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 low priced propositions across the entire tobacco category.

We’ve seen shopper demand for value gain momentum as a result of the cost-of-living crisis and we’re now seeing the lower priced tiered products account 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% YOY respectively (ITUK).

“It’s clear that there are significant sales opportunities for retailers given the amount of value that these segments offer,” comments Tom Gully, Head of Consumer Marketing UK&I at Imperial Tobacco. “However, in order to tap into these, they need to make sure that they are not only equipped with the right products, but that they have a strong level of knowledge of the tobacco category in order to help any customers looking for advice.”

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 Gully. “With this in mind, we strongly advise that they 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.”

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 (ITUK).

“With this in mind, we strongly recommend stocking a wide range of products across each of these segments to cater for customer needs and maximise the sales opportunities on offer,” says Gully. “While it’s important that retailers stock a wide range of different tobacco accessories to cater to different customers, such as filter tips, papers and flavour cards, given the prevalence of brand loyalty in tobacco overall, it’s even more important that they are stocking the most popular brands that consumers will be looking for, like Rizla, in order to avoid missing out on any sales opportunities.”

With over 200 years of heritage, Rizla is the No.1 Rolling Paper in the UK (EPOS data). One product that is proving popular with value savvy tobacco customers is Rizla King Size Combi Silver. With an RRP of £1.20, it offers both papers and tips in one pack.

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 recently announced the launch of newly improved Embassy Signature Silver Edition which offers a host of premium features without the premium price tag.

Imperial also recently launched a range of updates and upgrades to the popular Lambert & Butler (L&B) brand.

As part of the L&B brand developments, Blue Real Blue and Blue Bright Air Filter has been renamed to Blue Original and Blue Bright respectively, to further align the product with the rest of the brand family and create a more recognisable presence on shelves. L&B Blue Bright and New Crush now features Fresh Protect, offering customers a more protected pack with a premium resealable foil. All variants are available to buy at an MRRP of £11.85 for a pack of 20s.

Kate O’Dowd, Head of Commercial Planning UK & Ireland, Philip Morris Limited, comments: “With the cost-of-living crisis soaring, consumers are looking to make savings wherever possible. It’s only natural that many may consider ‘trading down’ to battle inflationary costs of everyday items – forgoing their usual brand selection for more affordable options.”

The switch from combustible tobacco products to smoke-free alternatives is no exception here. While the best choice anyone can make is to quit completely, convenience retailers agree that many adult smokers are looking to offset the rising cost-of-living by choosing smoke-free alternatives that are a better, and more affordable choice to cigarettes – which are now priced at £12.77 (on average) per pack (ONS).

This change in consumer spending was reflected in a recent PML-commissioned survey, looking at emerging trends in the smoke-free category in 2023. The survey found nearly two-thirds (65%) of convenience retailers agreed that adult smokers were switching to smoke-free products, like e-cigarettes and heat-not-burn products, to save money in the current economic climate (PML).

In fact, retailers agreed that smokers would prioritise affordability above all else when choosing a smoke-free alternative this year – with roughly half believing customers would select the cheapest products available (PML), followed by those products offering the best overall value for money (18%, PML).

PML recently entered the disposable e-vapour segment in the UK, with the launch of VEEBA – a premium and recyclable e-vapour product that strives for excellence in design, quality, and compliance.

VEEBA is PMI’s custom-developed disposable e-vapour device, which is available in nine flavours – ranging from classic tobacco to menthol and aromatic flavours.

“We’ve invested USD 10.5 billion in the development of our smoke-free portfolio since 2008 and apply scientific methods, inspired by the pharmaceutical industry, to ensure that every product adheres to the highest manufacturing standards and strict quality control measures – with VEEBA no exception,” adds O’Dowd.

VEEBA’s liquid ingredients pass rigorous scientific and quality assessments to ensure they deliver a consistent taste every time. VEEBA emits on average over 99% lower levels of harmful chemicals compared to cigarettes.

“The convenience sector should be a destination for adult smokers on their journey to becoming smoke-free. Retailers must move beyond transactional-based relationships and build connections, so they can offer advice and support that is trustworthy and actionable,” says O’Dowd.

“Retailers must take responsibility for their learning to close the knowledge gap and become a credible source of information. They must gain comprehensive knowledge of smoke-free categories, brands, and products – including the benefits and relative risks compared to smoking – to ensure recommendations are made based on individual needs and preferences,” O’Dowd continues.

“Stores must accommodate customers by making the point of sale easy to navigate, so decisions can be made at, or away from, the countertop,” says O’Dowd.

“Collaboration is key to accelerating the journey to a smoke-free future. Retailers should seek best practice from other local retailers and be able to direct customers to nearby stores if their preferred smoke-free product isn’t available,” advises O’Dowd. “As customers shift towards the smoke-free category, retailers must ensure they’re future-proofing their businesses. The data suggests a phased approach, whereby retailers continue to sell combustible tobacco products whilst they test which smoke-products are effective – and tailor their gantries to suit.”

