Tobacco continues to be a huge FMCG category, worth £2.2bn after tax. The market remains driven by value, with the sub economy sector accounting for nearly 60% of factory made cigarettes.

Retailers need the right products and the right knowledge to help their customers navigate the tobacco category.

Duncan Cunningham, UK Corporate Affairs Director at Imperial Tobacco & blu, tells Grocery Trader how retailers can merchandise tobacco in store and how Imperial works with retailers to improve sales.

Tell us about your background – where have you worked before, how long have you been at Imperial, how long have you been in your current role?

I started my career as a Diplomat, before joining Lockheed Martin in the UK to lead their government engagement work and then joining Imperial Brands 7 years ago to run their Corporate and Legal Affairs teams in the UK & Ireland. A common theme has been the interaction between industry and governments, and I am passionate about making that interaction as successful as possible.

What does the Corporate Affairs Director role involve? What is a typical day for you?

My role is to ensure our products reach our customers in the way which best meets the demands of our consumers, both adult smokers and adult vapers. I am extremely lucky to have some fantastic colleagues in my teams and so a typical day involves checking in to ensure I am on hand to support them in whatever way they feel best to help drive our government engagement, regulatory work and of course, engagement with the trade media.

Are there any particular aspects of the Imperial business that you are most passionate about and most keen to focus on?

Imperial is really putting the consumer at the centre of everything it does and so it has been great to work alongside our trade and marketing teams to better understand market trends and consumer needs. In my role as a leader of our UK and Irish business, I’m also passionate about ensuring everyone feels valued and able to be the same person they are at work as they are at home.

What is Imperial doing in the area of sustainability to reduce its environmental impact?

As with many businesses, this is an area of rising focus and one which is of increasing importance to both ourselves as a responsible business and to our customers and consumers. Work is underway across many aspects of our business, and I look forward to being able to share more over the coming year.

Why have you reduced the price of some of your brands including Embassy Signature, Richmond and Riverstone Roll Your Own Tobacco?

Following a shift in the market with a rising number of smokers moving to more affordable price points, we have reduced the MRRP on several of our key brands to support our customers and their sales.

Demand for value tobacco continues to play a major role in shopper purchasing decisions. By adapting the pricing on these leading brands, we can help retailers ensure they continue to offer their customers great quality brands at great value price points.

As part of the price repositioning, the MRRP of both Embassy Signature and Richmond has been reduced to £9.75, and Riverstone Roll Your Own Tobacco reduced to just £12.95 and £21.20 respectively for its 30g and 50g formats*, joining recently launched JPS Players Easy Rolling Tobacco in this new price tier.

How has JPS Players Easy Rolling Tobacco been performing since launch?

The launch of JPS Players Easy Rolling Tobacco has been well received by the trade with the range already achieving 2% share of the RYO marketi, despite only launching in April this year.

Our research shows that consumers remain fully focused on seeking out the best value from the tobacco products they buy. This is especially true within the growing RYO segment, with the Economy sector accounting for just shy of half the market at 49.87%ii. With JPS Players being a nationally well-known and trusted brand, we’re confident this latest innovation will continue to help retailers capitalise on the rising demand for quality tobacco products at great value price points.

What is Imperial doing to fight against counterfeit tobacco?

We firmly believe that illicit tobacco trade must not be tolerated. The sale of illicit tobacco is a global industry that harms honest retailers and damages communities. Illicit tobacco sellers can have links to other organised crime activities and, at worst, fund illegal operations such as human trafficking and modern day slavery. However, to truly address the problem, we need everyone to be alert and take action by reporting any suspected illicit activity to the relevant authorities.

We recently launched a new and improved anti-illicit trade website as part of our continued ‘Suspect it? Report it!’ trade campaign to tackle illegal sales of tobacco. The redeveloped website is a valuable resource for information about the illegal tobacco problem in the UK, with the site containing information about the latest developments in illicit tobacco via an updated news page and Twitter feed.

Our aim is that this redeveloped site will help retailers to remain vigilant and raise awareness of the scale of the problem at hand. As well as keeping retailers informed, we want to encourage retailers to report any suspected sellers in their area to our salesforce through our dedicated SARA trade platform or call Imperial directly through our anti-illicit trade hotline on 0800 0495992.

For any retailers keen to find out more about illicit trade seizures and success stories, we’d also recommend following @suspect_report on Twitter or visit www.suspect-it-report-it.co.uk.

How many reports of potential illegal trade activity have you received via your anti-illicit trade app, SARA?

