The cigar category has greatly expanded over the last year, driven by the rapid growth of the cigarillo segment. but further helped by the rise of the medium / large sector.
Miniatures remain the largest segment within cigars, while the search for value is another long term trend.
Scandinavian Tobacco Group UK (STG UK) is a major player, producing Signature Blue, the UK’s number one traditional cigar, Moments Blue, the fastest growing miniature cigar, and Henri Wintermans Half Corona, the nation’s leading medium/large cigar.
Matthew Swinburne, Head of Key Accounts at STG UK, tells Wholesale Manager what trends are driving the market and how wholesalers can merchandise cigars and pipe tobacco in depot.
What is your background? How long have you been at STG and where did you work before that?
After finishing University having studied Molecular Biology, I took up what I thought would be an interim job before firming up a more permanent career path, however, after a stint promoting games and organising competitions as an Electronic Arts rep, this gave me a taste for sales, and from there my passion grew leading to positions at Britvic then BAT. Whilst at BAT an old colleague contacted me and offered me a position as Key Account Manager for Loretta Cigars, now Scandinavian Tobacco, where I’ve now been for 18 years, moving from KAM to National Account Manager and more recently to Head of Key Accounts.
Tell us about your role as Head of Key Accounts at STG. What is a typical day for you?
I love early morning starts and with two young children there’s no issue about being up early. Most days I’m able to have breakfast with them, and this puts life into perspective for the working day ahead. It’s very difficult to define a typical day as it’s so varied. I currently have a team of four Key Account Managers and one National Account Manager, and I’m looking to expand this over the coming months, so supporting them is my main priority. Alongside managing my team, my job also involves analysing key customer sales data and market trends, preparing for meetings with business partners, working closely with them on NPD launches, planogram / range development and online presence.
Can you give us an overview of the company’s brands?
First and foremost, we have the nations’ favourite traditional cigar in Signature Blue, the fastest growing miniature cigar in Moments Blue and the UK’s best-selling medium / large cigar with our Henri Wintermans Half Corona. Aside from these three, we have other popular brands like Signature Red Filter, which is the UK’s favourite aromatic cigar and our Signature Action filter cigarillo which, while not the biggest brand in the sector, plays an important role as the cheapest brand in the segment with an RRP of just £3.99 for a pack of ten. When it comes to Pipe tobacco, we have the UK’s third best-selling brand in Clan, but we also distribute the Mac Baren brands in the UK which includes St. Bruno Ready Rubbed, St. Bruno Flake and Gold Block.
What is the value of the UK cigars and pipe tobacco markets?
The performance of traditional cigars is fairly static and doesn’t tend to change too dramatically over time. However, when you include the recently emerging and fast-growing cigarillos segment, you can see that the combined category has grown strongly over the last year or so and is currently worth just over £273m in annual sales across the UK. The Pipe tobacco category is much smaller than cigars, with just over 90 tonnes of it sold in the last 12 months, and a retail sales value of just under £29m.
What trends are driving the market?
The strong performance of the category is predominantly due to the rapid growth of the cigarillo segment, which is already worth just over £75m and accounts for just over 39% of all cigars sold in volume terms, but also supplemented by the continual rise in the medium / large segment, albeit from a smaller base. Miniatures are still the largest segment within cigars, currently worth just under £105m in annual sales, while the small cigar segment appears to be continuing a slow but consistent decline. The search for value has been a long term trend in cigars for quite some time which is evidenced by the success of our Moments Blue brand, which offers a quality smoke at a low price. It is the second best-selling traditional cigar brand in volume terms, and should be part of every retailer’s cigar offer, because with the added impact of the pandemic on the economy for the foreseeable future, I would only imagine this move towards value will increase.
How was business for STG during Covid-19?
I think anyone asked this question 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’. 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.
How have Royal Agio Cigars been performing since STG acquired the brand?
Despite some early challenges which presented themselves whilst moving these brands under our stewardship, availability and sales are now both growing steadily. Brands like Mehari’s enjoy a great heritage and brand story and give us an additional foothold into the small cigar segment and we are delighted to have them in our portfolio.
What advice do you have for wholesalers on merchandising cigars and pipe tobacco in depot?
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. 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.
How do you work with wholesalers to improve sales?
We regularly have meetings with our wholesale partners, discussing the market dynamics and ensuring their product mix is what the consumers and retailers are asking for. We also support wholesaler to retail purchases of NPD through promotions and money off incentives. As we know, this can improve footfall into the wholesaler and potentially influence other purchases in depot, so a ‘win win’ for both parties. All figures sourced from IRI MarketPlace, Value and Volume sales, Time Period: w/e 08-08-2021, unless otherwise stated.