No mess, no smoke, no smell

British American Tobacco’s UK general manager, Fredrik Svensson, tells Asian Trader how the business has navigated a challenging 2020 and why there has “never been a better time” to get involved in next generation nicotine products. Tom Gockelen-Kozlowski reports

0
Fredrik Svensson

“We are very proud of our field force and what they’ve accomplished during such difficult circumstances to help our retail partners and their consumers,” says Fredrik Svensson, general manager British American Tobacco UK & Ireland.

In a difficult year for FMCG brands of all kinds, those which have continued to invest in rep teams have been well positioned to use this expertise to support stores through tough times. BAT is no different.

“We transformed our field force into a telesales force during lockdown as we had to keep many of our field force at home for extended periods,” says Svensson.“They were given plenty of technology, reporting insights and different ways to communicate with retailersto explain the deals that we had available and how we could serve them remotely.”

The pandemic has come at a point of existential transformation for one of the world’s biggest tobacco companies. After decades of operating with increased regulation and taxation on its products, BAT is now increasingly pivoting away from combustible tobacco and focusing instead on its next generation products portfolio. This approach has been codified by its Better Tomorrow corporate strategy.

“At BAT our purpose is to build a better tomorrow by reducing the health impact of our business through offering a greater choice of enjoyable and less risky products for our consumers,” Svensson says. “While vaping is not risk free, according to nearly all major public health bodies in the UK, including Public Health England, vaping is around 95 percent less harmful than smoking.”

The key, Svensson says, to succeeding in next generation products is “consumer satisfaction” and in a fast-evolving category ensuring this doesn’t come cheap. BAT has invested well over $1 billion in developing next generation products since 2012.

 

Vype ePod

“Understanding this innovation and expertise can go a long way in assuring our customers they’re getting a quality product. Quality and innovation are at the core of every phase of our production process and our team of more than 50 scientists at our global R&D facility in Southampton, including toxicologists and bio-scientists, aim to create the most reliable products possible. We have developed a specific campaign called ‘Vape Quality Matters’ with a hub on vapermarket.co.uk to help reassure retailers and consumers that Vype devices and e-liquids are developed to the highest standards of quality and safety.”

Safety has become central to this category, in particular due to the EVALI scandal where, for some time, it appeared that all vape products were causing permanent lung damage to users in the US. It was quickly discovered that only those containing Vitamin E Acetate (those e-liquids found on the black market, most of which were cannabis-based) which were responsible, but the mud stuck for the whole industry.

Svensson says: “We rigorously assess everything that goes into making our products, as well as the emissions that come out of them, and we are one of only a handful of vaping companies operating in the UK who take such a thorough approach to product stewardship.”

In addition to safety, however, BAT has worked hard to ensure its Vype-branded vape products provide the requisite high-quality experience. This means meeting the needs of the full breadth of vaper tastes and preferences.

“Consumer choice is at the heart of our business, which is why we offer a constantly evolving portfolio of smoke-free, alternative nicotine products,” Svensson says. “In response to the menthol tobacco product ban we launched several new flavours for Vype, the leading closed system brand. These included Peppermint Tobacco and Just Mint for the ePen3, and Peppermint Tobacco and Creamy Mint for ePod, across various strengths.”

This evolution of the Vype range offers significant sales opportunities for retailers as discerning vape customers look for the latest product to satisfy their nicotine cravings.

“We continue to see closed system vaping devices becoming the vapour product of choice for nicotine consumers, which is why we have invested significantly to achieve our market leading position with our flagship brand Vype. We have always been at the forefront of innovation in the vaping category and we are delighted that this is reflected in Vype’s ranking as the number one closed system device in the UK, according to Nielsen,” Svensson says.

In a market where it is impossible for even the most successful brand to stand still, the Vype brand will inevitably evolve and expand further as trends change.

“As consumers become more familiar with the vaping category, the consumer journey typically moves from a tobacco or mint flavour and then progresses to different flavours and strengths,” says Svensson.“We are seeing the emergence of fruit flavours as a significant segment as well as more adult appropriate beverage-inspired flavours such as Vype Tequila Sunrise.”

This investment in bringing new products to market is one of the clearest signals of the confidence that BAT has in its new nicotine products portfolio.

“I’m sure these new innovations will continue to help our retail partners to thrive. There’s never been a better time to make sure that retailers take this new category seriously and stock our award-winning products and our innovative menthol vaping alternatives,” says Svensson.

