The continued consumer demand for value is shaping the tobacco category. As adult smokers increasingly shift their purchasing habits between segments, they are expanding the range of nicotine products they buy to cater for different occasions.
This has led to a rise in the number of dual users buying both factory made cigarettes (FMC) and roll your own (RYO) products, as well as moving into emerging nicotine segments such as vaping.
“As consumers move towards more of a nicotine portfolio approach, shopper purchasing decisions remain heavily influenced by this constant drive for value,” comments Duncan Cunningham, UK Corporate Affairs Director at Imperial Tobacco & blu. “We expect the arrival of the menthol ban to accelerate this trend further, with smokers seeking out different nicotine solutions that suit their lifestyle.
As a result, stocking a range of products from the different nicotine segments is of key importance for retailers. However, it’s even more crucial that retailers and their staff understand the products they are selling so they can offer informed advice to their customers and help them find the right product for their needs.”
Demand for value for money is a dominant trend within the tobacco category. As more consumers seek out the lowest out of pocket spend, we’re seeing an increasing shift away from factory made cigarettes (FMC) and into roll your own (RYO). As a result, the segment continues to grow its share of the market as value seeking shoppers move into RYO or become dual users, smoking both cigarettes and RYO products across different occasions.
As value for money continues to be a focus for many adult smokers, the economy RYO segment continues to go from strength to strength and now accounts for 45% share of Fine Cut Tobacco sales, vs 38.3% last year, with further growth expected to come. Since its launch, Riverstone has become one of the fastest growing tobacco brands in the market as it taps into this trend with its easy-to-roll blend and affordable price.
“While offering great value for money is crucial, many consumers making the move into RYO are looking for reassurance on quality by buying products from well-known brands they can trust,” adds Cunningham. “With its strong tobacco heritage and brand recognition, Lambert & Butler is well placed to respond to this trend with its new RYO variant.”
Available to buy in both 30g and 50g formats and priced at just £11.00 RRP and £18.15 RRP respectively, the new Lambert & Butler RYO blend offers premium quality at an economy price point. The unique blend benefits from reduced moisture levels to make it easier to roll.
Imperial Tobacco has announced product enhancements across five of its brands, as part of its new Green Filter range, plus the launch of a brand-new product, JPS Bright, to help retailers maintain menthol customers and grow their sales.
Ross Hennessy, Sales Vice President at JTI UK, comments: “Value has become a clear trend in the current tobacco market and wholesalers can maximise on this by stocking Value brands, such as JTI’s Sterling Tobacco – which is now the UK’s fastest growing tobacco brand and Amber Leaf, the UK’s No.1 tobacco brand in the UK with a 30% share of the RYO market (IRI). However, there is still a significant demand for premium and mid-priced brands, so wholesalers should ensure they stock a full range that reflect the needs of retailers who visit their depot to avoid losing out on sales.”
Existing adult smokers are looking for convenience, and 3-in-1 formats are the perfect solution. JTI’s recently launched Holborn Yellow and Kensitas Club 3-in-1 variants which provide 30g of tobacco, 100 papers and 77 filter tips all in one pouch for a fuss-free experience. This variant has the same RRP (£11.70) as the 2-in-1 version, offering adult smokers even more value for money.
“Price remains a key factor for existing adult smokers when choosing where to shop for tobacco, so retailers should look to remain competitive by selling at the RRP or below to help drive sales,” adds Hennessy. “Yet, maintaining a full range and availability of tobacco brands across the pricing scale is of vital importance because customers are brand loyal.”
Research has also shown that nearly a third of smokers will choose to buy elsewhere if their preferred brand is unavailable.
“It is therefore crucial for retailers to maintain good availability across their range,” Hennessy says. “If they don’t, they could be in danger of losing sales.”
Mark Yexley, Communications Director at JTI UK, says about the menthol ban: “Now that the ban is in effect, retailer should look to stock a range of alternative products. JTI expects most adult smokers to stay within the cigarette category and remain brand loyal. That’s why we have launched the ‘New Dual’ range, a distinctive tobacco blend in a unique dual pack, with two sections of ten cigarettes.”
The launches include Sterling New Dual, Benson & Hedges New Blue Dual, Sovereign New Dual and Benson & Hedges New Dual. The same distinctive blend is also available across Sterling New Superkings Green, Benson & Hedges New Superkings Green, Berkeley New Superkings Green and Mayfair New Green.
In addition, Sovereign New Dual’s Flow Tech centre hole filter offers further product differentiation within the market by providing a firmer filter, quality smoking experience.
