The tobacco category, which is worth £14bn each year before tax (ITUK), provides a substantial sales opportunity for retailers.
Looking at the sub-categories, Factory Made Cigarettes (FMC) currently hold the lion’s share of the market, worth 70% of tobacco sales, with Roll Your Own (RYO) accounting for 30% (ITUK).
As the cost-of-living crisis continues to impact consumer spending, we’re seeing shopper demand for value rise across the entire tobacco category.
As a result, products in the lowest pricing tiers now account for the majority of all tobacco sales.
In fact, the value tier, combined with the economy sector, now make up a substantial 69% of all FMC sales and 54% of all RYO sales (ITUK).
“In order to capitalise on the significant sales opportunities presented by the tobacco category, it’s crucial that retailers are stocking a wide range of products that cater for this value trend, especially those within the value and economy priced tiers,” comments Yawer Rasool, Consumer Marketing Director UK & Ireland at Imperial Brands. “While having the right product range is key, it’s also important that both retailers and their staff are equipped with in-depth knowledge of the tobacco category to deliver a great customer experience for any shoppers seeking advice.”
Worth the biggest share of all tobacco sales (70%, ITUK), the FMC category holds a huge amount of value for retailers. With products in the lowest pricing tiers (economy and value) now worth 69% of all FMC sales (ITUK), it’s clear that sales in the category are very much driven by demand for value. With this in mind, Imperial Brands launched a new update to its popular Embassy Signature New Crush and L&B Blue New Crush variants to enable retailers to cater to the ongoing demand for value tobacco.
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 great 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.
As many consumers remain money-conscious, we’ve seen RYO product sales within the value price sector increase by an impressive 8% year-on-year (ITUK), making it the fastest growing segment that accounts for almost a quarter (24%) of all RYO sales (ITUK).
Data also shows that 30g packs of rolling tobacco are now the most popular with this format now making up a significant 69% of all RYO sales (ITUK). It’s clear that value focused customers are increasingly opting for budget-friendly RYO products that offer the lowest out-of-pocket spend.
“To cater for this demand, it’s key that retailers stock the right RYO product offering and we would highly recommend offering a wide range of leading brands such as Embassy Signature, Riverstone and Players JPS,” adds Rasool. “Although 30g formats may be proving the most popular for shoppers, larger formats still account for 31% of RYO sales (ITUK) so ensuring a range of 50g formats is available should also be a focus.”
While products in the value and economy price tiers make up over half of RYO sales (ITUK), the premium price sector in fact holds the largest share of the RYO market at 36% (ITUK). This really demonstrates that, despite the focus on value, there are still many adult smokers who remain brand loyal and are willing to pay a more premium price for a brand that they know and trust. With this in mind, Imperial recommends that retailers stock a range of leading premium RYO brands, including Golden Virginia.
With 4.5 million RYO smokers in the UK (Imperial internal estimates), the tobacco accessories category provides a substantial sales opportunity for retailers. The rolling papers category has performed well over the last year, with recent figures showing that king size papers represent around 60% of the sales value and within this, combi papers is the fastest growing segment.
Value savvy consumers are increasingly migrating from king size into combi formats due to the added value and convenience they offer. To help retailers tap into this trend, Imperial recently extended its combi range to include a new Classic King Size Combi variant for the Rizla brand.
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 papers with a more natural look and feel with the added benefit of tips in the same pack. This ensures Rizla Classic King Size Combi offers everything smokers will need for the perfect, authentic rolling experience.
“With volume sales of combi formats expected to exceed those of popular standard format king size papers thanks to the great convenience they offer, we’d highly recommend that retailers stock up on Rizla Classic King Size Combi to tap into this trend and grow their sales with an iconic and market leading paper brand,” says Rasool.
“We expect value to remain the dominant trend shaping sales across the tobacco category. 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 Easing Rolling Tobacco and Rizla Classic King Size 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.”
Imperial has just brought Embassy Signature Silver Edition back to the market with further improvements to the range to help retailers cater for summer sales amongst adult smokers looking for a familiar brand at a low price.
Available to buy now for a limited time only, the new Embassy Signature Silver Edition benefits from the same premium features, including the finest tobacco blend, reduced smoke smell paper and high-quality packaging with a resealable foil. The latest launch now also offers a new diamond shaped bore filter for a unique smoking experience.
Embassy Signature Silver Edition is the only product on the market to offer all of these premium features in one product, with an MRRP of £12.75 per pack of 20s.
“In order to maximise tobacco sales, we highly recommend that retailers stay up-to-date on the latest category trends. For example, with many consumers looking to save money, there’s now much higher demand for value products so retailers need to ensure they are responding to this trend by stocking products such as Embassy Signature and Players JPS in order to boost their sales,” suggests Rasool.
“While value products are proving particularly popular with shoppers, retailers also need to remember that no two stores are the same. While one store may have customers looking for tobacco products at the lowest price possible, another may have a customer base who are interested in premium products and remain loyal to certain brands like Golden Virginia. Therefore, stocking a range of products across the category, including value and premium brands, that’s tailored according to the customer base and supported with a selection of accessories like papers, lighters and filters, is essential.”
