Trade in tobacco is still well alight, and the recent action by government to attack vaping might just give the category a shot in the arm
It is unfair to say, as was reported in a national newspaper, that Big Tobacco will be “rubbing their hands together” at the prospect of the disposable vapes ban – not least because the tobacco companies are themselves now largely committed long-term to going “smokeless”, and have invested heavily in their own vape and heated tobacco brands and devices: blu, Ploom X, IQOS, Vuse – a panoply of products intended to replace tobacco now exists as a result of massive investment and strategic re-direction from the majors.
It is understandable. Cigarette smoking has been declining for years, at a rate of about three per cent annually, and could have been expected to carry on like that, hastened by the fact that vapes – and especially single-use e-cigs – were attracting more and more smokers and those who would have smoked (including rebellious teenagers).
In the light of the interestingly credulous vape ban announced by the Conservative government– which not only makes illegal the disposable version of vape devices, but also limits the flavours of the remaining legal vape products to just four – we might expect the fortunes of traditional tobacco products to see something of a revival. It is not just that smokers will now continue to smoke or revert from the e-cigs they were trying (and liking). It is also because the message the government has transmitted via the ban is that vaping is dangerous, and that smoking is a simple alternative – even though vapour is around 90 per cent less harmful than combustible tobacco.
For hard-pressed retailers, more than ever at the mercy of preening or panicking politicians, the wise thing to do, now that a large part of their vape section is redundant, would probably be to refill it with traditional tobacco products. They will predictably witness an uptick in consumer demand.
Surveying the scene
With the tobacco category worth £14bn each year (before tax), it continues to hold a significant amount of value for retailers – and probably much more so following the government’s vape ban. Any generational tobacco ban would not be put into effect until 2027, so no need to worry about that just yet.
Imperial Tobacco’s UK Head of Consumer Marketing, Tom Gully, says there is basically a 50/50 market share split between Factory Made Cigarettes (FMC) and Roll Your Own (RYO) categories, at 54 per cent and 46 per cent respectively, and with more consumers looking for ways to reduce spending amid soaring household costs, he says the industry is continuing to see a shift towards value products across the entire tobacco category.
“We’ve seen shopper demand for value gain momentum as a result of the cost-of-living crisis and we’re now seeing the lower-priced tiered products account for the largest proportion of tobacco sales,” said Gully. “For example, the sub-economy segment now makes up for 63 per cent of FMC sales, while the economy segment accounts for just over a half (56 per cent) of RYO, and these segments are showing strong growth at three per cent and five per cent year on year respectively.”
A general secular contraction is slowly taking in the tobacco market as older smokers “age out”, while many in the younger generations either do not partake or switch to vapour instead, and a move to value tobacco and RYO occurs among those who continue to smoke. But that still does not mean tobacco is an unprofitable category for retailers: there remains a lot of revenue and margin in the products. That also goes for cigars, as Nataly Scarpetta, Marketing Manager at Scandinavian Tobacco Group UK, explains.
“Our latest data shows the total UK cigar category to be worth £295m in annual sales, which is a value increase of 3.2 per cent versus the same time last year,” she says.
“This positive performance is mainly down to cigarillo sales, which account for the largest of the four segments in the cigar category, and the only one currently in growth. Cigarillos are now worth over £111m in annual sales and are responsible for very nearly half of total cigar volume sales.”
Scarpetta points out that in these challenging financial times, price is always going to be high on many shoppers’ agendas, “so we always advise retailers to make sure they are highlighting their value brands to customers to help them save money.”
She says that (as with FMC and RYO) the trend for value has been prevalent in the cigar category for some time now, which is evidenced by the success of STG’s Moments Blue brand.
“In fact, our Moments 10’s packs are the biggest brand in the VFM segment and are well-known amongst tobacco-selling retailers as a popular choice amongst those customers who are looking to save money, and our Signature Action brand is currently the fastest growing cigarillo, experiencing sales growth of over 41 per cent versus the same time last year.”
But it’s not just cigarillos which evidence the popularity of flavoured cigars.
“Our Signature Red Filter brand is currently the UK’s best-selling aromatic filter cigar, with a smooth taste and vanilla flavour which proves consistently popular with those adult smokers who enjoy a flavoured cigar.”
What’s hot?
Its value and RYO all the way down, according to Gully.
“With many shoppers looking to cut down their household spending, we’ve noticed a significant increase in the number of RYO sales accounting for nearly a half of all tobacco sales,” he says, and as the cost-of-living crisis continues, it’s likely that the need for value products is going to continue to be a dominant trend in the category for some time
“Retailers need to make sure they can cater for this demand by stocking the right product offering. With this in mind, we strongly advise to check that they stock a wide range of leading RYO brands, including Riverstone and Players JPS, so that they are fully prepared for this continuing rise in demand for value tobacco products.”
