The UK tobacco market is worth (after tax) £2.5bn. Factory Made Cigarettes (FMC) still equate for the majority of tobacco sales with a 53.5% share of the market and are experiencing volume growth of 2.5% YOY.
The tobacco market remains heavily price driven and this has led to an uplift in consumers switching into Roll Your Own (RYO), as well as value Factory Made Cigarettes (FMC). There is also a rise in dual users buying both RYO and FMC for different occasions, as more shoppers move to a nicotine portfolio approach. Imperial Tobacco estimates a quarter of consumers are now dual smokers.
“Wholesalers must be well-equipped with a strong product range across all categories in order to cater for this trend and keep one eye on their sales so they can adapt their range to meet the needs of their customers,” says Duncan Cunningham, UK Corporate Affairs Director at Imperial Tobacco & blu.
As a result of this continuing shift into RYO, the segment has expanded its market share and now accounts for 45% of tobacco sales, with recent data showing volume sales are growing by an impressive 30% (Imperial Tobacco estimates) as consumers seek out greater value for money.
In line with this growing demand for value, sales in the Economy RYO segment are also rising.
Imperial Tobacco recently announced the launch of JPS Players Easy Rolling Tobacco, a new blend of fine cut tobacco that offers an easier rolling experience, at an attractive price point. Presented by 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 new range is available in 30g and 50g formats and each pouch includes a set of quality rolling papers.
Despite launching into the market just over a year ago, Lambert & Butler has already grown to become one of Imperial’s fastest growing Roll Your Own brands. Lambert & Butler RYO is a quality brand with a long-standing heritage and with demand for value tobacco continuing to rise, it has seen YOY volume growth of 28%.
To celebrate one year in the market, Imperial has just launched two new formats and a limited-edition design for the Lambert & Butler RYO range. Launching exclusively into the independent channel, the limited-edition packs are available to buy now in both 30g and 50g formats. With an eye-catching branded trade outer that celebrates the milestone, both of the new limited-edition packs will benefit from an improved freshness seal, to help keep the product fresh for longer. Furthermore, with Imperial’s research showing 82% of RYO consumers use tips, the 30g will also offer even greater value for money with the addition of 60 filter tips and 60 high quality papers, while the 50g will include 100 papers.
“This increasing consumer shift towards RYO products also presents new sales opportunities for tobacco-related accessories,” adds Cunningham. “In order to help retailers 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.”
In 2019, Imperial launched the Rizla Flavour Infusions range which has been extremely well received by both the trade and consumers. Rizla Flavour Infusions comprise flavour cards that can be used with traditional factory made cigarettes or roll your own tobacco products. 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 flying off the shelves and currently selling around 900,000 packs per week as consumers look to recreate the menthol experience.
While we’re seeing a growing trend towards RYO, Factory Made Cigarettes (FMC) still account for the majority of tobacco sales with a 55% share of the market and are experiencing volume growth of 4% YOY (Imperial Tobacco estimates). As in the wider category, interest in value for money remains a leading trend, with many consumers seeking products that offer the lowest out of pocket spend.
“We actively monitor the emerging market trends in the tobacco category and adapt our product offering to ensure it is well positioned to help our trade customers tap into the latest sales opportunities,” Cunningham continues. “In recent years, this has included the repositioning of some of our leading brands into the sub-economy sector, such as L&B Blue and Embassy, which both now offer premium quality and at an affordable price. We also launched a raft of new innovations in the wake of the menthol ban to help wholesalers provide their retail customers with suitable solutions for ex-menthol shoppers, including Green Filter, JPS Bright and most recently, Embassy Signature New Crush.”
Ross Hennessy, Sales Vice President at JTI UK, comments: “Within the RYO category, Value RYO is the leading sector with a 50.2% share, providing a significant opportunity for wholesalers to maximise sales. Price remains a key factor for existing adult smokers – wholesalers therefore should stock up on Value RYO products, such as JTI’s Sterling Rolling Tobacco, which is currently the UK’s fastest growing tobacco brand.”
This spring JTI introduced a new member to the Sterling family, Sterling Rolling Tobacco Essential 30g. Available at an RRP of just £12.35, it offers the lowest price point in the Sterling Rolling family as a less for less alternative, creating a great value tobacco option for customers which stays true to the brand’s reputable quality, from the No.1 Value RYO brand (IRI).
