Despite UK smoking rates and overall sales volumes continuing to decline, the tobacco market remains bullish, says Paul Coggins, Head of Key Accounts at Imperial Tobacco UK, and is still the UK’s single biggest FMCG category, with a market value of £14.4bn, of which readymade cigarettes (RMC) make up £11.6 billion.
Even with the impact on sales from TPD II and standardised packaging regulations have, Paul Coggins remains positive about the opportunities to bring products to market that meet evolving consumer demands and ensure adult smokers continue to enjoy innovative new tobacco experiences:
“Wholesalers should continue to stock up on Imperial’s best-selling factory made cigarette (FMC) and Roll Your Own (RYO) brands like Player’s, L&B Blue and Gold Leaf to ensure they meet retailer demand.”
Since the introduction of the EUTPD II regulations in May 2017 the pace of the shift from factory made cigarettes has increased significantly. Between 2014 and 2016 RYO saw an average monthly gain in White Stick Equivalent share of 0.07%, but in 2017 it speeded up, almost triple the rate of overall category growth.
In another development the crushball (capsule) sector also continues to flourish, standing at over 15% of the overall factory made market. Imperial’s Rizla Polar Blast is the first Roll Your Own filter tip to contain a Crushball, bringing the popularity of Factory Made Cigarette Crushballs to RYO. Crushballs are squeezable filter tips adult smokers can ‘click’ to enjoy the taste of mint whenever they roll their own.
Brand News from Imperial Tobacco
• Rizla papers’ packaging has been reimagined with a ‘tuck in’ closing mechanism to reduce wastage, plus a more tactile ‘soft touch’ finish.
• Riverstone, Imperial’s new RYO tobacco brand, appeals to factory made cigarette smokers moving over to RYO, as well as dualists. 30g and 50g packs have RRPs of £10.50 and £17.35.
• Imperial is renaming its Mid-Price RYO brand GV Smooth Bright Golden Virginia Yellow, capitalising on Golden Virginia Yellow strong brand equity enjoys as a premium RYO brand.
Better Be Legal
The UK tobacco trade has long been a magnet for trading in illicit products. In a recent legal ruling, Blackburn-based tobacco trader has had his gantry removed by Imperial after violating the terms and conditions of his contract, and will no longer receive any sales support from the company. Zainul Chandia, of Northgate News in Blackburn, was convicted by magistrates for possession of counterfeit tobacco. A raid by local Trading Standards resulted in the discovery and seizure of over 100 packets of cigarettes, and over 40 pouches of rolling tobacco. Imperial Tobacco UK’s dedicated anti-illicit trade app, SARA, launched in January 2018, and since then they have received over a thousand reports of potential illegal tobacco sales, resulting in 56 positive seizures and the removal of 103 social media posts.
In November, JTI assisted in 10 illegal tobacco prosecutions. The total number of reports amounted to 21 prosecutions and 13 seizures. It remains to be seen what effect the Track and Trace system (see separate story) will have on the illicit tobacco trade.
Capsule sales in orbit
Jan Louw, Head of Wholesale at JTI agrees that the UK tobacco market is going through a sea change: “There are two clear trends in the current tobacco market in terms of cigarettes – the growth of the Capsule segment and the growing Value segment, as consumers seek out value for money products.”
JTI is another company continuing to invest in product innovation and support for wholesalers, to help them maximise tobacco profits. It extended the Capsule range in 2018, adding three new value products, Sterling Dual Superkings 20, Sterling Dual Double Capsule King Size 20 and B&H Blue Dual Superkings 20.
Jan Louw says he and his colleagues have also seen the roll-your-own sector grow as existing adult smokers seek out these value for money products and says Roll-your-own now generates sales worth over £2.7 billion.
Jan Louw has some specific advice for wholesalers:
“With smaller packs now gone, wholesalers need to adapt their tobacco rooms to utilise the additional space now available. We continue to advise our wholesale partners on how best to use the space for both tobacco and vaping ranges. In terms of merchandising, wholesalers should concentrate equally on keeping a well-stocked tobacco room so they are meeting retailer needs and become a destination depot, as well as supporting new product launches in depot with promotions via product information leaflets and posters provided by the manufacturer.
”Wholesalers should maintain regular contact with their local JTI Rep and be as knowledgeable as they can about their tobacco portfolio, including new products and best sellers, so they can respond to retailers’ questions on tobacco ranges, NPD and legislation.”
