Smokers are shifting towards value-oriented products (due to the cost-of-living crisis) and there is a significant surge in nicotine pouches and roll-your-own (RYO) tobacco, which are gaining market share as traditional cigarette sales decline.
While overall smoking rates are falling, the market is adapting through diversification into higher-margin accessories like filter tips.
High inflation has pushed consumers to switch from expensive, ready-made cigarettes to lower-priced, “ultra-value” brands and, more commonly, to roll-your-own (RYO) tobacco.
Value and economy products now account for roughly 72% of all factory-made cigarette sales.
RYO tobacco is performing well, with consumers perceiving it as offering both better quality and value. This has boosted the smoking accessories market, which is growing at 14% year-on-year. Filters (particularly eco-friendly ones) are growing at 9% to 10% annually.
Paul Dufourne, Director of Commercial Operations at Philip Morris Limited (PML) in the UK and Ireland, comments: “As the traditional cigarette market is declining, demand for smoke-free alternatives is growing in the UK amongst adult nicotine users who would otherwise continue to use nicotine products. Adult nicotine users want more choice than ever before. They want a variety of options that meet every need, supporting in the switch away from cigarettes for good. We are proud to be an organisation that offers 3 premium smoke-free options – with two global leaders in their respective categories – to support adult smokers, who don’t want to quit nicotine, make that switch from cigarettes.
“At PML, we’re dedicated to offering smoke-free nicotine products to support adult smokers switch away from cigarettes for good. The best thing any adult smoker can do is quit nicotine entirely, but for those who choose not to quit nicotine, our smoke-free products are compelling alternatives thanks to the highest standards of product development, quality and product experience they deliver.”
Almost half of our global revenue at Philip Morris now comes from smoke-free products (PMI). Its products are sold in 100 markets and are estimated to be used by over 41 million adults worldwide (PMI). IQOS stands as the world’s number 1 heat-not-burn device, and ZYN stands as the world’s No.1 nicotine pouch brand (PMI). The direction is clear: this isn’t just about one product fading; it’s about multiple alternative categories rising.
“At Philip Morris we pay close attention to what adult nicotine users are asking for. Right now, one of the clearest trends in nicotine products is dual/poly-use. Adult nicotine users are choosing more than one product type as part of their routine. Some might use heated tobacco or a vape when they’re at home, then switch to nicotine pouches when they’re on the go. That mix-and-match behaviour is shaping demand in stores,” adds Dufourne.
“That’s why products like IQOS and ZYN are so important to stock. Together, they cater to different needs. IQOS for those who still want a behavioural ritual close to smoking, and ZYN for those looking for discreet, convenient nicotine satisfaction. Stocking multiple categories allows retailers to meet customers at the different nicotine moments and maximise sales, rather than forcing them into one box.”
Independent research conducted by KAM on behalf of Philip Morris Limited further highlights that legal age nicotine users seek variety. Findings show that 68% of independent retailers believe that success will hinge on offering a varied product portfolio – one that includes a full range of e-cigarettes, heat-not-burn products, and oral nicotine pouches, rather than relying on a single category as they may have done previously with disposables.
Adopting a multi-category product approach is critical if retailers are going to continue to meet different legal age nicotine users’ tastes and preferences amid changing legislation. Retailers have the opportunity to offer previous adult disposable vape users an alternative smoke-free option, preventing them from reverting back to cigarettes while also protecting their stores’ bottom line. However, it must be supported by comprehensive information and education of the benefits of switching from cigarettes to better alternatives.
There is no “one-size-fits-all” approach, which is why having a portfolio of products that deliver on quality is an opportunity retailers can capitalise on. For example, in the UK, 73% of the 6 million adult smokers have tried vaping, but only 18% have quit cigarettes for good with vapes (ASH). That’s where PML’s multi-category approach plays a role. By offering a range of formats and price points – even within the same category – smoke-free products are made accessible to all legal-aged nicotine users who want to continue using nicotine, supporting them make the switch from cigarettes.
“Recognising that no single smoke-free product can age nicotine users won’t make the switch, and the bigger goal of a smoke-free future becomes harder to achieve.
IQOS is a leading smoke-free alternative for those directly transitioning from cigarettes, so much so that of the brand’s 33.8 million users across the world, 22.4 million adult smokers have stopped burning tobacco entirely, heating it instead with IQOS. IQOS, the world’s number one heat-not-burn device (PMI), when used with TEREA sticks, provides real tobacco taste and satisfaction whilst emitting 95% less harmful chemicals than cigarettes. IQOS revenues overtook Marlboro in early 2024 (PMI), a real signal of where the market is heading. Smoke-free products make up more than 40% of PML’s total revenues (PMI).
