Cigarillos is easily the largest of the four cigar segments by both volume and value, with their growth being driven by their compact size and unique flavour.
STG’s Signature Action cigarillo brand has seen its sales almost double over the last year thanks to their flavour and cheaper price point.
Rich Eves, Head of Key Accounts Northern Europe at Scandinavian Tobacco Group UK, discusses the performance of cigarillos as well as STG’s successful entry into the fast-moving nicotine pouch category with it’s XQS brand.
What is your background? How long have you been at STG and where did you work before that?
I joined STG nearly two years ago, initially as UK Head of Key Accounts but since January of this year that role has expanded to include both Sweden and Denmark too. My FMCG career began at Bacardi and then took me on to the likes of Unilever, Premier Foods and Henkel which has given me broad experience of working in every channel and with a wide range of customers.
Tell us about your role as Head of Key Accounts at STG. What is a typical day for you?
I have ten people directly reporting into me across the three markets, plus I oversee three additional export markets too. This means looking after over one hundred customers across all key channels, including grocery, convenience, wholesale, online and specialists, so it’s certainly busy. In terms of what a typical day looks like, I’ve found working at STG is like opening a box of chocolates where you never know what you’re going to get! Thankfully this means no two days are the same and I’m certainly never bored. Common tasks would include reviewing sales performance and EPOS data across markets to understand the drivers of the business, planning customer development opportunities to drive our market ambitions, checking in with teams to help them develop and deliver their plans, as well as a fair amount of cross functional work with many categories in multiple markets to ensure we have the best tools to deliver what we need to.
Can you give us an overview of the company’s brands?
For most of its history Scandinavian Tobacco Group has been focused on cigars, but last year we entered the Next Gen Nicotine category with our pouch brand XQS which originates from Sweden. However, the heritage of the company is firmly in cigars, where we have key brands like Signature, Moments and Henri Wintermans, which should all feature in any grocery retailers’ tobacco offer.
What is the value of the UK cigars market?
Our latest data shows the total cigar category to be worth just over £327m in annual sales, which is a YOY growth in value terms of 1.5%.
Is the cigarillos category in growth?
Yes, cigarillos are undoubtedly the current success story in the cigar category, showing value growth of 9.4% versus the same time last year. So, while the cigarillo segment may be the smallest in terms of the actual cigar size, but it is easily the largest of the four segments in terms of volume and not far off the other three combined in terms of value.
How much of the overall cigar category is accounted for by cigarillos?
If we look at it in value terms, sales from the cigarillo segment currently account for over £155m of that total £327m, which equates to just over 47%. However, when we look at volume sales, cigarillos account for nearly 58% of all cigars sold.
What trends are driving cigarillos growth?
The popularity and growth of cigarillos is down to their size and flavour. Over the last couple of years distribution has improved and sales have really shot up for our Signature Action cigarillo brand. In fact, its sales have almost doubled since last year, with adult smokers appreciating the great flavour and cheaper price point, compared to other brands in the market. To further capitalise on the surge in demand for flavoured cigarillos, at the start of this year we announced the launch of Signature Action Mix cigarillos into our portfolio, which contain two capsules and combine the flavours of Berry and Mint. They come in ten-packs with an RRP of just £5.85 which is lower than competitor brands but still offering an attractive margin to retailers.
More recently we’ve introduced a new 17-pack format too, which have been available to retailers since August. This latest addition complements the existing two ten-pack offerings, providing consumers with greater choice and value, but features the same menthol flavour that has been synonymous with the brand since its launch back in 2020. With an RRP of £9.89, including a price-marked version, the new 17-pack delivers value to consumers, positioning it as a competitively priced option in the market. It also offers an attractive margin for retailers, reinforcing STG UK’s commitment to supporting its trade partners with high-quality, high-demand products.
Do larger cigars remain popular in the run-up to Christmas?
Yes, it’s certainly true to say that cigar sales enjoy an upward trajectory over the Christmas period when many adult smokers like to enjoy one as part of their festive celebrations. Its typically larger cigars that people will gravitate towards as a bit of a Christmas treat when they are in celebratory mood and typically have more time to enjoy it.
How can retailers maximise sales of larger cigars during the festive season?
My advice at this time of year is always make sure you have brands like our Henri Wintermans Half Corona in stock as it is easily the UK’s best-selling medium / large cigar and has a loyal following due to its quality blend and heritage.
How is the pouches category performing?
Our latest data shows total UK nicotine pouch sales to be worth just under £158m and growing by 71% YOY in volume terms, with the majority of sales taking place in the grocery channel. And remember, nicotine pouches offer attractive profit margins in general, but I’m pleased to confirm that XQS in particular offers one of the highest margins of all pouch brands, which is yet another reason to ensure you are well-stocked.
What is driving growth of pouches?
Similar to cigarillos, flavour is a key driver within nicotine pouches. The predominant flavour is definitely mint but fruity flavours are proving increasingly popular with consumers too. We currently have eight different flavoured SKUs in the XQS portfolio, and we certainly won’t be stopping there.
How is your brand XQS performing?
Just eighteen months after launching, XQS is already the sixth biggest pouch brand and there’s so much headroom for further growth across the range. Our current best-sellers are the Tropical and Black Cherry flavours, which were two of the earlier flavours to launch, while other particularly popular ones to call out at the moment would be Arctic Freeze and Strawberry Kiwi. All of our XQS SKUs come in strengths of either 8mg or 11.2mg, apart from our best-selling Tropical flavour which also comes in 4mg and is sold exclusively online.
How is XQS currently being supported?
While we may not have the financial muscle of some of the larger nicotine pouch manufacturers, XQS continues to punch above its weight and maintain a strong presence with both retailers and consumers. For example, over the summer our teams engaged directly with adult nicotine users, providing education on alternative options and introducing them to our diverse range of flavours.
How do you work with retailers to grow sales?
Most importantly we provide them with products which we know their customers will want. However, more recently we’ve been working with them since the disposable vape ban to help them fill those lost sales and point their disposable vape customers in the direction of credible alternatives like nicotine pouches. Brands like our very own XQS are really hitting the spot for nicotine consumers as they are discreet, portable and come in a range of great flavours, and most importantly can help play an important part in filling that lost revenue in retailer’s tills. We know both tobacco smokers and vapers are now entering the nicotine pouch category in growing numbers, with sales increasing accordingly
Comments are closed.