Jennifer Roberts, UK Category Controller at blu, discusses all the latest e-cigarette changes and how they may affect you.
Wholesale Manager: What is the new EUPTD II legislation around ecigs?
The new EUTPD legislation has been designed to bring in more control and direction over the quality of products available in the ecigarette market. The legislation should help consumers have more trust in, and feel more confident about, buying e-cigarettes. For the market it means there are now much tighter regulations around product compliance.
At blu, we believe the market will change a lot over the next 12 months as suppliers and manufacturers decide whether to become compliant with the new legislation or leave the market. There is a considerable cost associated with redeveloping products to adhere to the legislation and registering those products for sale within the UK market with the MHRA (Medicines & Healthcare products Regulatory Agency.) This will mean that stocking the category-leading brands is even more crucial for any wholesalers looking to take advantage of the sales afforded by this booming category. In addition, we also expect to see the split of sales between specialist vaping shops, online retailers and traditional retail change, with increasing sales going though convenience stores and supermarkets.
This presents wholesalers with yet another opportunity to grow their sales in this category.
The legislation comes into effect in three phases with the first two putting most of the onus on the manufacturers to comply, however retailers need to be aware of the advertising restrictions that are now in effect. The key date for wholesalers and retailers is 20th May 2017, which is when they need to be compliant in what they sell, though it is never too early to start to get prepared. In terms of what action retailers and wholesalers should be taking and when, we recommend they follow the timeline below: From 20th May 2016 Phase 1 – Advertising and promotion restrictions came into effect Action: Increase visibility and POS in-store to drive awareness and sales From 20th November 2016 Phase 2 – Production of non-compliant stock must cease and all new products being manufactured must be fully compliant. All existing products remaining in the market until May 2017 need to have been registered with the MHRA.
Action: Understand what compliant products look like, start the change-over in-store/depot and promote existing stock, noncompliant stock, to sell-through.
From 20th May 2017 Phase 3 – The sale of noncompliant stock is no longer allowed Action: It is now your responsibility to stock and sell fully compliant products. Ensure that ordering of non-compliant stock stops at the start of 2017 to give you time to sell-through as much as possible.
WM: Why should I stock e-cigs in my depot following legislation?
It is estimated that a large proportion of e-cigarette sales in the UK are sold online and in vape shops, but this has been changing and the flow of sales into traditional retail is set to increase further. This presents a huge opportunity for retailers and wholesalers to attract new customers by highlighting their e-cig range and improving their category understanding. Currently in the UK there is still a large number of retailers who don’t stock any ecigarettes.
As a result, there are growth opportunities for wholesalers both from sales through existing stockists, as well as from retailers adding the category to their stores.
The category is worth an impressive £164m per annum and growing at 23% year on year, while also presenting both retailers and wholesalers with excellent profit margins. If wholesalers get their range right, display it clearly and can help retailers understand the category so they can talk to their shoppers about it, they will be able to make the most of the sales opportunity that the legislation presents.
With a range of award winning products and positioned as the second biggest selling e-cigarette brand in the UK, blu is perfectly placed to help retailers and wholesalers achieve the sales and margin potential available to them.
In fact, blu now has over 16% market share and holds the position as the number one tank and e-liquid brand, as well as being the most widely sold brand in the UK.
WM: How should I promote them? Are there any restrictions around promoting them?
Under the new legislation, there are no restrictions on trade to trade communication. This means that wholesalers can still do all the following:
• You can SELL e-cigarettes and accessories
• You can actively DISPLAY ecigarettes and accessories. There are no restrictions over location so to drive sales you can site products outside of the tobacco room.
• You can PROMOTE e-cigarettes and accessories. Bundle deals work well.
• You can ADVERTISE in and around depots and stores via posters, POS etc.
WM: Will it steal sales away from tobacco?
The majority of vapers are actually dualists (72%), i.e. smoke tobacco and vape, while a further 24% are people that have successfully quit using vaping products1. The ecigarette category is currently significantly smaller than the cigarette category so the impact on tobacco products is limited at this stage. However, tobacco sales continue to decline year on year as more consumers strive to quit smoking and/or switch to e-cigarettes, which have significant margins vs tobacco products, so wholesalers need to take advantage of the opportunity presented by the growing e-cig category to avoid missing out.
WM: How do I know which brands and formats are right for my customers’ stores?
Wholesalers should ensure they’re stocking a range of products to cover all vaping needs, including both disposable and rechargeable ecigarettes for new users, such as the blu Plus+ Kit. Whereas vaporisers and eliquid refills, such as the blu Pro Kit and award winning eliquids, should be stocked for their retail customers who receive visits from experienced vapers or for those looking for a bigger throat hit.
One of the key product areas to stock within wholesale is accessories, particularly clearomisers. There are essentials items for consumers, drive additional profit for retailers and wholesalers, and are great ways for retailers to keep consumers coming back to their stores and to your depots.
WM: How many brands should I stock?
At blu, we recommend that retailers stock 2-3 of the top brands in their stores to give consumer choice. However, we would recommend wholesalers stock the top five to six brands in the convenience channel to provide choice to retailers and enable them to select the brands that are best fit for their shoppers. The top brands are blu, MV, E-Lites, Vivid, and Vapourize. blu is the 2nd biggest ecigarette brand, the No.1 e-liquid brand, and one of the fastest growing within the top five e-cigarette brands, which together represent 68% of the market2, making them important must-stock brands for any wholesaler.
WM: Where should I put e-cigs in my depot?
E-cigs don’t need to be stocked in the tobacco room so we recommend wholesalers take advantage of this and make them as visible as possible in depot to draw the attention of customers and ultimately drive sales.
Dual siting or promoting e-cigs outside of the tobacco room is a great way to drive additional sales, particularly with those retailers who don’t visit the tobacco room.
About blu™ blu™ electronic cigarettes offer the experience of traditional cigarettes – without the tobacco smoke, ash, or smell.
The blu brand represents a positive lifestyle choice for adult smokers that stands for pleasure and freedom.
Available online at www.blu.com and at retailers nationwide, blu electronic cigarettes come in convenient disposables, rechargeable and refillable packs for regular use, with or without nicotine, and in a variety of innovative flavours.
blu UK was recently voted TNS Product of the Year 2015 in the E-cigarette & E-liquid Category. For more, visit www.blu.com.
All data sourced from Nielsen ScanTrack and are 52wks to 02.04.16, (unless otherwise stated) 1 Source: Nielsen Smartphone Shopper Q1 2015 2 Nielsen: ScanTrack – Total Impulse Channel – sales 12wks to 26.03.2016