Nataly Scarpetta, Marketing Manager at Scandinavian Tobacco Group UK (STG UK), comments: “Tobacco remains a key category for convenience retailers, particularly as a driver of footfall in-store. Our latest data shows the total cigar category to be down slightly by 3.4% in value terms compared to last year, at £282.1m.”

Whilst cigarillo sales continue to grow (currently £99.1m, and up 0.7% on last year), the more traditional cigar segments are all in slight decline which is likely to be due to a combination of factors such as some smokers moving into vaping or pouches, and / or people cutting down due to the on-going cost of living crisis.

The Cigarillos segment within cigars barely existed three years ago but now makes up over 47% of the total volume and just under £100m in value sales. STG’s Signature Action brand has seen sales grow by over 39% in the last year.

“I think there’s little doubt that the cost-of-living crisis is highlighting the importance of value as a consumer trend at the moment,” adds Scarpetta. “Many consumers are going to be increasingly price conscious, and this will affect cigars and the wider tobacco category purchases just as much as any other category in-store, so retailers should ensure they are highlighting their value brands to customers to help them save money. And when it comes to pricing, I always 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 suggest that retailers follow manufacturers’ guidance on pricing, as our recommendations afford value for the consumer, whilst giving exceptional margins for them, typically three times of those from cigarettes.”

STG’s best-selling products are Signature Blue, Henri Wintermans Half Corona, Moments Blue and Signature Original.

To celebrate the 60th anniversary of Signature, the world’s first small cigar, STG UK has just launched a range of limited-edition packs to bring excitement and interest to the cigar category. The new limited-edition packs have been designed to celebrate the brand’s anniversary and give retailers a talking point to their customers, as well as giving consumers something new and different. The pack messaging highlights not only the longevity of the brand but also the consistent quality that has made it a preferred choice for well over half a century.

“Retailers should take the opportunity to stock up, as limited-edition packs usually prove popular with regular smokers and will be in demand,” says Scarpetta. “They may even become collectors’ items in the future! In further exciting news for the brand, we have also recently confirmed that the iconic tins are permanently returning for packs of Signature Blue 20’s and Signature Original 20’s.”

“It’s always worth reminding convenience retailers that as cigars are exempt from the plain packaging legislation, we recommend they stock them on the middle shelf of the gantry where they are visible, and more likely to be purchased by adult smokers who can see them,”

Gavin Anderson, Sales & Marketing Director at Republic Technologies (UK) Ltd, comments: “As demand for factory-made cigarettes continues to decrease, tobacco accessories are very well placed to offer consumers quality and a value alternative, but they must be effectively displayed.

“Retailers who create an eye-catching display off-gantry while stocking brands such as Swan, ZIG-ZAG and OCB, stand to benefit most. Our latest branded display units not only enable retailers to showcase the very latest NPD, creating awareness and driving impulse purchase, they also enable retailers to signpost the wider tobacco category.

“Our brands have a proven track record of delivering quality, affordability and, in relation to new products, all-important innovation, and shopper loyalty is high. The added bonus for stockists of the most popular brands is that tobacco accessories’ consumers are creatures of habit, with strong levels of repeat purchase.”

As the economic climate continues to impact on 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 has resulted in year-on-year growth of 5% (IRI), with annual sales of accessories now valued at a massive £341m (IRI).

The category’s fastest growing sector is rolling papers, which is also the highest value sector in tobacco accessories at £105m (IRI).

Leading the charge is Republic Technologies’ premium quality papers brand, OCB, currently the UK’s fastest-growing mainstream rolling paper brand at +48% YoY (IRI), underlining its importance to all tobacco accessories’ stockists.

The Slim & Tips subcategory is also recording impressive growth with value sales of almost £30m (IRI) 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.

Effective merchandising and display can play an important role in boosting category sales. Republic Technologies provides various space-efficient counter display units (CDUs) for its ranges to support retailers.

Republic Technologies acts as a one stop shop for retailers serving the needs of RYO smokers across filters, papers, lighters, matches and rolling accessories. The company has developed an unrivalled broad consumer offer which includes innovation in flavour and format, such as Swan Fresh Burst Crushball, which continues to be the best performing menthol capsule filter in the market (IRI), giving retailers great sales and margin. The crush capsule delivers a strong peppermint flavour and comes in a 2-part sliding pack containing 54 filters, RRP: £1.35.

Sustainable products remain high on the agenda for shoppers across all categories, including more natural ingredients, and reduced single-use packaging.

Swan Eco Loose, the most environmentally friendly filter in the UK market, is 100% biodegradable and made from unbleached paper, RRP: £1.45 (200 per box).

OCB Virgin Slim (RRP £1.04) and OCB Virgin Slim & Tips (RRP £1.63) are unbleached papers manufactured using OCB natural gum, which is sustainably sourced, vegan and GM free.

“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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