandemic
It’s both a cliché and a fact that most convenience categories have been hugely affected by the coronavirus pandemic. It is important to remember that 2020 has also seen the arrival of the menthol ban. Finding time to build and manage a vape range has therefore been a challenge for many store owners Asian Trader speaks to each week. Yet, according to the industry, the numbers suggest focusing on vape is paying off for retailers.
“The vaping category has experienced solid growth in the past few years,registering significant double-digit growth each year,” says John Patterson, Sales Director, Juul Labs. “More recently, if we look at sales this year, in the twelve weeks pre and post the removal of menthol cigarettes, IRI figures show the vaping category in tracked channels grew by 12.6 percent –but it is the closed pod category that is driving the majority of the growth. Indeed, these figures show JUUL, in particular,experiencing growth of 65 percent and being responsible for over a third (37 percent) of all growth in the category.”
Pod mods are convenience-friendly
According to some suppliers there are areas of this broad market which overperform within convenience, where a different mix of customer types is reflected in sales.
“Closed pod refills and e-liquids tend to work best in convenience, given they are pre-mixed and simple to use, and should form the majority of space on the fixture, with at most 20 percent given to hardware,” says John Patterson. “Smokers tend to buy the same products from the same stores, so offering them a range of refills for the best-selling closed pod devices and a range of e-liquids for open systems – in the same stores where these smokers purchased their cigarettes – is the best way to grow the category in convenience stores.”
The podmod market has become an engine of innovation for the industry in recent years and 2020 is no different. One eye-catching launch has been the arrival of EDGE Hybrid which combines capsule vaping with the traditional filter found in ready-made cigarette sticks. The product is designed to provide the familiarity smokers need to jump from combustible tobacco towards vape. Flavours included in the system include Tobacco, Very Menthol and Blackcurrant.
The company says: “Born out of consumer demand, EDGE Hybrid is a next generation product that bridges a significant gap in the market… According to research 60 percent of smokers are wanting to quit but 37 percent of those who have tried vaping but dislike the hard, unfamiliar mouthpiece.”
EDGE Hybrid filters also feature a cigarette-style crushball.
One new brand that is looking to find a place in this fast-growing market is RELX, a brand that already has an established footing in the Asian vape market. The RELX Infinity device features a ceramic coil that helps to provide a “SuperSmooth” experience for vapers.
Micaela Sangiovanni, senior trade marketing manager at RELX:“Infinity and Essential ceramic pods offer 1.9ml nicotine and last around 500 puffs based on average consumption. They are the only pods in the market designed with the SuperSmooth feature which provides rich and dense vapour with just the right temperature, appropriate draw resistance and a quiet inhaling experience, giving users a consistently smooth and familiar experience from start to finish.”
Of course, alongside these new players, the capsules market has a set of established big players which have continued to invest in their brands in 2020, from JUUL and Myblu to Logic Compact and Vype.
For a category that can seem filled with new jargon and fast-changing product ranges, there is at least some recognisable and simple category management advice that will help stores boost sales. And this includes how to position a vape display:
“Shoppers are often drawn to products displayed at eye-line to help attract their attention, we’d recommend placing devices at this level, and then the supporting brand e-liquids or accessories on the shelves above and below,” says Duncan Cunningham, UK corporate affairs director at blu. “Low margin products, or cheaper brands, should be placed on the lower shelf, with higher margin products above the devices.”
One other familiar tool when constructing an effective display is brand blocking, says Cunningham: “Grouping the respective brands together in a well-organised display will help to create further shelf-appeal for products, as well as making it easier for staff to locate products for quick service and maintain stock levels.”
As display is such a key way for firms to develop their own brand recognition, it is an area where suppliers of all kinds are willing to lend a hand.
“We have a full range of proven point-of-sale display solutions, which help to drive sales; from counter-top units (CDUs) taking a small footprint in prime positions, to compact-yet-impactful free-standing display units (FSDUs), or even full vape walls to really make an impact,” says John Taylor, chief marketing officer at Dinner Lady vapes.
And if one solution doesn’t meet a store’s needs, companies such as Dinner Lady are happy to come up with something bespoke. “We can customer-design materials for your specific space, by working with our in-house designers, to best suit the retail environment,” Taylor adds.
Focusing on new flavours
With flavour such a vital component of this market, it has understandably become a focus of product development.
