Within the tobacco market, which is currently worth £14bn (before tax) per year, there is almost a 50/50 market share split across Factory Made Cigarettes (FMC) and Roll Your Own (RYO) categories – at 52% and 48% respectively, according to Imperial Tobacco.
Overall, there is continued movement towards low priced propositions across the entire category as consumer demand for value continues to drive tobacco purchasing patterns.
As part of this shift, the lower price tiers now account for the majority of sales, with the sub-economy segment making up 63% share of FMC, and the economy segment accounting for 56% of RYO, with these value segments growing at 3% and 5% YOY (Imperial Tobacco).
“In order to effectively harness the sales opportunities this presents, retailers and wholesalers must be equipped with the right products and importantly, the right knowledge, to help their customers navigate the tobacco category,” comments Tom Gully, Head of Consumer Marketing UK&I at Imperial Tobacco.
Looking at the RYO category in particular, we can see that the consumer drive for value remains a big factor, with the economy segment accounting for 56% of sales, and mid-price and premium products comprising 32% and 12% share respectively (Imperial Tobacco).
“Our new JPS Players Easy Rolling Tobacco is a great example of what wholesalers should be stocking to cater for these increasingly value savvy shoppers,” adds Gully. “JPS Players Easy Rolling Tobacco is an exciting new blend of fine cut tobacco that offers an easier rolling experience and benefits from the brand recognition of one of the UK’s best-selling cigarette brands.”
JPS Players Easy Rolling Tobacco features a more vibrant colour and lower levels of moisture, making the blend easier to handle and to roll. The range is available to buy in 30g and 50g and priced at £13.65 and £22.35, and each pouch includes a set of quality rolling papers.
Another RYO brand that is a must-stock for any wholesalers tapping into the value trend is Riverstone. The range was recently repositioned to sit within the rising economy RYO segment alongside JPS Players, with its 30g and 50g pouches also priced at £13.65 and £22.35 and including both papers and filters for the ultimate in convenience.
“This increasing consumer shift towards RYO products also presents new sales opportunities for tobacco-related accessories,” says Gully. “In order to tap into this trend and take advantage of the incremental sales on offer, wholesalers should make sure they’re fully stocked at all times of filters, papers, lighters and other flavour-related innovations like Rizla Flavour Cards and Rizla Polar Blast Crushball filters, to cater for the rising number of consumers buying into the RYO segment.”
A few years ago, Imperial launched the Rizla Flavour Infusions range. Rizla Flavour Infusions comprise flavour cards that can be used with traditional factory made cigarettes or roll your own tobacco products. Smokers simply insert a flavour card into a packet of cigarettes or roll your own tobacco and wait at least 60 minutes, or leave it in longer for a stronger, more intense flavour. Latest figures show they are currently selling around 450,000 packs per week (Imperial Tobacco estimates) as consumers look to recreate the menthol experience.
Another area of the accessories market that’s proving popular with these value focused shoppers is combi packs such as Rizla Silver Kingsize Combi which, priced at just £1.20, offers papers and tips together in one pack.
“From an FMC perspective, as demand for value tobacco continues to grow, many consumers are looking for a familiar brand that they know will deliver satisfaction at a low price,” Gully continues. “With this in mind, we recently announced an exciting new launch for our Embassy Signature range to help retailers unlock summer sales amongst adult smokers seeking out top brands.”
Available to buy now, Embassy Signature Silver Edition benefits from special reduced smoke smell paper and features a modern shaped filter and textured tipping paper to provide a unique smoking experience. The pack has been designed with a resealable ‘fresh protect’ foil feature to maintain product freshness, while the branded trade outer promotes the brands’ modern design with a new luxury embossed sleeve.
The Embassy Signature Silver Edition is available to buy until the end of September with an MRRP of just 10.15 per pack of 20s, providing the same value as the original product, but with an elevated experience. The increasing shift to roll your own amongst smokers is continuing to provide major profit opportunities for wholesalers.
The UK tobacco accessories category is currently worth £324 million and continues to show YoY growth, currently at +4.8% (IRI), highlighting the importance for wholesalers to tap into these sales.
Gemma Bateson, Sales Director at JTI UK, comments: “Over the past year, existing adult smokers have continued to seek out good quality tobacco at an affordable price – and this is a trend we predict will remain popular. Within the RYO Category, Ultra Value RYO is the fastest growing sector (IRI), so wholesalers should stock up on such products.
“Over the last two years we have worked hard to bring out products that tap into the growing demand for value tobacco – from Sterling Rolling Tobacco Essential through to the new Benson & Hedges Blue Rolling.” New for May this year, JTI launched two of its most iconic brands into the ultra-value segment to provide high quality value for existing adult smokers. Featuring the lowest recommended retail prices from JTI, Benson & Hedges Blue, the UK’s No.1 cigarette brand (IRI), has a new rolling tobacco offering, Benson & Hedges Blue Rolling, whilst Mayfair introduced a new RMC range – Mayfair Silver.
