Worth £14bn each year (before tax), the tobacco category continues to hold a significant amount of value for retailers (ITUK).
There is nearly a 50/50 market share split between Factory Made Cigarettes (FMC) and Roll Your Own (RYO) categories, at 54% and 46% (ITUK) respectively, and with more consumers looking for ways to reduce spending amid soaring household costs, we’re seeing a shift towards value products across the entire tobacco category.
Shopper demand for value has gained momentum as a result of the cost-of-living crisis and now the lower priced tiered products accounts for the largest proportion of tobacco sales.
For example, the sub-economy segment now makes up for 63% of FMC sales, while the economy segment accounts for just over a half (56%) of RYO, and these segments are showing strong growth at 3% and 5% Year on Year (YOY) respectively (ITUK).
“With household bills and inflation soaring, we expect value to remain the dominant trend shaping sales across the tobacco category,” comments Yawer Rasool, Consumer Marketing Director UK & Ireland at Imperial Tobacco. “But it’s really important for retailers to remember that value means different things to different people. For some, convenience will remain a priority, with shoppers seeking out tobacco solutions that offer added value such as Embassy Signature’s premium features, or the addition of papers and tips in RYO like we offer through Players JPS Easy Rolling Tobacco and Rizla Combi for accessories. While others will be looking for a leading brand that offers the reassurance of a brand name they know they can trust that also delivers on price. Thanks to our wide portfolio of leading brands that deliver on value across every category, we’re in a strong position to help retailers cater for these trends in the months and years ahead.”
With many shoppers looking to cut down their household spending, there has been a significant increase in the number of RYO sales. In fact, the category now accounts for nearly a half (46%) of all tobacco sales (ITUK).
“As the cost-of-living crisis continues, it’s likely that the need for value products is going to continue to be a dominant trend in the category for some time, so retailers need to make sure they can cater for this demand by stocking the right product offering,” adds Rasool. “With this in mind, we strongly advise that retailers check that they stock a wide range of leading roll your own brands, including Riverstone and Players JPS, so that they are fully prepared for this continuing rise in demand for value tobacco products.”
Imperial Tobacco recently announced a new rolling tobacco variant for its Embassy Signature range to enable retailers to further capitalise on the rising demand for value tobacco.
As demand for Roll Your Own (RYO) tobacco grows in light of the rising consumer appetite for value, the tobacco accessories category provides a substantial sales opportunity for retailers.
Recent figures show that filter tips are worth a sizeable £114m of sales, and while regular papers account for £44m, king size papers £29m and combi papers are also proving to be popular at £33m (EPOS & ITUK). With this in mind, Imperial Tobacco has just launched a new Rizla Classic King Size Combi variant to help retailers capitalise on the growing demand for natural rolling papers with the added benefit of papers and tips in one pack for the ultimate convenience.
Available to buy now at an MRRP of £1.30, the new Rizla Classic King Size Combi includes 32 unbleached king size papers and tips to appeal to the rising number of smokers looking for more natural papers. The unbleached brown papers offer a more natural and authentic feel and with the addition of tips in the same pack, Rizla Classic King Size Combi offers everything smokers will need for the perfect roll.
Looking at the FMC category, as the need for value-focused products continues to increase, many tobacco shoppers are seeking a familiar brand that they know and trust but at a low price point. With this in mind, Imperial Tobacco has recently launched several new products to enable retailers to cater to the ongoing demand for value tobacco.
The Players range has been extended with the launch of Players Max to enable wholesalers to cater to the ongoing demand for value tobacco. Players Max features cigarette sticks that are 12% longer in size and contains a new intense blend, which was shown to be a popular and preferred choice in consumer testing thanks to its full tobacco taste.
The new variant also features a modern and stylish, bevelled-edge pack which feels more robust and firmer in hand. With an RRP of just £12.90, the new launch provides an enhanced smoking experience at a low price point, making it a must-stock for wholesalers looking to cater for modern smokers seeking full-strength tobacco taste and great value.
Imperial Tobacco has extended the Embassy Signature range with the launch of a new rolling tobacco variant, which offers a range of premium features at a low price point.
The new Embassy Signature Rolling Tobacco includes Imperial’s fastest selling (EPOS data) and finest tobacco blend in a 30g pouch. During consumer testing, the Embassy Signature blend came out as No.1, demonstrating the blend’s appeal amongst adult smokers. The portrait pouch provides a modern look that’s easy to fit into a pocket and features a premium resealable zip lock to keep the freshness in. The new variant is available to buy at an MRRP of £18.50.
Imperial Tobacco has also just announced an update to the L&B Blue and Embassy Signature New Crush variants. Available to buy now, the newly updated variants, L&B Blue New Crush Fusion and Embassy Signature New Crush Fusion, provide adult smokers with the opportunity to enjoy an instant cooling sensation thanks to its new and exclusive “Fusion” large bore filter. Nearly 20% larger than a standard-size bore filter, the “Fusion” large bore filter offers smokers a new smoking experience.