In a year that has seen so much upheaval, the idea that there has never been a better time for the Vype brand in the UK may raise eyebrows, but Svensson stands by this evaluation.

“Despite everything that’s happened this year, Vype continues to thrive with more than 77,000 weekly customers in traditional retail and has won Product of the Year in the vaping category for two years in a row for Vype’s ePen 3 in 2019 and ePod in 2020.”

Vype gantries, with high-tech design cues, are far from a boring functional piece of storage

Meanwhile, Svensson says the firm has also improved its links with stores:“We have further strengthened our relationships with independent trade partners throughout 2020 with our Vype gantry programme which we have rolled out across the UK, reaching 5,500 installations.

“Our display solutions are well-designed, high-quality and give the unique option to use 40 per cent of the display space to list any competitor products retailers might have, and the remaining 60 per cent of space will be for our brands.”

This is one of many examples from vape brands – both tobacco company-owned and not – to capitalise on the decline of cigarette SKUs and the decisions many stores are making to dedicated the space to other categories.

“Without menthol tobacco products taking up space anymore there is of course more room up for grabs in the shop. Retailers have increasingly chosen to invest in smoke-free alternative nicotine products, with vapour product ranges leading the way.

“It really is a great display solution and we are already hearing positive feedback about increased sales. We would encourage any retailer out there to get in touch with us to discuss how we can further develop our partnership,” Svensson says.

This, in a roundabout way, gets us back to the sales force. Svensson says that display has been a key part of the message his team has been sharing with stores this year: “If products and categories are scattered across the shop, your display becomes disjointed and creates confusion for retailers, staff and consumers alike.”

So, what other advice does his team have for retailers? Svensson says improving knowledge of the category is the first and biggest challenge.

“Education is key in such a large and fragmented sector. Our vapermarket.co.uk portal has different learning sections for retailers and staff, to give you the power in helping adult nicotine consumers choose the right products for them,” he says. “Retailers knowledgeable about the category can assist their consumers and build trust securing repeat visits and sales. We would always encourage retailers to speak to their local BAT sales representative, who can provide up-to-date advice and information on the category and trends.”

The positive news is that this work is going on at a time when Svensson and his team at BAT are seeing vape consumers tilt towards the independent trade.

“Having experienced the recent menthol tobacco product ban, and the lockdown period with so many people changing their shopping habits, there’s a clear trend emerging in the market. People are increasingly turning towards the convenience channel as they don’t want to travel further away than they need to or to visit the bigger crowded stores,” he says.

“With vape shops closed during lockdown, this has only increased the move towards convenience shops.”

While – and Asian Trader keeps its fingers and toes crossed before writing this – lockdown is a temporary challenge, BAT is now using this shift towards convenience to adjust its sales strategy going forward.

“This is a major change in the sector and for our business as well. However, we certainly see this as a great opportunity to invest in building strong relationships with our retailers and increasing our range to accommodate their costumer’s needs.”

This approach extends beyond vape. Last month, and reacting to huge market growth, BAT launched its VELO nicotine pouch brand in the UK.

“These products come in a range of different flavours and nicotine levels, designed and created to become market leader in this emerging category. We designed these tobacco-free pouches to be the easiest, most convenient nicotine pouch at our consumers’ disposal,” Svensson says.“There’s no mess, no smoke, no smell, which means VELO can go absolutely anywhere with you.”

VELO is already the number one nicotine pouch in Scandinavia, according to Nielsen data and, in further proof of this sector’s growing importance, the company announced this month that it has also acquired the US pouch brand Dryft which will now also sit within the VELO brand, providing an even larger range of flavours for VELO users in the US.

With the VELO and Vype brands, BAT looks to be in a strong position for next step in the evolution of this category. And this is without even mentioning the heat-not-burn market.

BAT’s Glo system has gained plaudits in the Asian markets where it was first introduced and has now started a Europe-wide expansion which includes Romania, Italy and Spain. BAT remains tight-lipped on a UK launch for the system but with the launch of JTI’s Ploom system as the first major challenger to IQOS, it wouldn’t be a surprise to see Glo arriving in UK stores in the not-so-distant future.

For now, however, Svensson wants to make sure stores capitalise on the opportunities already present in this profitable, fast-growing category.

“We certainly expect 2021 to be a very busy year as we continue to see the vapour category evolve. Vaping technology gets faster, more efficient and the devices get smaller and more powerful. BAT UK is at the forefront of this innovation with our award winning Vype brand. We will continue to innovate and develop world class, quality devices for our consumers.”