Scandinavian Tobacco Group UK (STG UK) can boast of some impressive stats. It supplies the UK’s number one cigar in Signature, Britain’s fastest growing and second best selling miniature cigar, Moments Blue and Henri Wintermans Half Corona, the nation’s most popular medium to large cigar.
Far from resting on its laurels, the company has this year extended the Signature range with the launch of Signature filter cigarillos.
Alastair Williams, Country Director at STG UK, tells Grocery Trader what trends are driving the cigar market and how the category has proved resilient to the outbreak of Covid-19.
What are the key products in your range that supermarkets should be stocking?
Of course, the first cigar on any list should be Signature which is by far the best-selling cigar in the UK and very much the jewel in our crown. The reason behind Signature’s success is because it is bang on trend, offering time-poor adult smokers a high quality, smooth and aromatic smoke. The Signature range currently accounts for well over one third of all cigars sold in the UK, led by Signature Blue, which is the UK’s favourite cigar, with a 22% volume share. This is closely followed by Signature Original and Signature Filter Red, which, when combined as one brand portfolio, is worth nearly £55m in annual sales.
But there is more to the Scandinavian Tobacco Group cigar offer than just Signature. We also have Moments Blue, which is the UK’s fastest growing and second best-selling Miniature cigar, and of course our Henri Wintermans Half Corona holds the position as the UK’s favourite Medium to Large cigar, so if supermarkets stock these as a minimum, they should be able to perfectly meet the needs of each and every one of their customers.
What is the value of the UK cigar market?
The UK Cigar category is well established and may not be as dynamic or fast moving as something like Vaping, but it is still worth just under £195m in annual sales, and the products within it typically offer three times better profit margins than cigarettes, so it’s absolutely one that is worth getting right. I’m pleased to say that Scandinavian Tobacco Group is by far the biggest player with just under 55% of all cigars sold in the UK, and the Grocery channel is a key one for us, as it accounts for nearly two thirds of all UK sales.
What trends are driving the market?
The key trends in the cigar category have remained pretty consistent over the last few years and are unlikely to change significantly in the next 12 months. Firstly, miniature cigars have been growing in popularity for a while and now account for over 74% of total UK cigar sales. STG brands account for four of the top six selling miniature cigars, which are worth over £70m in annual retail sales value. Next, we’ve seen a consistent growth in the popularity of good quality value for money cigars amongst adult smokers for a while now, and with the current economic outlook not looking particularly rosy, we only expect this trend to accelerate. Our very own Moments Blue brand is the fastest growing and best-selling value for money brand in the category. Finally, larger cigars are particularly popular in the summer or at key celebratory periods throughout the year such as Christmas or New Year.
What effect has Covid-19 had on the cigar market?
Since the outbreak of Covid-19, the Tobacco category has proved to be pretty resilient so far. Certainly at the beginning, many consumers preferred to visit their local convenience store rather than the larger format supermarket and it is no surprise that this has been reflected accordingly in sales data, however, now it appears that sales patterns are slowly returning to the previous ‘normal’. Earlier on in the pandemic we also saw some stockpiling or panic buying from consumers and this translated into cigars sales too. Probably because people have been at home more, coupled with some nice weather recently, we’ve seen sales of our larger format cigars being particularly strong. In fact, sales out from our warehouse of our Henri Wintermans Half Corona were up 40% in June, compared to the same time last year. Thankfully, it seems like miniature cigars sales have not suffered as a direct consequence, with brands like Signature and Moments continuing to perform very well.
What advice do you have for supermarkets on merchandising tobacco?
Grocery retailers will know their local customers far better than me, so the only advice I would offer them is make sure you are continuing to follow the wider consumer buying trends which I’ve already mentioned. Also, don’t be tempted to stock too wide a range as it’s worth noting that the top ten brands account for just under 90% of total sales. So, our core range advice remains the same… we have the number-one cigar in Signature Blue, we have the fastest-growing product in Moments Blue and we have the number-one medium / large cigar in Henri Wintermans Half Corona, so the message is simple… stock the number ones!
How do you work with supermarkets to improve sales?
Obviously retailers have been working unbelievably hard and doing an incredible job in very difficult circumstances at the moment, and for that we are all very grateful. They have had to be agile and adapt quickly in response to fluctuating demand for products and challenging supply chain issues which is no mean feat. From an STG perspective, 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 to provide up to date advice on adult cigar consumers smoking habits, or assessing inventory levels in order to maintain continuity of supply.
How are Signature filter cigarillos, launched last February, performing?
The Signature filter cigarillos is a natural extension to the range and perfectly complement the existing Signature Filter Red. The key product feature is that it has an acetate filter containing a peppermint capsule under a lasered marker. In addition, a carefully selected blend of Virginia tobacco and a light real leaf Ecuadorian wrapper deliver a smooth taste. They come in a convenient and stylish pack of ten, with a low out of pocket price of just £4.95. It is still relatively early days and consumers are still trialling different products to see which they like best, but early signs are positive and as the product is in good distribution, we expect it to do very well in the long term.
What brand activity do you have planned?
It’s been a busy year for our cigar range so far, with a new addition to the Signature portfolio and we’ve recently launched a limited-edition pack for our Henri Wintermans Half Corona brand. l also want to briefly reference our pipe tobacco range as we’ve recently signed a distribution agreement with the Mac Baren Tobacco Company for their most prominent pipe tobacco brands in the UK market. Brands such as St. Bruno and Gold Block are welcome additions to our expanding product portfolio, and it is well worth retailers spending a bit of time ensuring they have the right pipe tobacco brands on offer. This deal has firmly positioned STG as the leading player, not only in cigars, but now also in traditional pipe tobacco too, and means we can now offer the trade two of the top three significant brands in the category.