Despite smoking rates and overall sales volumes continuing to decline longterm, the British tobacco market remains bullish, says Paul Coggins, Head of Key Accounts at Imperial Tobacco UK. It is still the UK’s single biggest FMCG category with a market value of £14.4bn, of which factory made cigarettes (FMC) make up £11.6 billion, and still offers plenty of profit potential for retailers:

“Even with the EUTPD II and standardised packaging regulations, opportunities still exist to bring products to market that meet evolving consumer demands and ensure adult smokers continue to enjoy innovative new tobacco experiences.

“Downtrading is one notable current trend we’re noticing. We continually monitor and – if necessary – reposition our portfolio to react to evolving market trends. For instance, L&B Blue shifted from the Economy to the Sub-Economy factory made cigarette sector in 2018. More recently, we announced plans to rename our Mid-Price RYO brand GV Smooth Bright Yellow as Golden Virginia Yellow, capitalising on the strong brand equity the latter enjoys as a premium RYO brand.“

Looking at overall product trends, in the UK, Roll Your Own (RYO) has been consistently growing its share of the overall tobacco category. However, since the EUTPD II regulations came into full effect in May 2017 the speed of the shift from factory made cigarettes (FMC) has increased significantly.

Between 2014 and 2016, says Paul Coggins, RYO saw an average monthly gain in White Stick Equivalent (WSE) share of 0.07% but in 2017, its share of WSE grew more sharply, increasing by an average 0.18% per month, almost triple the rate of overall category growth. UK RYO market share in relation to FMC stood at almost 39% in November 2018, and current trends suggest this pattern is set to continue. The crushball (capsule) sector also continues to flourish, currently standing at over 15% of the overall FMC market.

In terms of bestselling products, retailers should continue to stock up on Imperial’s best-selling factory made cigarette (FMC) and RYO brands like Player’s, L&B Blue and Gold Leaf to ensure they meet consumer demand. “Continued focus on new product development is critical,” says Imperial Tobacco’s Paul Coggins, “but in this challenging post-EUTPD II environment it’s also vital to communicate that innovation to retailers. Our salesforce spends significant time with our customers explaining the importance of new products.”

Imperial suggests organising tobacco products by brand, range and price segment – covering sub economy to premium ensures availability is consistently maintained. Paul Coggins concludes:

“Retailers should also take note of their bestselling FMC and RYO SKUs and always ensure their stock rooms contain enough backups to replenish gantries, should supplies run low.

Capsule sales in orbit Ross Hennessy, Head of Sales at JTI UK agrees the UK tobacco market is going through a sea change:

JTI is another manufacturer continuing to invest in product innovation and support, to help retailers maximise tobacco profits. It extended the Capsule range in 2018, adding three new value products, Sterling Dual Superkings 20, Sterling Dual Double Capsule King Size 20 and B&H Blue Dual Superkings 20. Ross Hennessy confirms that he and his colleagues have also seen the rollyour- own sector grow as existing adult smokers seek out these value for money products and says Roll-your-own now generates sales worth over £2.7 billion.

JTI is bolstering its Capsule offering with two new products: Sterling Dual Triple Green and Benson & Hedges Blue Dual Double Capsule. Sterling Dual Triple Green is the first triple menthol cigarette in the UK tobacco market. The innovative mentholated cigarette has two capsules, one peppermint and one spearmint, and offers a new proposition for existing adult smokers from the UK’s no.1 Capsule brand. Similarly, the new B&H Blue Dual Double Capsule will bring a more intense flavour option to the UK’s fastest growing cigarette brand. Entering the market as the UK’s lowest priced Double Capsule offering, it will also help retailers tap into the growing Value segment.

Retailers unsure about Track and Trace, reveals JTI research A recent survey conducted by JTI has revealed several areas of retailer uncertainty regarding the upcoming Track and Trace legislation, coming into force on 20th May. The survey of over 1,400 retailers carried out via JTI Advance, highlights that further education is needed on the specifics of the legislation.

70% of those surveyed revealed they were unaware they had to apply for two separate identifier codes to be able to store and sell tobacco products legally, whilst 60% admitted they were unsure when the legislation comes into effect. To support retailers through the transition, JTI is launching a dedicated microsite (, featuring a host of practical information and advice to help them prepare. JTI’s dedicated sales representatives will also be on hand to communicate the changes and answer any questions retailers may have in the lead up to 20th May and beyond. Mark Yexley, JTI’s Head of Communications comments: “Ensuring the new Track and Trace system is implemented by 20th May is a significant challenge for the tobacco trade sector as a whole, but JTI will be on hand to help support our trade partners through the transition, every step of the way. We advise retailers to visit our new microsite to ensure they are fully prepared.”