As a brand, IQOS owns the heat-not-burn category, generating 95% of volume sales in the UK. Nearly 50% of UK nicotine users recognise the IQOS brand, and this level of awareness has led to more adult smokers switching to IQOS ILUMA. The UK is at a pivotal moment in its journey towards a smoke-free future; a downward trend in demand for combustible tobacco indicates a steady, but continuing decline in smoking itself.
Adult consumers demand broad flavour choice, and TEREA, as part of the portfolio of products that are compatible with IQOS ILUMA, has responded by expanding its flavour portfolio with the launch of TEREA Pearls. The TEREA Pearls range features innovative capsule technology, enabling users to switch seamlessly to flavours like Blueberry and Strawberry & Basil, to Menthol with a single click. TEREA Silver drives even more choice for adult IQOS ILUMA users who prefer real tobacco taste and a smooth blend, complementing bestsellers like Amber, Sienna and Russet.
PMI recently announced the launch of its latest innovation from the IQOS range of heat-not-burn devices, IQOS ILUMA i ONE. The IQOS ILUMA series is a revolutionary device, using a bladeless SMARTCORE INDUCTION SYSTEM™ to heat and deliver tobacco taste and satisfaction, but with 95% less harmful chemicals compared to cigarettes.
Prianka Jhingan, Head of Marketing at Scandinavian Tobacco Group UK, comments: “Whilst traditional tobacco sales have been in decline for some time now, what’s left is still huge and of course many nicotine users have been transitioning over to next gen products such as vapes or nicotine pouches, cater to every smoker’s preference, embracing a multi-category approach becomes indispensable for those investing in their smoke-free portfolio. Building a range that reflects the diversity of adult nicotine users today is vital. That flexibility is what will protect businesses and keep them continually relevant as the market changes. Our multicategory range of alternatives is leading the charge in making this vision a reality,” says Dufourne.
“For both retailers and consumers, it starts with education. We make sure communication is clear, accurate and always directed at adult nicotine users. That means being upfront about the facts. For example, VEEV One emits around 99% lower levels of harmful chemicals than cigarettes. VEEV One is not risk-free, but it is a high-quality alternative to continuing to smoke. It also offers a premium alternative for legal-aged nicotine users that are looking for a closed-pod vape system after the disposable vape ban.
“Of course, nicotine is addictive, and the best thing any smoker can do is quit nicotine altogether. But for those who don’t want to, there needs to be credible alternatives on the table. That’s why we focus on scientifically substantiated, smoke-free products. Because if an alternative doesn’t feel satisfying, legal which are becoming an increasingly important part of the mix. Grocery retailers need to ensure they are following trends and stocking the right range to ensure their customers are happy and don’t feel the need to shop elsewhere.”
The latest IRI data shows the UK Cigar market to be worth just over £328m in annual sales which demonstrates value growth of 1.4% versus the same time last year. By far the largest segment within cigars is cigarillos, whose sales account for £158.1m of that total, followed by the miniature segment (£93m), the small segment (£52m) and the medium/large segment (£23m), with the rest (£2.2m) being made up of handmade cigar sales.
The cost-of-living crisis has helped shape the category over the last few years with value brands and smaller pack sizes often in demand. It’s no surprise that price remains important because that search for value can still be a motivating driver of purchase for adult smokers.
Cigarillos remain the current success story within cigars. This segment in the cigar category only really started six years ago with the arrival of these smaller, peppermint flavoured products, but sales are now worth £157.4m and they account for more than half of all cigars sold in volume terms. In the last couple of years distribution has improved and sales have really shot up for the Signature Action cigarillo brand. In fact, its sales have gone up by almost 33% since the same time last year, with adult smokers appreciating the great flavour and cheaper price point, compared to other brands in the market.
STG’s most recent launch was the expansion of its Signature Action menthol capsule range with the introduction of a new 17-pack format which has been available 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 exceptional value to consumers, positioning it as the most competitively priced option in the market. It also offers an attractive margin for retailers, reinforcing STG’s commitment to supporting its trade partners with high-quality, high-demand products.
“With cigars, it’s more important to stock the right range rather than a big range, so we usually advise retailers to consider stocking the top two or three brands in each of the four main cigar segments, as the top ten biggest sellers overall account for well over 90% of total sales so there’s absolutely no point tying up your cashflow with slow-moving brands,” adds Jhingan. “And when it comes to pricing, I think it’s always important for retailers to offer a range of cigars with different price points to meet different consumer needs. But in general, I would strongly suggest that retailers follow manufacturers’ guidance on pricing, as our recommendations give value for the consumer and exceptional margins for them, which are typically three times higher than those from cigarettes.”
