In 2025 we stand at a fork in the road in the tobacco market. Soon, a new Tobacco and Vapes Bill will come into force that will forbid the sale of tobacco products to any adult born after a certain date. Regardless of what you may think of this new retail apartheid, the implications for the sector are clear: it will evolve and attempt, as many tobacco companies are even now doing, to leave combustible tobacco behind forever; or, should we say, for good?
A few observations in the meantime: the vapes and next gen market, of which heated tobacco, included here, is also a part of (like a hybrid EV, with a foot in both camps, but incomparably safer to consume than traditional cigarettes), is truly thriving. On 1 June, however, disposable vapes, which are at present incredibly popular, will be banned, and vapers will either need to switch to pods – which many vapers are doing already – to nic pouches (see the feature in this issue), or to some other form of nicotine ingestion.
Some speculate that many vapers, discouraged by hostile legislation and black propaganda about the ill-effects of vapour, will see no point in carrying on their migration away from tobacco, and will return to cigarettes (while others might boost heat-not-burn sales).
At the same time, the demand for tobacco in the form of cigarettes and rolling tobacco (RYO) remains (and we choose the word advisedly) healthy – except in terms of revenue for the Exchequer. The market for illicit tobacco has caught fire and has perhaps reached a tipping point. Now, something like half of all cigarette sales are “out the back of the store” – or the barbershop or the pub or the van. In short, endless new regulations placed on smokers, producers and retailers over the years, together with ever-increasing taxes, compounded by a seemingly never-ending cost-of-living crisis, have driven many cash-strapped customers into the arms of illegal gangs importing or manufacturing inferior, often dangerous but undisputedly much cheaper tobacco products.
Yet the products on offer from proper tobacco manufacturers in the UK are arguably better than ever, as the producers manage with skill the slow transition from traditional products towards new and innovative alternatives – realising that their existing customers remain important and should be catered to with both quality and value, in the face of rising prices and multiplying restrictions.
Value rules
The UK tobacco category is estimated to be worth more than £22bn each year [Statista], and accounting for the biggest share of all tobacco sales (70 per cent), cigarettes still hold a huge amount of value for retailers, confides Andrew Malm, UK Market Manager for Imperial Brands
At the same time, the share of the market for value roll-your-own (RYO) products has increased by nearly two per cent year on year, making it the fastest-growing segment, now accounting for more than a quarter (24 per cent) of all RYO sales [ITUK Data, October 2024].
This is not surprising, given the cost savings in using loose tobacco, and over the years we have noted, repeatedly, how increasing taxes on tobacco have eroded the old division between FMC smokers and the RYO community
“With more consumers looking for ways to reduce spending amid soaring household costs, we’re seeing a shift towards lower-priced propositions in both RYO and factory-made cigarettes (FMC)," confirms Malm.
“More generally, there is also continued demand for more intense tobacco blends and greater variety. This is driving sales in smoking accessory products such as flavour cards and menthol filter tips” – and indeed, the accessories category is doing fine, as all smokers need papers and filters, whether they buy their tobacco from a legitimate store or a white van.
“Looking ahead,” says Malm, “we anticipate that the move towards value products will continue to intensify as pressures on the cost of living remain for many.”
He believes the search for value is very much a long-term trend, and smokers are shopping around to find a product they enjoy smoking without it hitting them too hard in the pocket. With products in the lowest pricing tiers (economy and value) now worth 72 per cent of all FMC sales in the UK [ITUK], it’s clear that sales in the category are very much driven by demand for value.
Launched in late 2024, Paramount is Imperial’s new cigarette brand aimed at adult smokers who are seeking excellent value without compromising on quality.
It uses top-quality, full-flavour Virginia sun-ripened tobacco, meeting the needs of the majority of cigarette smokers in the UK, where now 90 per cent of cigarettes are Virginia blends and 83 per cent full-flavour tobacco – a major trend.
Malm notes that the value sector has grown by five per cent in the last 12 months alone. With an RRP of £12.50, Paramount is available in both king-size and super king-size formats, again reflecting the broad demand for both sizes among UK smokers.
With existing adult smokers increasingly looking for products that offer premium quality at an ultra-value or value price point, JTI has also continued to invest in the category with recent innovations such as Mayfair Gold, which the fastest growing new tobacco brand in 2024, says Lisa Anderson, Marketing Director at JTI UK.
JTI expands Mayfair Gold range with new ‘roll your own’ format
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“Mayfair Gold represents JTI’s cheapest offering in both the RMC and RYO sectors, demonstrating JTI’s commitment to the Ultra Value sector – which remains the fastest growing in share terms at 17.6 per cent of the combined tobacco market,” she says.
“Over 70 per cent of shoppers who purchase tobacco in convenience say price is the main reason for their visit and the majority of tobacco customers said price is important when purchasing the product in store, therefore, retailers should ensure they remain competitive by selling at RRP.” Anderson adds that retailers can take advantage of the Margin Calculator on JTI360, JTI’s retailer hub, to establish their profit per pack [of JTI brands], making it easier to set competitive prices without sacrificing profitability.”