Available across all channels now, Benson & Hedges Blue Rolling includes quality Virginia tobacco blend and 100 papers within the 30g and 50g pouches, with an RRP of £13.65/£22.35 per 30g/50g and is available across England and Wales only. Mayfair Silver is available in both King Size and Super King at a RRP of £10.15 per 20 pack, and is available across England, Wales and NI.
“The Cigarillo category has seen strong growth this year and is now worth approximately £8 million a month (IRI),” adds Bateson. “To capitalise on this growth, wholesalers should stock up on products such as Sterling Dual Capsule Leaf Wrapped, the UK’s No.1 cigarillo brand, with a 91.6% share of the cigarillo market (IRI).”
Sterling Dual Capsule Leaf Wrapped includes a mentholated Virginia blend tobacco and capsule filter that when crushed releases a peppermint flavour. It has an RRP of of £5.30 for a pack of 10 and £10.40 for a pack of 20 cigarillos.
Gavin Anderson, Sales & Marketing Director at Republic Technologies (UK) Ltd., says: “Cash conscious shoppers are turning to more affordable RYO products as a way of saving money, versus factory made cigarettes.”
The pandemic and subsequent lockdowns brought more shoppers than ever to local convenience stores, as people chose to stay local and minimise supermarket visits. This gave retailers an even bigger opportunity to drive visibility of margin-boosting tobacco accessories products.
“By ensuring they are fully stocked with a range of tobacco accessories from trusted brands, wholesalers can cater for every customer and drive sales. As category specialists, we’re continuing to innovate. Not just with NPD but with a renewed focus on merchandising solutions, enabling wholesalers to highlight NPD and increase visibility of best-selling products,” adds Anderson.
“Our iconic brands – including Swan, Zig-Zag and OCB – have considerable history in the market and are synonymous with quality and value for money. This, combined with our team’s valuable expertise in the category, means that we are well placed to add real value to.”
Alastair Williams, Country Director at Scandinavian Tobacco Group UK (STG UK), comments: “Aside from the rapid growth of the cigarillos segment over the last few years, the search for value has also been a consistent trend in cigars for a while now, evidenced by the success of our Moments Blue brand, which offers a quality smoke at a low price. It is now the sixth best-selling traditional cigar brand in the UK in value terms, but interestingly most of its’ sales go through the multiple grocery channel, so I wonder if it’s one area where wholesalers and independent retailers might be missing a trick by not stocking it? And with the continued impact of the increasing cost of living crisis for the foreseeable future, I would only imagine this move towards value will increase.”
Whilst perhaps not as prevalent as elsewhere in Europe, flavoured cigars are growing steadily in popularity here in the UK.
Obviously, menthol cigarillos have exploded in popularity over the last couple of years, but it’s not the only flavour of choice.
Last year STG announced a new pack format for the Signature Red Filter brand, which is currently the UK’s best-selling aromatic filter cigar and whose smooth taste and vanilla flavour proves consistently popular with those adult smokers who enjoy an aromatic cigar.
“Of course, the first cigar on any list should be Signature which is by far the best-selling traditional cigar in the UK and very much the jewel in our crown,” adds Williams. “But there is more to the Scandinavian Tobacco Group cigar offer than just Signature. We also have Moments Blue as a value offer in the miniatures segment, Signature Action in the fast-growing cigarillo segment, and of course our Henri Wintermans Half Corona holds the position as the UK’s favourite Medium to Large cigar, so if wholesalers stock these as a minimum, they should be able to perfectly meet the needs of each and every one of their customers.”
It’s certainly more important to stock the right range rather than a broad range, as the top ten cigar brands account for over 90% of sales (IRI).
Miniatures remain the engine room of the category, so it is important wholesalers get this segment right.
By far the biggest player here is STG’s Signature range, which is ably supported by the Moments brand, which offers a good quality smoke at a cheaper price. Aside from Cigarillos, wholesalers also need to consider brands in both the Small and the Medium / Large segments to ensure they are covering their bases, so think about including the top-selling brands from each segment as a minimum.
“I believe it is very important to ensure our products are merchandised in a way that it makes it easier for the retailers to navigate, find them and purchase them,” suggests Williams. “Of course, consistent availability and competitive cost prices are essential, but keeping the range in sight for the retailer to buy, will ensure we have our products at the ‘risk of sale’ within their outlets. Brand blocking is an effective tool to merchandising, along with a clear category versus market trend approach to stocking products.”
STG regularly has meetings with its wholesale partners, discussing the market dynamics and ensuring their product mix is what the consumers and retailers are asking for. The company also supports wholesaler to retail purchases of NPD through promotions and money off incentives. This can improve footfall into the wholesaler and potentially influence other purchases in depot, so a ‘win win’ for both parties.
“I think anyone asked about the effect of Coronavirus crisis within a sales environment would say it was a challenge, but it opened up new ways of working, some of which were necessary, and some have been so successful they’ve evolved into the new normal,” Williams continues. “We were in the more unusual situation where sales remained very buoyant during this time, but consumers’ buying habits changed with a trend towards smaller retailers, therefore business through the wholesaler channel remained high. As a business Scandinavian Tobacco UK kept abreast of the changes and I believe excelled at ensuring our products remained available across the UK market from Wholesalers to direct delivered accounts.”