With no filters and papers, it provides existing adult smokers with the freedom to purchase their preferred tobacco accessories. It also comes in a paper insert pouch packaging which contains less aluminium, whilst the blend generates less leaf waste compared to other RYO brands due to its unique whole leaf blend.
JTI has recently repositioned Kensitas Club Rolling Tobacco with RRPs of £11.95 for 30g 3-in-1, giving the range the lowest RRP for a 3-in-1 rolling tobacco product in the UK, as well as £19.60 for 50g pouch formats. This offers the same great quality and convenient tobacco product in easy-to-use formats as previously sold, now with a better value price.
The decision to lower the RRP reflects consumer demand for value RYO tobacco, which is currently leading the RYO Price Sector with a 50.2% market share (IRI).
“To capitalise on this growth of the cigarillo market which is now worth circa £6 million a month, wholesalers should stock up on products such as Sterling Dual Capsule Leaf Wrapped, which is the No.1 cigarillo brand, with a 92.5% share of the UK cigarillo market,” adds Hennessy.
The Sterling Dual Capsule Leaf Wrapped in a brand-new 20s format, follows the same stick configuration as the 10s, with a mentholated Virginia blend tobacco and capsule filter that when crushed releases a peppermint flavour. It offers a good value and high-quality product, with an affordable RRP of £9.10 for a pack of 20 cigarillos.
A growing number of existing adult smokers are looking for an alternative but familiar tobacco experience in the form of heated tobacco products.
The Heated Tobacco category is now worth nearly £1 million a week in Traditional Retail (IRI).
To help wholesalers profit from this growing category, at the end of 2020 JTI launched Ploom – a sleek, unique and innovative heated tobacco product alongside compatible EVO tobacco sticks, which are available in four different flavours.
Kate O’Dowd, Head of Commercial Planning UK & Ireland, Philip Morris Limited, comments: “By replacing cigarettes with smoke-free products as fast as possible, Philip Morris is on track to achieve its ambition of becoming a majority smoke-free company.”
PMI aims to increase the net revenues for its smoke-free portfolio to more than 50 percent by 2025. Strengthening the support retailers receive will be critical if that ambition is to be achieved.
“In the UK, we have rewired our entire business to do exactly that; investing more money, people and resources to build a community of retailers that is driving large-scale switching, faster,” adds O’Dowd. “This is important, not only to their communities but to their businesses.”
Smoke-free categories, like heated tobacco and e-cigarettes, continue to eat into the market share of conventional tobacco products, like cigarettes. IQOS, PMI’s heated tobacco system, remains the category leader as well as the UK’s number one smoke-free product (Nielsen).
Not only are these smoke-free products a better choice for adult smokers who do not quit tobacco or nicotine products completely – they also represent the future of retailer economics.
Retailers are best placed within their communities to help drive real change. In fact, 45 per cent of retailers feel they are part of an adult customer’s journey to becoming smoke-free (KAM Media).
“Awareness of the options, access to devices and availability of consumables, are fundamentals when providing adult smokers with better choices that could help them abandon cigarettes for good,” says O’Dowd. “Without the convenience channel, we wouldn’t be able to realise the maximum potential of smoke-free products for population harm reduction.”
As such, Philip Morris has fully committed to the convenience channel – remodelling its commercial business to support retailers selling IQOS and HEETS nationwide.
Gavin Anderson, Head of Sales at Republic Technologies UK, comments: “Innovative new product development combined with consumers spending more time at home over the last 12 months, with less day-to-day restrictions on tobacco use, has led to the UK’s tobacco accessories market continuing to show strong performance.”
Since the start of the UK’s first lockdown last year, many people have started to shop more frequently at stores local to home, avoiding longer trips and large numbers of shoppers in supermarkets, and this is helping to maintain the strong performance of tobacco accessories.
Market growth has also been accelerated by the record number of consumers turning to roll-your-own products from factory-made cigarettes, recognising the quality and affordability they deliver, as cost-conscious shoppers look for greater value for money in both tobacco and accessories.
“Retailers and wholesalers should be continually reviewing their range of tobacco accessories, utilising innovative NPD and a renewed focus on merchandising solutions,” adds Anderson.
Following the change in legislation last May, there has been a significant number of consumers looking for flavour alternatives to menthol cigarettes and a raft of tobacco related NPD has hit the market to help retailers cater to this demand.
“The iconic Swan brand is a beacon within the tobacco accessories category and is synonymous with quality and value for many roll-your-own shoppers,” says Anderson.