“Of course, others will make choices based on their preferences and may seek alternatives,” adds Yexley. “JTI is determined to provide those smokers with innovative new products that meet their needs. We launched Sterling Dual Capsule Leaf Wrapped cigarillos earlier this year which contain a peppermint capsule that smokers can click to release a menthol flavour. Whatever adult smokers do now the ban is in effect, JTI has the alternatives covered.”
High levels of demand for the quality, choice and value provided by roll your own accessories products is contributing to strong growth of the sector.
As the tobacco ban continues to impact on cigarette sales, accessories continue to outperform the total tobacco market, with better value for money than factory-made cigarettes remaining a key consideration for RYO smokers.
The RYO accessories market is currently worth more than £288.3m, up 2.3% year-on-year, outperforming total tobacco, with filters leading the charge, showing value growth of 5.4% year-on-year (IRI).
“As category specialists, we’re continuing to innovate with NPD and new merchandising solutions to ensure retailers can meet the needs of the growing number of RYO smokers. This is helping to maintain the strong growth the category has seen in recent years,” says Gavin Anderson, General Sales Manager at Republic Technologies (UK) Ltd.
The company has also invested heavily recently to ensure it has a very clear understanding about RYO smokers and their requirements.
“Most of our customers have been smoking for some time and whilst value for money is a key consideration, particularly in times of economic uncertainty, many prefer the tactile aspect of roll your own which for some also provides the added benefit of reducing consumption as smoking becomes less instant,” adds Anderson.
“There is quite a bit of overlap with pre-made cigarettes and vaping, but with RYO smokers this is occasion or influence driven as most of our consumers prefer the RYO experience.
As environmental considerations are influencing smokers more than ever before, with demand for more natural products, reduced packaging and removal of single-use plastics at record levels, Republic Technologies is accelerating its environmentally friendly NPD.
The company’s focus on more environmentally friendly NPD has led to the introduction of category-boosting products such as OCB Virgin Slim and Slim & Tips, both of which are available in a slim vertical box, enabling retailers to manage shelf space more efficiently.
“We’re really optimistic about the future of the RYO accessories market,” adds Anderson.
“The combination of rising cigarette prices and the higher margins offered by RYO products will continue to drive growth. Whilst the vaping sector continues to expand, it’s not inhibiting the sustained rise in demand for RYO accessories and with menthol cigarettes being discontinued from May 2020, accessories may well provide the solutions and options which consumers will be seeking.”
Meanwhile, Republic Technologies has recently unveiled its biggest ever NPD programme with the introduction of six new filters from the market-leading Swan brand to the UK’s £288 million (IRI) category.
The major new product rollout comprises a carbon paper filter for enhanced filtration, a Swan Long Extra Slim Filter (50% longer than standard), the most environmentally friendly filter in the UK market and three menthol products, including two crushball filters.
“As increasing numbers of smokers are turning to roll your own, we’re developing a wider range of products for improved customer choice, enabling retailers to capitalise on the strong performance of the accessories category and to take advantage of the margin opportunities offered by Swan, the UK’s best-selling filter brand,” says Anderson.
Suggested RRPs for the new products range from £1.03 for the Swan Long Extra Slim Filters (80 per box) to £1.39 for the Swan Eco Loose filters (200 per box).
“We’re confident that the introduction of six new filters from the iconic Swan brand will contribute to the sustained value growth of the tobacco accessories category in the future.”
Alastair Williams, Country Director at Scandinavian Tobacco Group UK (STG UK), comments: “Whilst most of the usual key cigar trends such as ‘value for money’ and the ‘rise in miniatures’ have remained, we’ve seen some interesting new ones too. Probably because people have been at home more, coupled with some nice weather recently, we have seen sales of our larger format cigars being particularly positive.”
Sales out from STG’s warehouse of Henri Wintermans Half Corona were up 20% in April, compared to the same time last year. It seems like miniature cigars sales have not suffered as a direct consequence, with brands like Signature and Moments continuing to perform very well.
“Our best-selling Signature range has always offered a taste profile to suit all consumer preferences and currently accounts for over one third of total cigar sales in the UK,” adds Williams. “In addition to this, recently we have introduced a new product to the range, which we are confident will prove a very welcome addition to the UK’s biggest cigar brand portfolio.”
Launched in February, the new arrival to join the Signature brand family is a filter cigarillo coming in a convenient and stylish pack of ten, with a low out of pocket price of just £4.95. 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.
“Since the outbreak of coronavirus, the tobacco category has proved to be pretty resilient so far,” says Williams. “Earlier on in the pandemic we also saw some stockpiling or panic buying from consumers and this translated into cigars sales too. Obviously retailers are 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.”