New from JTI
JTI is bolstering its Capsule offering with two new products: Sterling Dual Triple Green and Benson & Hedges Blue Dual Double Capsule. Sterling Dual Triple Green is the first triple menthol cigarette in the UK tobacco market. The innovative mentholated cigarette has two capsules, one peppermint and one spearmint, and offers a new proposition for existing adult smokers from the UK’s no.1 Capsule brand. Similarly, the new B&H Blue Dual Double Capsule will bring a more intense flavour option to the UK’s fastest growing cigarette brand. Entering the market as the UK’s lowest priced Double Capsule offering, it will also help retailers tap into the growing Value segment.
Miniature cigars are big sellers
Currently worth £199.8m, the UK cigar market is reporting a minor increase of 1.3% overall, says Jens Christiansen, Head of Marketing & Public Affairs at Scandinavian Tobacco Group (STG UK), with the Miniatures and Medium/Large cigar segments showing an increase of 5.1% and 7.2% respectively. Miniature cigars continue to dominate, accounting for 72.7% of total cigar volume and £103.9m in value sales.
STG UK’s portfolio of miniature brands contributes 70% of Miniature Cigars value sales and account for three of the top four brands in this segment:
• Signature Blue, previously Café Crème Blue: 30%
• Moments Blue: 17.8%
• Signature, previously Café Crème: 11.8%
STG UK brands account for 5 of the Top 10 brands, including Signature Blue, previously Café Crème Blue, the UK’s No.1 cigar brand in the UK. In line with its leading category position, STG UK is responsible for the lion’s share of the market at 53.4%. STG UK’s miniature brands collectively represent £72.3m in value sales over the last 12 months and are nearly 250% bigger than all other miniature brands combined.
In the Medium/Large cigar segment, which is also in growth (+7.2%), Henri Wintermans Half Corona holds top position as the UK’s favourite Medium/Large cigar brand, with 74.1% market share and value sales of to £14.9m.
Jens Christiansen says overall, the top 10 cigar brands account for 89% of the total cigar sales and 85% (£168m) of value sales: “This highlights just how important it is for wholesalers to stock the leading brands to take advantage of the sales and strong profit margins available within the cigar category.“
STG’s research highlights that 59% of male smokers who don’t normally smoke cigars would be willing to buy them, while 32% of traditionally noncigar smoking males said they would buy cigars for their taste, and 27% would if they were cheaper than cigarettes. The research also showed 79% of smokers who regularly visit a convenience store would try an alternative tobacco product, such as cigars, if it was recommended by store staff.
To make the most of this opportunity, Jens says wholesalers should help retailers to grow their category understanding, including the different cigars available in each segment, and what type of consumer they are most suited for:
“Our research shows consumers are open to trying cigars, especially when recommended by their local retailer, but less than half of retailers (46%) are taking advantage of this by proactively engaging with their customers. This highlights a huge opportunity for wholesalers to upskill their staff on their category knowledge so they can pass on this insight onto retailers, who can in turn train their team and reap the sales rewards as a result.”
Gavin Anderson, General Sales Manager at Republic Technologies says NPD and increased focus on merchandising are driving growth in the UK tobacco accessories market, which is putting increasing pressure on suppliers to innovate to make their mark. Now worth over £274m, the market has seen 7.0% annual growth, with papers and filters the most buoyant areas. Papers are worth £95.5m and growing at 8.1%, and filters worth £82.5m and growing at 8.5%:
“It’s crucial that suppliers maximise this opportunity by working with cash & carries and wholesalers to understand shoppers’ needs and, in turn, to enable retailers to drive sales of tobacco accessories in-store.”
Republic’s range review
Republic’s latest additions to its range, Swan Ultra Slim is the brand’s thinnest ever filter; Swan ‘Eco’ filters are the most environmentally friendly Swan product ever; and OCB Virgin Slim & Tips offer an unbleached paper and a softer smoke.
In 2018, the company also overhauled its matches range, including new packaging and a category-boosting extension for its iconic Swan brand. The relaunch included a new pocket-sized Swan match with a vibrant new colour scheme for additional shelf standout: a new pack design for Bryant and May ‘Extra Long’ matches: and the modernisation of Ship Matches, with a simplified design.
Tap into Tobacco Accessories – Republic’s Top Tips
• Stock a wide selection of products including core range filters, papers, matches and lighters, as well as the latest NPD.
• Pack formats play an important role; space saving packs such as vertical packs of Zig-Zag King Size papers – 50% space saving compared to traditional King Size packs – and Poppell 45 pack lighters help retailers manage shelf space more effectively, while pack formats such as Swan Slim Pop-a-Tip Filters offer a convenient alternative vs Swan Slim Loose Filters for on-the-go consumers.
• Dual-siting lighters and other nonrestricted products outside the tobacco room will also help to drive sales across tobacco accessories indepot.