Swan Fresh Burst Crushball filter is already the best performing menthol capsule filter in the market (IRI) a little over a year since launch and along with the other three menthol SKUs from Swan – Swan Cool Burst Crushball, Swan Cool Menthol Extra Slim and Swan Menthol Extra Slim – has been enabling retailers to offer even more choice in flavour and format that deliver on quality, brand assurance and value for money.
The tobacco accessories market is currently worth more than £313 million (IRI), and the flavour card sub-category is set to deliver £18m in annual sales (IRI), highlighting a further opportunity for retailers to maximise profits within the tobacco accessories category.
Swan’s latest new product launch, Flavour Fusion Cards, enables consumers to create their own level of flavour in a packet of cigarettes or roll-your-own tobacco from just 30 minutes and are available in two variants, Fresh Burst and Menthol. Each small, lightweight outer contains 25 individual cards and allows retailers to manage shelf space more effectively.
Meanwhile, environmental considerations continue to influence shoppers, with increasing demand across all categories for more natural products, reduced packaging and removal of single-use plastics.
This has led to a surge in demand for category-boosting products such as OCB Virgin Slim & Tips and OCB Organic Hemp Slim & Tips, which are unbleached papers and made using OCB natural gum which is sustainably sourced from African Acacia trees.
There has been increased interest across all premium Paper & Tips formats, with the sub-category now worth more than £16m and growing at 66% year-on-year (IRI) in the convenience channel. Demand for OCB products is such that it is currently the fastest-growing paper brand in the market (IRI).
“Republic Technologies is also advising wholesalers to consider impactful display units, where space allows,” advises Anderson. “Driving visibility of category boosting NPD is key to increasing awareness and can be a successful tool towards encouraging sales.”
Alastair Williams, Country Director at Scandinavian Tobacco Group UK (STG UK), comments: “One current trend in cigars definitely worth highlighting is the medium / large segment enjoying something of a renaissance at the moment, growing by 16.7% in volume and 22.5% in value versus the same time last year. “This may potentially be down to people being at home more with increased time on their hands to enjoy a larger format cigar. And as lockdown eases and consumers are out and about enjoying their newfound freedoms, we expect a good number of adult smokers will continue to trade-up to enjoy a larger format cigar.”
The trend is led by our Henri Wintermans Half Corona brand, which is responsible for three quarters of all sales in this segment, and in value growth of 25.5% since the same time last year.
Outside of traditional cigars, the cigarillo segment has emerged over the last year or so, where STG’s Signature Action brand continues to play an important role. Launched at the beginning of last year, it’s a Filter Cigarillo with a peppermint filter which comes in a convenient and stylish pack of ten. In addition, a carefully selected blend of Virginia tobacco and a light real leaf Ecuadorian wrapper deliver a smooth taste, making it a very credible option for those smokers who enjoy the peppermint flavour.
“Of course, the first cigar on any list should be Signature which is by far the best-selling cigar in the UK and very much the jewel in our crown,” says Williams.
But there is more to the Scandinavian Tobacco Group cigar offer than just Signature. STG also has Moments Blue, which is the UK’s fastest growing miniature cigar, Signature Action in the growing cigarillo segment, while Henri Wintermans Half Corona holds the position as the UK’s favourite Medium to Large cigar.
“Wholesalers should ensure they are stocking the right brands and following the relevant consumer trends,” advises Williams. “When it comes to cigars, I think some wholesalers have sometimes been guilty of stocking too broad a range that doesn’t necessarily match up with current consumer trends. This is probably because they are aiming to provide their retailer customers with the perception of choice, but in reality, the top ten brands are responsible for almost 90% of total volume sales so knowing what those brands are and ensuring they are always in stock should be a key focus.”
STG enjoys a close working relationship with wholesalers, keeping them up to date with what’s going on in the category, and when possible, coming on-site for ‘depot days’ like the one with Bestway last October at their Park Royal site. This gives STG a great opportunity to interact with retailers as they are doing their shopping and share knowledge on what’s driving the category.
“I wouldn’t expect the cigar category as a whole to be directly impacted by the nation emerging from lockdown but we may see some specific segments benefiting,” adds Williams. “We’ve all been through a very trying time in the last 12 to 18 months, and many of us will be looking forward to a summer of celebration as restrictions ease and ‘normal life’ slowly resumes, so for some adult smokers that may well include trading up to a larger format cigar such as our Henri Wintermans Half Corona.”