Following a successful launch last year, Imperial Brands has reported that its value cigarette brand Paramount is now the UK’s fastest growing in the cigarette category (IMB).
Introduced in England, Scotland and Wales in October 2024, Paramount has quickly gained market share, with customers already demonstrating brand loyalty by coming back time and time again to repurchase. Combining exceptional value and quality, Paramount features premium, full-flavour Virginia sun-ripened tobacco, catering to the UK market where the majority of cigarettes feature Virginia blends (ITUK). Paramount’s success reflects the growing demand for value options in the UK, with the value sector now representing nearly 37% of the UK cigarette market (ITUK).
Available in both full flavour king-size and super king-size formats, Paramount continues to be Imperial Brands’ best value product and has maintained a competitive RRP of £12.50, making it an attractive choice for adult smokers while still offering a strong margin for retailers.
Shirley Soccio, Head of Consumer Marketing UK & Ireland at Imperial Brands, comments: “While we were not surprised that Paramount has been well received in the UK market based on its success in continental Europe, its performance to date has surpassed expectations. It’s clear there is continued demand for value cigarette products which make no concessions when it comes to quality.
“There are many smokers across the UK and Northern Ireland who are receptive to trying new brands at the right price and quality – and it’s evident that having tried Paramount, many of them have decided that it’s the right brand for them and are staying with it.”
Having previously launched in Europe, Paramount also enjoyed a highly successful launch in Germany, where it established itself as the fastest-growing cigarette product on the market when it hit the shelves in the summer of 2023 (NielsenIQ).
The UK’s tobacco accessories market continues to deliver robust growth, presenting significant profit opportunities for retailers.
Now worth more than £479m (IRI), the category is benefiting from strong consumer engagement driven by ongoing innovation, including new product development, refreshed pack designs and formats, and smarter, more tailored merchandising solutions.
As shoppers look for value, convenience and quality, Republic Technologies is responding with products that elevate the fixture and enhance the overall customer experience, ensuring the category remains a reliable performer on shelf.
Demand in the £130m (IRI) papers sector remains particularly strong, with value sales up 7.9% (IRI) on last year.
Roll-your-own specialist Republic Technologies (UK) Ltd is playing a major part in the category’s continued success, driving strong levels of consumer demand for all its best-performing filters, papers and matches. This has been achieved by fine-tuning its NPD programme, working closely with its retail partners and backing both its established and new products with strong levels of trade support.
“Against the backdrop of an increasingly challenging retail climate, the high margin tobacco accessories category continues to deliver for retailers,” says Gavin Anderson, Sales and Marketing Director at Republic Technologies.
“The combination of introducing more choice to long-established products, including those brands of choice which roll-your-own enthusiasts know and trust, complemented by the launch of category-boosting new products which reflect changing consumer needs and aspirations, is proving to be a winning formula.”
Traditionally known for its strength in the filters category, Republic Technologies is making headlines in the papers sector with its environmentally-friendly OCB range, the UK’s fastest-growing papers brand (IRI). The company has accelerated demand for the OCB range with the recent introduction of OCB Authentic REAL Rice Papers which appeal to the growing number of roll your own consumers who are now looking more closely at products with natural ingredients.
Organic and chlorine free, OCB Rice Papers are made from a blend of rice and organic hemp. The unbleached, ultra-thin papers deliver a premium rolling and slow-burning experience in a natural, brown paper. OCB’s on-shelf appeal has also been strengthened by a full range pack refresh. The full OCB range has benefited from a modernised design which has enabled both brand recognition and clearer product differentiation, enabling roll-your-own shoppers to choose the OCB products which suits them best.
“The new designs are really distinctive and accentuate the core element of each product but maintain a clear focus on OCB which has become a real talking point in the papers sector thanks to its clear point of difference which caters for a variety of shoppers’ needs,” adds Anderson.
Consumers can choose from OCB Premium, Virgin, Organic Hem, Ultimate and Rice Papers, available in both Slim and Slim & Tips variants.
Environmental considerations also feature strongly in recently launched Just Paper plastic free Swan filter tips.
Just Paper Swan Filters provide a similar experience to traditional cellulose acetate filters but have a much lower environmental impact. Featuring a ‘flip-a-tip’ design which dispenses loose, extra slim filters without the use of plastic rods, each box contains 120 filters, with 10 boxes per outer, with an RRP of £1.45 per consumer unit.
“The Just Paper Swan Filters is something of a breakthrough in the filters sector. Not only does the product perform really well, it has strong environmental credentials which ticks an important box for a growing number of roll-your-own enthusiasts,” adds Anderson.
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