Imperial continues to assist in the reporting and investigation of these illegal activities wherever possible. Our dedicated anti-illicit trade app, SARA (Suspicious Activity Reporting App), launched in January 2018, has now received nearly 3,000 reports of potential illegal trade activity which we have shared with law enforcement.

How many seizures of illicit tobacco have been made following these reports?

We are aware that seizures have been made in over 250 premises reported based on information available in the public domain, and over 130 social media posts have also been removed.

However, action can only be taken when illicit tobacco trade activity is reported and, according to recent figures, a staggering 78% of those who are aware of illicit tobacco being sold in the last 12 months haven’t reported it, with just 19% saying they didiii.

To combat illicit trade, we need our trade customers to take action by reporting any suspected illicit activity. It’s important that staff are educated on the issue so that, alongside store owners, they too can be vigilant and notify the relevant authorities or report any suspected sellers to us direct through our dedicated SARA platform.

How many retailers have had their gantries removed by Imperial Tobacco following the discovery of illicit tobacco on the premises?

We take our role in tackling illicit tobacco trade activity very seriously and continue to remove units from stores following prosecutions. This includes three recent gantry removals from stores in Manchester, Banbury and Bolton, following the discovery of violations of the Tobacco and Related Products Regulations 2016.

What is the value of the UK tobacco market? How has the tobacco market performed since the introduction of the menthol ban?

The UK Tobacco market is worth (after tax) £2.2bniv and remains heavily price driven. A trend that we’ve seen developing in recent years is a move towards more of a nicotine portfolio with adult smokers buying different RYO (Roll Your own) and FMC (Factory Made Cigarettes) products to suit different occasions. In fact, figures show a quarter of consumers are now dual smokersv.

What trends are driving the market?

While many smokers may be experimenting with the nicotine products available across segments, shopper demand for value continues to drive buying habits in tobacco overall. Looking at the data, the Sub Economy sector is now worth almost 60% of the total FMC marketvi, while sales in the Economy RYO segment are also rising and now accounting for nearly half the market at 49.87%vii. These figures really demonstrate just how great the demand for value tobacco is at present and this is very much a growing trend.

In order to effectively harness the sales opportunities this presents, retailers and wholesalers must be equipped with the right products and importantly, the right knowledge, to help their customers navigate the Tobacco category.

What advice do you have for retailers on merchandising tobacco in depot?

Every store and its customer base are completely unique so there’s no one-size-fits-all approach to follow. It’s important for retailers to consider various factors when deciding their range to ensure it meets the needs of their customers. This includes everything from the gantry and countertop space available, to what products are proving popular with customers, alongside the latest market trends.

Ultimately, we’d recommend stocking as broad a range as space allows and then fine tuning this in the weeks and months that follow according to customer feedback and sales. The retailers who can remain agile, will be in the best position to cater for their customers and grow their nicotine sales as a result.

Retailers can also do simple things to drive sales such as using small countertop unit for tobacco-related accessories, especially if it is well organised and fully stocked. Making sure it is positioned in a well-lit part of the counter will also help increase stand out even further.

Ensuring staff understand the different segments and respective products on offer is arguably more important in tobacco than any other FMCG category. Shoppers have been largely reliant on the knowledge of staff ever since the display ban resulted in tobacco products being hidden away from sight, meaning browsing the gantry at the till point to see what’s on offer was no longer an option.

Most smokers are brand loyal so many will know what they want to buy when they walk into the store. However, if their product of choice is out of stock, it can be quite an intimidating process choosing another product when you can’t see what’s on offer, especially if a big queue of people starts forming behind you.

With this in mind, retailers need to ensure their staff know what products are stocked in store and where they’re positioned on the gantry at the bare minimum. Better still, if they can be armed with advice on what solutions they should offer if a product does go out of stock for any reason, this will go a long way to helping retain customers. Otherwise, there’s a high likelihood the shopper will simply walk out of the store and go elsewhere. For this reason, it’s also crucial for retailers to make sure they maintain stock levels at all times, especially of their top sellers. As I say, smokers tend to be brand loyal so if they walk out due to their product being out of stock, they simply may not return, especially if they do find it in stock at a store nearby.

How do you work with retailers to improve sales?

Retailers are a hugely important route to market for us, representing a significant proportion of our sales. As such, we continuously invest in supporting retailers so that they can make the most out of our products with sales and trends advice, promotions, store visits and in-store furniture.

As well as supporting retailers through our team of sales representatives, our 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.

* For the avoidance of doubt, customers are free at all times to determine the selling prices of their products.

 

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