The New Crush Fusion range also features a white tip for the ultimate contemporary look and feel, a resealable foil to guarantee continuous freshness, as well as special tipping paper to provide the innovative cooling sensation. L&B Blue New Crush Fusion and Embassy Signature New Crush Fusion, which are available for an RRP of £13.00 and £12.75 respectively, provide the same tobacco blend as the New Crush range, making it the ideal product for adult smokers who are seeking a new smoking experience at great value.
“Staying on top of any new trends within the tobacco category can be a great way to ensure maximum sales impact,” says Rasool. “Value products, for example, are much more popular at the moment than premium products, given that many consumers are looking to reduce spending, so retailers need to ensure they are responding to this trend in order to grow their sales.”
However, it’s important to remember that every store is different, so retailers should analyse their sales data and talk to their customers on a frequent basis to understand what product they are looking for and purchasing often. Once retailers have an understanding of this, then they can tailor their range accordingly.
“Making sure that stock levels are continuously maintained is also key to improving sales. If retailers run out of popular products, it can be costly, particularly within a category that is mainly driven by brand loyalty,” Rasool continues. “With this mind, store owners and their staff should consistently check their stock levels – both on the shelf and in the stock room – to ensure they’re not missing out on any sales opportunities.”
Retailers are a hugely important route to market for Imperial Tobacco, representing a significant proportion of the company’s sales. As such, the company continuously invests in supporting retailers so that they can make the most out of its products with sales and trends advice, promotions, store visits and in-store furniture.
As well as supporting retailers through its team of sales representatives, Imperial’s Ignite app is another great resource and allows retailers to keep up to date with the latest news, information and training opportunities to help them perform at maximum efficiency. It includes a wide range of tools and advice, including incentive articles, downloadable POS, product information and top tips on how to increase sales in store.
The Prime Minister announced at his Party Conference in October the intention to pass into law a generational smoking ban for the UK. It means anyone born on or after 1 January 2009 will never be able to be legally sold cigarettes. This will mean raising the age of sale by one year each year for this generation.
Lindsay Mennell Keating, Head of Corporate & Legal Affairs UK & Ireland, Imperial Tobacco UK & Ireland, comments: “Verifying age to meet these restrictions will be a real burden for retailers. The time will come when a shop keeper would need to take a judgement about asking people in their 30s to verify their age and asking for photographic ID each time. Many people do not routinely carry photographic ID and checking for ID at every sale will be a hassle and slow down service in their shops.
“And it could lead to increased abuse from customers which is on the rise in any case, especially as we know that age-related questioning in shops is the main trigger point for staff being abused.”
The illicit tobacco trade is already booming in the UK. Over the last two years more than 27 million illicit cigarettes and 7,500kg of hand-rolling tobacco have been seized. It is highly likely if a generational smoking ban is implemented we will see a marked rise in the supply and availability of illicit tobacco. This unintended consequence has been the case in other countries like South Africa after prohibition was announced.
“And it is crucial that the black market does not expand as a result of a generational smoking ban because adults now wishing to smoke have to rely on illegal sources due to their age group,” adds Keating. “Many hard-working shopkeepers already lose out on valuable revenue as smokers switch to cheaper, un-taxed and un-regulated illegal products.”
For now, it is business as usual for retailers who are allowed to sell tobacco products to adult smokers. The proposed new legislation will not come into force until 2027.
“However, we’d strongly encourage retailers to write to their MP via https://consumerchoicecenter.org/no2prohibition/, and engage with trade bodies to voice their views on the proposed legislation,” says Keating.
“Imperial Brands wants to support retailers and help them ensure they only sell our products to adults who are legally allowed to smoke. We would recommend retailers doing things like checking up on the No ID No Sale guidelines. No retailer wants to have a Restricted Sale Of Premises Order imposed on them limiting the products they can sell with the resulting effect on their business revenue.”
The guidelines offer lots of advice for staff training and tips on the use of a Refusals Register. In addition, the free retail packs offered contain lots of point of sale merchandise like Statutory Tobacco Notices and Age-Related posters along with ‘Scan Me’ and ‘No ID No Sale!’ badges and shelf wobblers.
Nataly Scarpetta, Marketing Manager at Scandinavian Tobacco Group UK (STG UK), comments: “Our latest data shows the total UK cigar category to be worth £295m in annual sales, which is a value increase of 3.2% versus the same time last year.”
This positive performance is mainly down to cigarillo sales, which account for the largest of the four segments in the cigar category, and the only one currently in growth.
Cigarillos are now worth over £111m in annual sales and are responsible for very nearly half of total cigar volume sales.