“Our RYO product sales have grown eight per cent year on year,” Andrew Malm continues, “making it the fastest-growing segment, accounting for 24 per cent of all RYO sales. JPS Gold Leaf is our top RYO seller, followed by Golden Virginia Original and Riverstone. Embassy Signature is our fastest-growing brand in this category.”
He says that data shows 30g packs are now by far the most popular, making up 69 per cent of all RYO sales: “With this in mind, it’s clear that value-focused customers are increasingly opting for budget-friendly RYO products that offer the lowest out-of-pocket spend.”
To cater for this demand, Malm advises it’s key that retailers stock the right RYO product offering and he recommends offering a wide range of leading brands such as Embassy Signature, Riverstone and Players JPS. “Although 30g formats may be proving the most popular for shoppers, larger formats still account for 31 per cent of RYO sales, so ensuring a range of 50g formats is available should also be a focus,” he says.
“While products in the value and economy price tiers account for more than half of RYO sales, the premium price sector in fact holds the largest share of the RYO market at 36 per cent [ITUK Report on Trade, November 2023]. This demonstrates that, despite the focus on value, there are still many adult smokers who remain brand-loyal and are willing to pay a higher price for a brand they know and trust. With this in mind, we’d recommend that retailers stock a range of leading premium RYO brands, including Golden Virginia.
Cigar sophistication
One category that has seen a big revival in recent years is the cigar – or more specifically, the cigarillo – category, where the tasty little smokes are seen as a sophisticated alternative to traditional FMC.
Far ahead in this category is Scandinavian Tobacco Group UK (STG) – also succeeding brilliantly with its nicotine pouch brand, XQS.
“Our latest data shows the total cigar category to be worth just over £324m, which is a year-on-year value growth of five per cent.” says Prianka Jhingan, Head of Marketing at STG. She explains that the cigar category is split into four segments, the largest being cigarillos, which has enjoyed rapid growth over the last five years and is now responsible for over 57 per cent of all cigars sold in volume terms.
“We can no longer call it a new trend,” says Prianka, “but there’s no doubt it’s cigarillos which are the current success story within cigars. This segment only really started five years ago but sales are now worth nearly £150m.”
Prianka reveals that in the last 18 months or so, distribution has improved, and sales have really shot up for STG's Signature Action cigarillo brand: “It’s currently worth over £6.5m and its sales have grown by over 50 per cent since last year, with consumers appreciating the great flavour and cheaper price point. And this current growth in cigarillo sales shows no signs of slowing, so we expect this positive performance to continue throughout this year and beyond.”
With the cigar and especially the cigarillos shelf, retailers must ensure they are fully stocked with the best-selling brands and, where possible, making sure they try and match the multiples on price.
“Tobacco remains an important category for independent retailers to get right, not only for the revenue it brings into their till, but as a driver of footfall and repeat business from regular customers and the associated basket spend which goes with that,” Prianka says.
“The top ten cigar brands account for well over 90 per cent of total sales, so there’s little point tying up your cashflow and filling up your shelves with slow-moving brands. From our portfolio I’d recommend retailers stocking as a minimum the two skus in our Signature Action Mix portfolio, as well as Signature Blue, Moments Blue and our Henri Wintermans Half Corona, which is easily the best-selling cigar in the medium / large segment.”
She adds that it’s always worth reminding convenience retailers that cigars are exempt from the plain packaging legislation, so they can be stocked on the middle shelf of the gantry where they are visible, and more likely to be purchased by adult smokers who can see them.
“The search for value is nothing new in cigars, and certainly there’ll always be some customers who are shopping on price and looking for the lowest-cost options, or perhaps ten packs instead of larger pack sizes. 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.”
However, whilst value can of course be a motivating driver of purchase in the cigar category, many adult smokers do often like to take the opportunity to “trade-up” to more premium or larger format cigars at certain times of the year.
Prianka says, “One such cigar is of course our Henri Wintermans Half Corona brand, which is by the far the UK’s best-selling medium / large cigar and is often given as gift on special occasions like birthdays, Father’s Day, or Christmas.”
At the start of 2025 STG announced the addition of Signature Action Mix cigarillos to its portfolio. Action Mix contains two capsules that combine the flavours of Berry and Mint. They come in ten-packs with an RRP of just £5.85 (lower than competitor brands while still offering an attractive margin to retailers).
“The new Action Mix cigarillos are a key focus for our sales force, who are targeting over 10,000 convenience stores at the moment to talk to them about the launch, as well as offering them branded merchandise,” concludes Prianka.
Smoke-free smoking
Heated tobacco, or heat-not-burn (HNB) products continue to build market share, and this Junes Disposable vape ban holds the potential to attract a certain number of vape “refugees” to this near-smoking alternative to traditional smoking, which does not involve setting the tobacco alight and therefore evades most (95 per cent) of the harmful chemicals released when doing so.
The UK market is split mainly between JTI’s Ploom and its Evo heat sticks, and Philip Morris’s IQOS, with its TEREA range of heat-stick flavours.