Last December, Imperial announced the return of two of its limited-edition ranges to allow retailers to cater for this rising demand for value. The two formats, launched exclusively for the independent channel, include its popular range of 21s packs and its 32g pouches of rolling tobacco.
The relaunched line of 21s packs is available to buy across two of Imperial’s best-selling brands, including Richmond 21s at an MRRP of £12.25 and L&B Blue 21s at an MRRP of £12.50. Alongside the 21s, Imperial is also bringing back its 32g packs of rolling tobacco for its popular brand, Riverstone, at an MRRP of £18.50.
“With the cost-of-living crisis continuing to impact household spending, we don’t expect this [hunt for value] to change any time soon,” Gully says. “By bringing back our range of independent exclusives, we are equipping retailers with bigger formats for some of our best-loved brands that will help them to cater to this rising demand for value. Both formats are available for a limited time only, so we’d recommend retailers take advantage of these added-value lines whilst stocks last” – and as at the time of writing, Bestway says that Richmond and Riverstone are both going fast!
Just last month, Imperial announced a new update to its L&B Blue and Embassy Signature New Crush variants – also to enable retailers to respond to the continued demand for value tobacco products.
The newly updated variants, L&B Blue New Crush Fusion and Embassy Signature New Crush Fusion, boast the new “Fusion” large bore filter, nearly 20 per cent larger than a standard-size bore filter, “promising a new smoking experience”.
The New Crush Fusion range also features a white tip and a resealable foil to guarantee continuous freshness, as well as special tipping paper to provide the innovative cooling sensation. L&B Blue New Crush Fusion and Embassy Signature New Crush Fusion are available for an RRP of £12.50 and £12.25 respectively.
“With Kingsize cigarettes seeing impressive growth in both the economy and value-priced sectors, stocking our New Crush Fusion range will help retailers to tap into the continued demand for value tobacco and in turn, maximise sales,” Gully says.
In addition, Imperial has extended its Players range with the launch of Players Max to enable retailers to cater to the ongoing demand for value tobacco. Players Max features cigarette sticks that are 12 per cent longer and contain a new intense blend, a popular and preferred choice in consumer testing thanks to its fuller tobacco taste.
The new variant also features a modern and stylish, bevelled-edge pack which feels more robust and firmer in hand and has an RRP of just £10.50, £1.35 less than Players’ standard Kingsize format.
JTI, meanwhile, is also actively serving the demand for value with the recent, October launch of Mayfair Gold King Size and Superkings 20’s, offering a premium quality Virginia blend at an ultra-value price.
Mayfair Gold will join Mayfair Silver with an RRP of £11.60 as one of JTI’s lowest priced cigarette brands.
As well as having a premium blend, Mayfair Gold packs will have rounded corners and modernised outer packaging. This will also be available on Mayfair Silver.
“Price remains the main consideration when existing adult smokers are making a purchasing decision,” said Mark McGuinness, Marketing Director at JTI UK. “By stocking iconic brands, like Mayfair Gold, at ultra-low prices, retailers can capitalise on the sales opportunity from this new launch.
“The ultra-value sector remains a key priority for us, as the fastest-growing segment in both RMC and roll-your-own tobacco. In fact, as of July 2023, ultra-value brands have a 27.9 per cent share of RMC volume and this continues to grow month on month.”
Meanwhile, small cigars and cigarillos should certainly be in the mix of current tastes in tobacco, with the category worth over £8 million a month of that £295m total cigar category turnover.
“Whilst obviously not matching the sales volumes of cigarettes or RYO tobacco, cigars are an important part of the tobacco category for convenience retailers because they drive footfall in-store and particularly as a driver of profit in tills, as they typically offer up to three times the margin that cigarettes do,” says STG’s Scarpetta, who points out that Moments Blue brand offers up to an impressive 18 per cent margin when sold at its RRP.
“With cigars, it’s more important to stock the right range rather a big range, so we usually advise retailers to consider stocking the top two or three brands in each of the four cigar segments, as the top ten biggest sellers overall account for well over 90 per cent of total sales,” she adds.
STG’s Signature brand celebrated its 60th anniversary in 2023 with the launch of some limited-edition packs and the permanent return of the iconic tins for packs of 20’s. It has now followed that with a contemporary redesign for its Signature cigar range which currently appears on packs of Signature Blue, Original and Red Filter. The overall design has been simplified and more focus has been added to the leaf icon to emphasise the unique nature of the product. “Whilst the packs have changed, the cigars inside certainly haven’t, and will continue to offer adult smokers a smooth taste and smoking experience with unquestionably high quality,” Scarpetta notes.
Around the same time STG was celebrating its birthday, JTI expanded its cigarillo portfolio with the launch of the Sterling Dual Double Capsule Leaf Wrapped, offering double the flavour with a combination of peppermint and berry mint capsules.
