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 has also been a rise in dual users buying both RYO and FMC for different occasions, as more shoppers move to a nicotine portfolio approach.
In fact, Imperial Tobacco figures show 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,” suggests 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% as consumers seek out greater value for money, Imperial Tobacco estimates.
In line with this growing demand for value, sales in the economy RYO segment are also rising, Imperial Tobacco estimates. Since its launch in November 2019, Lambert & Butler RYO has been growing its share and, in July 2020, it accounted for 4.7% of all sales within the economy RYO segment, Imperial Tobacco estimates.
“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.”
Imperial Tobacco launched its Rizla Flavour Infusions range at the end of last year 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. Smokers have to 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.
The range is currently selling between 800,000 and 900,000 packs per week and reached £5m sales value in 2020 with two months of the year to go, Imperial Tobacco estimates.
While there is 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,” explains Cunningham. “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 to help retailers provide suitable solutions for ex-menthol shoppers, including Green Filter and JPS Bright.”
Imperial Tobacco has launched a new Embassy Signature range, offering all the features associated with premium factory made cigarettes (FMC) without the premium price tag and promises to deliver increased sales and profit margins for wholesalers.
The range comprises Gold and Silver variants and features a modern blend using the finest Virginia tobaccos that live up to the high-quality standard consumers have come to expect from the brand, wrapped in premium paper to give smokers a satisfying experience. Embassy Signature Silver also benefits from the addition of special Reduced Smoke Smell (RSS) paper, designed to reduce the linger of smoke smell on clothes or fingers. The Embassy Signature outer promotes the brand’s new modern design with an eye-catching design that will grab the attention of retailers.
Imperial Tobacco has announced the launch of New Crush variants for two of its leading brands, L&B Blue and JPS Players. Designed specifically with ex-crushball consumers in mind, the latest innovations present retailers with fresh opportunities for growth in the wake of the menthol ban.
The New Crush variants benefit from various new product features developed to appeal to former crushball smokers. These include a unique filter that delivers a cooling sensation during smoking, as well as a white-tipped firm filter that retains its shape and structure until the end of the smoke.
“Restrictions on travel due to Covid-19 have reduced the amount of tobacco purchased abroad for consumption in the UK which, in turn has led to increased domestic sales, allowing wholesalers to benefit,” Cunningham comments. “As a strong travel retail brand, an increasing number of consumers have been buying Golden Virginia Original within UK retail stores.”
As well as increasing its market share within the UK, the volume of Golden Virgina Original sold to consumers in July 2020 was almost 50% higher than before the pandemic in February 2020, Imperial Tobacco estimates. The company expects this trend to remain as consumers continue to buy in bulk, especially for RYO given the demand for value currently being seen across the tobacco market.
“From a consumer perspective, customer service has a particularly crucial role to play at present, given the in-store restrictions in place as part of the Covid-19 pandemic,” Cunningham continues. “Many consumers won’t wish to handle products, such as lighters, flavour cards or other accessories, in order to look at them before they buy and may also be inclined not to ask questions at the till point to avoid queues building up behind them, which can be intimidating. This trend also translates to wholesale as well, with retailers more mindful of handling products prior to buying them. With this in mind, wholesalers and their staff need to be prepared to proactively offer them advice and help retailers feel at ease by providing knowledgeable answers to their questions that really showcase their understanding of the category.”
Ross Hennessy, Sales Vice President at JTI UK, comments: “With everything that has happened this year, the tobacco market still continues to be one of the biggest and most resilient FMCG categories in the UK and a category that drives footfall and revenue for wholesalers and convenience stores nationwide.”
With 7.6 million kilograms of rolling tobacco sold in the UK each year (IRI), this category offers a significant opportunity to maximise sales.
“Wholesalers should stock up on Value RYO products, such as JTI’s Sterling Rolling Tobacco, which is currently the UK’s fastest growing tobacco brand,” Hennessy suggests.
JTI’s Sterling 3-in-1 Rolling Tobacco recently transitioned from a box to a pouch, to offer adult smokers the fuss-free and convenient format they want, at the same value price as before.
With a current market share of 32.2%, cigarillos are the fastest growing cigar sector, and now worth circa £5 million a month (IRI).
“To make the most of this growth, wholesalers should stock up on products such as Sterling Dual Capsule Leaf Wrapped, which is the No.1 cigarillo brand, with a 92.3% share of the UK cigarillo market,” Hennessy adds.
It is predicted that by 2025 there will be nearly one million heated tobacco users nationwide and that traditional retail will contribute to two thirds (67%) of this volume, JTI estimates.
To help wholesalers and retailers profit from this category, JTI recently launched a new heated tobacco product, Ploom S, which is unique in its set up with its sleek design and carefully crafted technology.
Offering existing adult smokers and dualists (smokers and vapers) an alternative but familiar tobacco experience by heating tobacco instead of burning it, the Ploom S device is sold through Ploom-branded lounges – Argyll Street and Westfield Shopping Centre, London – Ploom pop-up shops, online at www.ploom.co.uk and through accredited retailers across London.
The device can be used exclusively with EVO tobacco sticks which are now available for wholesalers within the M25, and for all London retailers. The EVO tobacco sticks are available in four different flavours with an RRP of £4.50.
Gavin Anderson, Republic Technologies (UK) Ltd’s General Sales Manager, comments: “Strong levels of demand for the quality, choice and value provided by tobacco accessories are driving the continued growth of the market in the convenience sector.”