The Track and Trace legislation will allow the authorities to track the route of and source of genuine product throughout the supply chain.

Encouragingly, says Mark Yexley, nearly half (46%) of retailers surveyed agree the legislation will help combat the illicit tobacco trade – which the UK government estimates accounts for 15% of the cigarette market and 28% of the hand rolling tobacco market in the UK. Mark Yexley continues: “The success of the Track and Trace legislation will require strict enforcement, and it’s now more important than ever for retailers to report instances of illicit tobacco being sold in their area. Retailers found guilty could face any penalties HMRC decide to apply and potentially lose the right to trade tobacco.”

JTI is committed to supporting lawabiding retailers by fighting the illicit trade. The manufacturer launched its ‘Don’t be Complicit in Illicit’ campaign in 2018, aimed at encouraging retailers to join the fight against illegal tobacco. It has removed gantries from 35 retailers found to have been selling illegal tobacco, as well as supporting five private prosecutions in 2018, all of which resulted in successful convictions.

Implementing Track & Trace De La Rue, the world’s leading security and anti-counterfeiting solution provider has signed a £3.5m contract with HMRC to implement a track and trace system for all tobacco products sold in the UK.

The five-year contract will see De La Rue implement a digital solution to track and trace the estimated 1.7 billion cigarette and hand rolling tobacco packs sold in the UK each year through a unique identifier. Ensuring the traceability of all tobacco products is now a legal requirement under the EU Tobacco Products Directive, Article 15, with the specific aim of preventing the illicit trade of tobacco products throughout the EU and protecting citizens from counterfeit products which could be damaging to their health.

As part of the contract De La Rue will also manage the service for HMRC with all tobacco manufacturers, importers and relevant economic operators serving the UK tobacco products sector. De La Rue has been helping governments and tax authorities around the world to fight illicit trade and protect tax revenue for decades. De La Rue launched its track and trace digital solution DLR Certify in 2015 as part of its strategy to bolster its software and services offerings. In 2018, it won a fiveyear contract to implement a full track and trace solution for the Federal Tax Authority in the UAE to be initially applied on tobacco products.

Philip Morris’s new IQOS range Philip Morris has launched its latest range of IQOS heated tobacco products in the UK. The new smoke-free IQOS devices are the company’s most advanced to date and are designed to make it easy for smokers to switch away from cigarettes completely.

Philip Morris Limited’s Managing Director, Peter Nixon says the new products have been specifically designed to give every one of the UK’s 7.4 million smokers a way to stop “burning tobacco”, as they put it: ”We are confident that our new IQOS range provides the solutions needed to help all UK smokers move away from cigarettes.”

Looking at the new products, IQOS 3 is the latest version of the heated tobacco device. New features include longer battery life, faster charging and a more ergonomic design. IQOS MULTI is a new, more compact heated tobacco device, designed to provide a different experience to Philip Morris other devices. With IQOS MULTI you can use 10 back-to-back tobacco sticks before needing to charge the device.

Two new flavours of HEETS tobacco sticks are also being unveiled. The new ‘Sienna’ and ‘Blue’ SKUs join existing Amber, Turquoise and Yellow flavours in the range. The Sienna is a full bodied blend with dark roasted woody notes, and Blue is bold and cooling with minty notes.

IQOS heated tobacco technology heats real tobacco to produce a vapor and is growing in popularity and success. Over six million people worldwide now use it and Philip Morris’s research found that two thirds of smokers in the UK who buy IQOS switch away from traditional cigarettes completely.

Miniature cigars are big sellers Currently worth £199.8m, the UK cigar market is reporting a minor increase of 1.3% overall, says Jens Christiansen, Head of Marketing & Public Affairs at Scandinavian Tobacco Group (STG UK), with the Miniatures and Medium/Large cigar segments showing an increase of 5.1% and 7.2% respectively. Miniature cigars continue to dominate, accounting for 72.7% of total cigar volume and £103.9m in value sales. Jens Christiansen says overall, the top 10 cigar brands account for 89% of the total cigar sales and 85% (£168m) of value sales: “This highlights just how important it is for retailers to stock the leading brands to take advantage of the sales and strong profit margins available in the cigar category.”

STG’s research highlights that 59% of male smokers who don’t normally smoke cigars would be willing to buy them, while 32% of traditionally noncigar smoking males said they would buy cigars for their taste, and 27% would if they were cheaper than cigarettes. The research also showed 79% of smokers who regularly visit a convenience store would try an alternative tobacco product, such as cigars, if it was recommended by store staff.

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