“Sterling Dual Capsule Leaf Wrapped has had a strong couple of years since launching in 2019 and we wanted to build on this success by providing retailers with new flavours that respond to current trends,” said McGuinness. “We know that berry is already a popular flavour within other categories, such as Vape and Heated Tobacco products, so with this innovation we know we can help retailers drive incremental sales in their store. What’s more, the lower price point and the fact we can offer a 10-pack, means retailers can cater to those shoppers looking for value-for-money tobacco options – something we know is important for many, now.”
Accessorise!
As demand for Roll Your Own (RYO) tobacco grows in the light of the rising consumer appetite for value, the tobacco accessories category provides a substantial sales opportunity for retailers, points out Gully.
“Recent figures show that filter tips are worth a sizeable £114m of sales, and while regular papers account for £44m, king size papers £29m and combi papers are also proving to be popular at £33m,” he confides. “With this in mind, we strongly recommend stocking a wide range of products across each of these segments to cater for customer needs and maximise the sales opportunities on offer.”
Gavin Anderson of Republic Technologies agrees, and says the company is set to accelerate demand further for its fast-growing OCB range with the introduction of OCB Authentic REAL Rice Paper to the UK market.
Organic and chlorine free, OCB Rice Papers are made from a blend of rice and organic hemp. The unbleached, ultra-thin papers deliver a premium rolling and slow-burning experience in a natural, brown paper.
Featuring 32 papers per pack, OCB Rice is available in both Slim (RRP, £1.10) and Slim & Tips (RRP, £1.73).
Gully points out that with over 200 years of heritage, Rizla is the perfect brand to stock to tap into the value-seeking trend. “One product that is proving popular with value savvy tobacco customers is as Rizla King Size Combi Silver. With an RRP of £1.20, it offers both papers and tips in one pack to provide shoppers with the ultimate convenience so is a must stock product for any retailer.
One last drag
The tobacco category has been forced to accommodate itself to many changing circumstances over the recent past – the menthol ban and plain-packaging legislation, ever-increasing taxes and the challenge from vape (watch this space!), and now the threatened generational tobacco purchase ban. Nevertheless, it has proven to be enduringly popular with its loyal customers, and manufacturers have dealt creatively to the limits imposed on them, while responding to an evolving market and consumer preferences.
It’s a tough market but remains a rewarding one for retailers.
“Our advice to retailers would always be talk to your customers about what tobacco products they are looking for and what you have on offer,” says STG’s Scarpetta. “Some former cigarette smokers may potentially be interested in cigarillos or even happy to treat themselves to a larger cigar, but you’ll only find that information out if you talk to them.”
Imperial’s Tom Gully says that brands rule, and staying on top of any new trends within the tobacco category can be a great way to ensure maximum sales impact.
“However, it’s important to remember that every store is different, so retailers should analyse their sales data and talk to their customers on a frequent basis to understand what product they are looking for and purchasing often,” he says. “Once retailers have an understanding of this, then they can tailor their range accordingly.”
He adds that making sure stock levels are continuously maintained is also key to improving sales. If retailers run out of popular products, it can be costly, particularly within a category that is mainly driven by brand loyalty. With this mind, Gully concludes that store owners and their staff should consistently check their stock levels – both on the shelf and in the stock room – to ensure they’re not missing out on any sales opportunities.
Gavin Anderson reiterates that retailers have to keep eyes on the deciding factor in consumer preferences: Value: “Shoppers are more demanding than ever, looking for quality and value in every purchase. Top quality products, displays and innovation are important, complemented by broad availability and distribution, but the importance of a competitive price point should not be under-estimated,” he concludes.
Trends and insights
Republic Technology’s CEO, Gavin Anderson, gives his tips on how to drive sales by meeting shopper needs with quality, value and choice
- As the economic climate continues to impact on consumer confidence and shopping habits, the UK’s tobacco accessories category is maintaining its strong performance.
- The tobacco accessories category enabled retailers and wholesalers to meet growing consumer demand by offering products which not only provide value for money, but also quality and choice.
- The category’s robust performance resulted in year-on-year growth of 6.8%*1, with annual sales of accessories now valued at a massive £352m*1.
- The category’s fastest growing sector is rolling papers, which is also the highest value, growing at +13.3% and worth over £73m in convenience alone*2.
- OCB, the UK’s fastest growing paper brand in the tracked market, is leading the charge with growth of +45% YoY*1, underlining its importance to all tobacco accessories’ stockists.
- The Slim & Tips subcategory is also recording impressive growth with value sales upwards of £32m*1 as more consumers opt for premium formats. This growth reinforces the role that brands such as OCB can play, not only in retaining existing consumers but also in attracting new shoppers to the fixture.
- Roll-your-own products are becoming even more synonymous with value, and look set to appeal to even more consumers who want to cut costs without having to make major lifestyle changes or compromise on quality.
To use this website you must be aged 18 years or over. Please verify your age before entering the site.