Currently, approximately three quarters of all tobacco accessories’ sales are in the convenience channel, equating to over £229m annually, up 3.4% year-on-year (IRI), highlighting the opportunity for convenience retailers to drive sales and profit.
Filters are the star performers in the convenience tobacco accessories market.
Filter sales are worth almost £74m and are growing at 9.7% year-on-year in convenience, more than double that of the total accessories market and six times more than the next best sector, papers, which are up 1.6% (IRI).
“As tobacco legislation continues to impact on cigarette sales, accessories continue to outperform the total tobacco market, with better value for money than factory-made cigarettes remaining a key consideration for RYO smokers,” says Anderson.
“As category specialists, we’re continuing to innovate with NPD and new merchandising solutions for stores and depots to ensure retailers and wholesalers can meet the needs of the growing number of RYO smokers. This is helping to maintain the growth the category has seen in recent years.”
“We know that former menthol cigarette smokers have been looking for suitable alternatives with a similar flavour profile since May – and turning to convenience retailers for advice and guidance on making this transition,” adds Anderson.
“With our biggest and most successful NPD launch ever earlier this year, comprising six new filters from the market-leading Swan brand, we’ve provided a category-boosting solution for retailers to provide all important choice, quality and a range of menthol flavours and formats, enabling people who used to smoke menthol cigarettes to transition to roll-your-own.”
The major new product rollout comprised three Swan menthol filters, including two crushball filters, a carbon paper filter for enhanced filtration, a long extra slim filter (50% longer than standard) and the most environmentally friendly filter in the UK market.
Changes in people’s shopping habits during the pandemic have contributed to the growth of tobacco accessories in the convenience channel.
“Our research shows that the growth of the accessories market in recent months has been driven in part by consumers shopping more frequently in their local convenience outlets. This has coincided with rising numbers of smokers looking for alternatives to factory made cigarettes,” adds Anderson.
“With the emerging vaping sector still under some scrutiny, growing numbers of smokers are opting for RYO solutions. Also, many of our consumers like the tactile aspect of rolling, which has the added benefit of reducing consumption, as smoking becomes less instant,” comments Anderson.
As environmental considerations are influencing smokers more than ever before, with demand for more natural products, reduced packaging and removal of single-use plastics at record levels, Republic Technologies has increased its focus on environmentally friendly NPD.
This has led to the introduction of category-boosting products such as OCB Virgin Slim and OCB Virgin Slim & Tips, which are unbleached papers, with OCB natural gum which is sustainably sourced from African Acacia trees. Both are available in a slim vertical shelf ready box, enabling c-store retailers to manage display space more efficiently.
“We’ve also seen an increased interest in Premium Paper & Tips formats, such as OCB Virgin Slim & Tips, with the sub-category now worth over £13m and growing at 82% year-on-year. Demand for OCB products is such that it is currently the fastest-growing paper brand in the market,” adds Anderson.
Republic Technologies is developing a broader range of products, enabling convenience retailers to capitalise on the strong performance of the accessories category and to take advantage of the high margins provided by accessories’ products.
NPD has been a major focus this year, including the introduction of three Swan menthol SKUs.
Cool Menthol Extra Slim is a sister product to Swan Menthol Extra Slim in a pocket-sized pack containing 120 filters at an RRP of £1.09.
Cool Burst Crushball, in a 2-part sliding pack containing 54 filters, is a crush capsule delivering a cool menthol flavour sensation (RRP: £1.29).
Fresh Burst Crushball delivers a strong peppermint flavour and also comes in a 2-part sliding pack containing 54 filters, at an RRP of £1.29.
Consumer choice has also been boosted by this year’s launch of a new Swan carbon paper filter for enhanced filtration, along with a Swan Long Extra Slim Filter (50% longer than standard) and the UK’s most environmentally friendly filter.
Alastair Williams, Country Director at Scandinavian Tobacco Group UK (STG UK), said: “Most of the trends in cigars are fairly consistent and usually don’t tend to change too much, but in the last twelve months we’ve certainly seen a pretty decent rise in the sales of medium / large cigars, such as our Henri Wintermans Half Corona.”
IRI’s latest monthly data shows the medium / large cigar segment to be growing in both volume (up 7.3%) and value (up 10.4%) terms.
“The first cigar on any wholesaler’s list should be Signature which is by far the best-selling cigar in the UK. But there is more to the Scandinavian Tobacco Group cigar offer than just Signature,” adds Williams. “We also have Moments Blue, which is the UK’s fastest growing miniature cigar, and of course our Henri Wintermans Half Corona holds the position as the UK’s favourite Medium to Large cigar, so the message to wholesalers is clear… stock the number ones!”
Around a year ago STG introduced a Filter Cigarillo to the Signature brand family which has a peppermint filter, making it a very credible option for those smokers who enjoy the menthol flavour.
STG has the top two selling cigar brands in the UK in Signature Blue and Moments Blue, helping make the company the dominant player with a total market share of just under 55% (IRI).
“When it comes to cigars, I think wholesalers have sometimes been guilty of stocking too broad a range that doesn’t necessarily match up with current consumer trends,” continues Williams. “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. Wholesalers should stock the right brands and make sure they are following the relevant consumer trends.”
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 STG did with Bestway last October at the wholesaler’s Park Royal site.
“This gives us a great opportunity to interact with retailers as they are doing their shopping and share our knowledge on what’s driving the category,” adds Williams.