In order to understand what customers are purchasing most often, retailers and their staff should try to engage in conversations with customers to gain a better understanding of what they are looking for. Once retailers are equipped with this knowledge, then they can adapt their range accordingly.
It’s also important to ensure that stock levels are constantly maintained, as running out of popular products can mean losing out on sales. With this in mind, both retailers and their staff should continuously check and maintain their stock levels to avoid losing any potential customers.
Prianka Jhingan, UK Head of Marketing at Scandinavian Tobacco Group UK (STG UK), comments: “It’s definitely cigarillos which are the current success story within cigars. The category barely existed four years ago, but sales are now worth £133m and they account for more than half of all cigars sold in volume terms.”
Cigarillos are small, often flavoured, cigars. They are shorter, usually about three to four inches long, and narrower than traditional cigars and typically take less time to smoke which can often appeal to adult smokers. STG’s Signature Action brand is currently the fastest growing cigarillo, experiencing sales growth of 40.6% versus the same time last year.
Latest IRI data shows the total UK cigar category to be worth £316.6m in annual sales, which is a value increase of just 11.7% 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.
Cigarillos are now worth £133m in annual sales and are responsible for just over half of total cigar volume sales across the UK. STG’s Signature Action brand is currently the fastest growing cigarillo, experiencing sales growth of 40.6% across the UK versus the same time last year. The key thing cigars and cigarillos offer retailers that other forms of tobacco don’t is great profit margins. On average, they are three times higher than cigarettes, so for example, STG’s Moments Blue brand offers up to 18% margin when sold at its RRP.
“The on-going cost-of-living crisis has certainly brought into sharp focus the importance of value in the tobacco category,” says Jhingan. “That said, the value trend has certainly been around cigars for quite some time now, which is evidenced by the success of our Moments Blue brand. It’s also worth mentioning our Signature Action brand is the most affordable in the cigarillo segment. With these challenging financial times the country is going through, price is always going to be high on many shoppers’ agenda, so we always advise retailers to make sure they are highlighting their value brands to customers to help them save money. Finally, when it comes to pricing, we always recommend retailers follow manufacturers’ guidance, as our recommendations afford value for the consumer, whilst giving exceptional margins for retailers.”
At the start of the year STG 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 20’s. The exciting news for Signature continues with the launch of these newly designed packs, which 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 main cigar segments, as the top ten biggest sellers overall account for well over 90% of sales, so there’s little point tying up your cashflow with slow moving lines. And when we look at the cigar category in segments, I would recommend retailers start with cigarillos as they are now the biggest segment and have been the real success story of the cigar category over the last three or four years. Next comes the miniature segment, where STG brands like Signature Blue, the UK’s best-selling ‘traditional’ cigar, and Moments Blue, which are both must-stocks. Finally, retailers would also want to be stocking the top performing brands in both the small and medium / large segments, where we have our Henri Wintermans Half Corona which is easily the best-selling cigar in that segment,” advises Jhingan.
“With summer here many of your adult tobacco customers may want to think about trading up to larger format cigars to enjoy in the sunshine so ensure your staff are equipped with the knowledge to have those kinds of conversations.”
Retailers who offer tobacco accessories shoppers a broad range of products are benefiting most from the continued growth of the £376m market, which is currently growing at +10.2% (Circana) year on year. “Shoppers in this category have a range of different usage occasions and purchasing habits, so choice is absolutely key in maximising engagement and sales in tobacco accessories,” says Gavin Anderson, Sales & Marketing Director at Republic Technologies.
“Those retailers who offer a varied selection of product formats, from king size papers to eco-friendly filters are seeing the highest levels of repeat purchase which is a key driver for incremental sales.”
Backed by category-boosting NPD and sustained marketing support for all its leading brands, Republic Technologies currently accounts for approximately 40% (Circana) of total marketplace sales, with a diverse range of brands and products designed to meet the needs of every RYO shopper’s needs.
Papers remain the highest value sub-category in tobacco accessories, worth over £115 million and growing YOY (Circana). Republic Technologies’ eco-friendly OCB range continues to outperform other papers in both value and volume growth, maintaining its position as the UK’s fastest growing paper brand in the tracked market, at +40% (Circana).
Tobacco accessories can also be used as a signpost for related products and Republic Technologies’ space efficient perspex units are driving both awareness and demand. The multi brand units feature interchangeable inserts for multiple bestselling brands.
“They enable retailers to create eye-catching off-gantry displays and not only do they draw attention to new products, generating interest and impulse purchase, they also create more opportunities to upsell, as retailers can site them close to other tobacco related products,” says Anderson.
As shoppers continue to seek value in their everyday purchases, Anderson is also highlighting the benefit of stocking multipacks.
“Multipacks offer better value for both retailers and consumers at a time when rising numbers of cost-conscious shoppers want to get an even better return from the tobacco accessories category,” he adds.
NPD continues to underpin the growth of the tobacco accessories category and Republic Technologies is accelerating demand for its strong performing OCB range with the introduction of OCB Authentic REAL Rice Papers.
“We know that OCB Rice Papers will appeal to the growing number of roll your own consumers who are now looking more closely at products with natural ingredients. OCB always delivers on quality and value, which has led to strong levels of loyalty with shoppers,” adds Anderson.
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).
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