The HNB kits have a higher initial investment point than vapes, although it’s longer lasting and beautifully produced, and the gospel is slowly spreading through the country, with ever greater take-up and many satisfied customers (often, ex-smokers who really love their tobacco and for whom vapour doesn’t quite cut it).
PML has just announced the expansion of its TEREA range with the launch of TEREA Silver, available now in convenience and wholesale channels. It is the newest addition to the TEREA portfolio, a designed exclusively for use with IQOS ILUMA heat-not-burn device.
The new variant offers a balanced, toasted tobacco blend gently refined with light aroma notes of spicy herbs. TEREA Silver will complement retailers’ stock ranges, offering more choice for adult IQOS ILUMA users that prefer the Amber, Sienna and Russet variants.
The addition of TEREA Silver expands the full TEREA flavour range to 16, including six innovative, capsule-based TEREA Pearls flavours.
Available across all indirect retail channels, retailers can benefit from profit-on-return (POR) offers on TEREA Silver, which are used exclusively with IQOS ILUMA.
“The launch of new TEREA Silver is a further step forward on our mission to support adult smokers in making the switch away from smoking cigarettes, says Anthony Loinsard, Head of IQOS UK and Ireland at PML.
“For some adult smokers, having responsible access to a preferred flavour can be an important factor in making the switch from smoking cigarettes. By expanding the range, retailers also have more opportunity to offer their customers real tobacco satisfaction that can help them stay away from cigarettes for good.”
It is notable that IQOS ILUMA has achieved remarkable growth since launching in the UK in September 2023. It now holds a five per cent national share of the total heated tobacco and cigarette market, and an impressive 10.2 per cent share in London– highlighting the potential for across the country.
IQOS ILUMA enables savings of up to £3,400 a year compared to cigarettes, which should appeal to smokers seeking value and looking to quit.
Accessorise!
Tobacco accessories continue to be a key category for convenience retailers. What’s more, sales in the convenience channel now count for more than half of all tobacco accessories and are valued at £241m, growing at 14 per cent year-on-year, making it a must-stock (and compact, mostly counter-top) for indie retailers.
The tobacco accessories market is performing very strongly because value is pushing more smokers towards loose tobacco – and all smokers always need lighters and other sundries.
Gavin Anderson, Sales & Marketing Director at Republic Technologies, points out that with the accessories market valued at over £433m, and growing at 14.6 per cent, Republic Technologies is making a major contribution to sustained category growth, thanks to a combination of ground-breaking NPD, strong retailer relations and trade support for both new and established products.
The £124m papers sector continues to perform well, with value sales up 8.4 per cent on last year, and Republic Technologies is increasing its presence in this sector by offering consumers more choice within its fast-growing, environmentally-friendly OCB range – as consumers are increasingly demanding that greener products are available (see Data Cart in this issue).
Imperial Brands’ Andrew Malm says that in the area of RYO, value-conscious consumers are increasingly migrating from king size into combi formats due to the added value and convenience they offer. “Alongside this, we’re also seeing growing demand for unbleached papers as consumers seek out papers with a more natural look. To help retailers tap into this trend, we recently extended our combi range to include a new Classic King Size Combi variant for our iconic Rizla brand.”
Available at an RRP of £1.40, Rizla Classic King Size Combi includes 32 unbleached king size papers and tips to appeal to the rising number of smokers looking for papers with a more natural look and feel with the added benefit of tips in the same pack. This ensures Rizla Classic King Size Combi offers everything smokers will need for the perfect, authentic rolling experience.
“Shoppers still want quality and value, which OCB delivers,” emphasises Anderson about Republic’s offer, “but the plus point for the range is its environmental credentials which offer a clear point of difference vs most other papers, and this is really resonating with roll your own purchasers,” 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. With 32 papers per pack, OCB Rice is available in both Slim (RRP, £1.10) and Slim & Tips (RRP, £1.73).
Republic Technologies is also underlining its environmental credentials in the £82m filters sector with the rollout of Just Paper plastic free Swan filter tips.
In a category boosting first for tobacco accessories, innovative Just Paper Swan Filters provide consumers with an experience that is similar to traditional cellulose acetate filters, but with a much lower environmental impact
The Swan Just Paper range features a "flip-a-tip" design which dispenses loose extra slim filters, without the use of plastic rods. Each box contains 120 filters, with 10 boxes per outer, with an RRP of £1.45 per consumer unit.
“Choice, innovation and quality are well established drivers of the tobacco accessories category, and the Just Paper range delivers in each of those areas. Significantly though, the range has advanced the development of filter tips by offering roll your own consumers a product which not only delivers on performance, but which also has a significantly reduced impact on the environment,” adds Anderson.
All in all, the tribulations of the tobacco category are just one of the current headaches facing c-store retailers, but there is great resilience and robustness in the products available, and it’s a sector that remains extremely important to the channel. Clearly, these products and the best ways to sell to customers hold great potential and continuing optimism for tobacco well into the future.