STG’s Signature Action brand is currently the fastest growing cigarillo, experiencing sales growth of over 41% versus the same time last year.
“The on-going cost-of-living crisis has certainly bought into sharp focus the importance of value in the tobacco category,” adds Scarpetta. “That said, the value trend has certainly been around the cigar category for quite some time now, which is evidenced by the success of our Moments Blue brand. In fact, our Moments Blue 10’s packs are the biggest brand in the VFM segment and are well-known amongst tobacco-selling retailers as a popular choice amongst those customers who are looking to save money. It’s also worth mentioning our Signature Action brand is the most affordable in the cigarillo segment.”
Aside from the rise in cigarillo sales and the search for value, there are a number of other trends impacting cigar sales.
“Cigar smokers are typically brand loyal and prefer to stick to high quality, established brands which they know and trust, so stick to stocking the top performing brands which you know, and your customers love, such as Signature Blue which is the UK’s best-selling traditional cigar and a must-stock for any tobacco retailer,” says Scarpetta.
Whilst perhaps not on the scale as mainland Europe, flavoured cigars are growing in popularity in the UK too. This doesn’t only mean peppermint flavoured cigarillos, other flavoured cigars are popular too particularly in the miniature segment, so make sure you have some good quality options in stock. STG’s Signature Red Filter brand is currently the UK’s best-selling aromatic filter cigar, with a smooth taste and vanilla flavour which proves very popular with those adult smokers who enjoy a flavoured cigar.
Whether it’s Christmas, Easter, Father’s Day, or just a summer party or family celebration, many regular cigar (and cigarette) smokers will turn to a larger cigar to enjoy as a treat or part of their celebrations when they have more time to enjoy it. Henri Wintermans Half Corona is easily the UK’s best-selling medium / large cigar and a particular favourite at Christmas, although remains popular all year round. The brand has a long and rich history that dates back to the 1800s and should always be part of any retailers’ cigar offer.
STG’s best-selling products are Signature Blue, Henri Wintermans Half Corona, Moments Blue and Signature Original. The Signature Action cigarillo brand, although not one of STG’s biggest sellers, has seen sales grow by over 41% in the last twelve months.
STG has just announced a contemporary redesign for its Signature cigar range.
The new simple but smart design appears on packs of Signature Blue, Signature Original and Signature Red Filter and are available to retailers now.
Last year the Signature brand celebrated its 60th anniversary with the launch of some limited-edition packs and the permanent return of the iconic tins for packs of 20s.
Now, the newly designed packs have been upgraded to full colour on all sides.
The overall design has been simplified and more focus has been added to the leaf icon to emphasise the unique nature of the product.
Whilst the packs have changed, the cigars inside certainly haven’t, and will continue to offer adult smokers a smooth taste and smoking experience with unquestionably high quality.
“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 cigar segments, as the top ten biggest sellers overall account for well over 90% of total sales,” suggests Scarpetta.
“At STG we consider ourselves as the ‘cigar category champions’, meaning we work closely in partnership with all our multiple grocer customers, from offering promotional support, to visiting head offices providing up to date advice on adult cigar consumers’ smoking habits or assessing inventory levels in order to maintain continuity of supply.”
Gavin Anderson, Head of Sales & Marketing at Republic Technologies UK, comments: “As the economic climate continues to impact consumer confidence and shopping habits, the UK’s tobacco accessories category is maintaining its strong performance.”
The tobacco accessories category enabled retailers to meet growing consumer demand by offering products which not only provide value for money but also quality and choice.
The category’s robust performance resulted in year-on-year growth of 6.8% (Circana), with annual sales of accessories now valued at a massive £352m (Circana).
The category’s fastest growing sector is rolling papers, which is also the highest value, growing at +13.3% (Circana).
OCB, the UK’s fastest growing paper brand in the tracked market, is leading the charge with growth of +45% YoY (Circana), underlining its importance to all tobacco accessories’ stockists.
The Slim & Tips subcategory is also recording impressive growth with value sales upwards of £32m (Circana) as more consumers opt for premium formats. This growth reinforces the role that brands such as OCB can play, not only in retaining existing consumers but also in attracting new shoppers to the fixture.
Roll-your-own products are becoming even more synonymous with value, and look set to appeal to even more consumers who want to cut costs without having to make major lifestyle changes or compromise on quality.
Republic Technologies is set to accelerate demand further for its fast-growing OCB range with the introduction of OCB Authentic REAL Rice Paper to the UK market.
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. Featuring 32 papers per pack, OCB Rice is available in both Slim (RRP, £1.10) and Slim & Tips (RRP, £1.73).
“Shoppers are more demanding than ever, looking for quality and value in every purchase. Top quality products, displays and innovation are important, complemented by broad availability and distribution, but the importance of a competitive price point should not be under-estimated,” concludes Anderson.
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