“We believe that in order to successfully transition adult smokers away from cigarettes, products have to appeal to adult smokers, be satisfying and replicate their previous cigarette choices,” says John Patterson at Juul. “We launched Menthol JUULpods in April to offer adult smokers, particularly those who preferred mentholated cigarettes a wider range of alternatives. Our latest launch of Rich Tobacco JUULpods addresses the desires of adult smokers who prefer the flavour profile Virginia tobacco, the blend used in nine out of every ten cigarettes sold in the UK. while Menthol JUULpods is the most successful launch this year in terms of value sales.”
Duncan Cunningham agrees that menthol is now key. He says: “The range of devices on offer should always be supported with a strong portfolio of e-liquids, especially fruit and menthol flavours, in a variety of nicotine strengths, including nicsalts like MyBlu Intense, to cater for all tastes. Our best-selling variant in the MyBlu range is the Menthol Intense Liquidpod, so we would highly recommend this as a must-stock for all retailers.”
Getting the right flavours to vapers is just as important in the more specialist e-liquids market. “The development of flavours is only limited to the creativity of the mixologist,” says Luke Van Dijk, sales direct at Flavour Warehouse, brand owner of Vampire Vape. “It is possible to replicate most imaginable flavours. However, that does not mean that all flavours become popular to vape. Throughout our eight years of manufacturing, we have seen many flavour trends but ultimately, it’s always the core fruit, menthol and tobacco flavours that remain the most popular.”
While the bestsellers are clear, major brands are following specialist e-liquid brands in creating ever more eye-catching flavours. One such flavour comes from BAT’s Vype range which recently launched a Tequila Sunrise e-liquid, which the company describes as an “adult-appropriate beverage-inspired” flavour.
Evolution of e-liquids
There is so much focus on podmods or capsule systems that it can be easy to forget that open systems remain at the heart of many stores’ vape sales. As with other areas of this market, the e-liquids sector is changing fast thanks to the pace of innovation.
“The two major liquid developments in recent years have been both the emergence of nicotine salts and the increase in menthol tobacco flavours resulting from the recent menthol tobacco ban in May 2020,” says Luke Van Dijk.
Nic salts, for the uninitiated, is an alternative to the more traditional freebase nicotine used in most e-liquids. Nic salts are understood to have a quicker body absorption rate,making them ultimately more suited to recent ex-smokers who are looking to maintain the nicotine “hit” associated with tobacco.
Nic salt e-liquids are now ubiquitous across e-liquid brands big and small and have also moved into the capsules market with the likes of myblu Intense and VypevPro cartridges.
Heat not burn
This segment of the “next generation nicotine products market” has been so far something of a slow burner. Not anymore.
This month has seen the launch of JTI’s Ploom system, currently available in just 30 London stores after the 30 vape specialist businesses (and two JTI-run Ploom “lounges”) were forced to close within days of the launch due to lockdown.
Ploom is the first competitor to Philip Morris’s IQOS system and features a new shape, promising a no-puff limit experience. The system uses EVO sticks, the equivalent of IQOS’s HEETs, which retail at £4.50 per pack of 20.
Nick Geens, Head of Reduced Risk Products at JTI, says: “It is predicted that by 2025 there will be nearly one million Ploom users nationwide and that traditional retail will contribute to two thirds (67 percent) of this volume.”
While the plan is to launch Ploom gradually, starting solely in the capital, stores which wish to stock the system are encouraged to speak to their JTI rep.
IQOS, meanwhile, isn’t standing still. The company has launched Sienna Caps. The company says: “Sienna Caps HEETS offer the rounded, toasted tobacco blend of Sienna Selection with its woody and light tea aroma, which in a click delivers a cooling menthol breeze with notes of zesty mint.”
With BAT’s Glo heat-not-burn system launching in multiple European markets in 2020, it is likely that 2021 will be a big year for the sector.
Another area of this market which has developed substantially during 2020 is nicotine pouches.
One brand to emerge is Swedish Match’s ZYN pouches which the firm describes as “a modern way to enjoy nicotine, free of smoke and free from tobacco”.
“This enables you to have your nicotine wherever, whenever: at the pub with friends, during a business meeting or at home. Always stay present in the everyday moments. Now you can”, says Paola Midence, Swedish Match Brand trade manager Europe.
The product is already available in independent stores but its market position was recently boosted by being listed in almost 1,300 Sainsbury’s stores.
British American Tobacco is also investing heavily in the pouch market with the recent launch of its VELO brand in the UK. Flavours include Polar Mint, Tropic Breeze, Ice Cool and Urban Vibe.
JTI’s Nordic Spirit and Imperial’s ZoneX have also launched over the past 12 months, making this one of the most vibrant segments of the next-generation market.
That there is so much activity in this market – across each of its individual segments – is further proof that this is a category that now demands attention of stores of every kind. Only one question now remains: What are you waiting for?