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Bigger smokes
11 February, 2019

Cigars, once saved just for special occasions and celebrations, have far wider appeal than you might imagine. Research conducted by Censuswide UK on behalf of Scandinavian Tobacco Group UK Limited (STG UK) has found that 59% of male smokers who don't normally smoke cigars would be willing to buy them. The company surveyed 1,000 adults, who smoke daily and also visit their local convenience store at least once a week.

In addition the study found that 32% of traditionally non-cigar 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 store staff recommended them.

Alastair Williams, head of sales at STG, says these insights should help to dispel any misconceptions that cigarette smokers are not open to smoking cigars and instead highlight that they are open to recommendations from store staff.

"To make the most of this opportunity, retailers should invest in up-skilling both themselves and their staff to grow their understanding on the different cigars available in each segment, and what type of consumer they are most suited for. In doing so, retailers will be able to offer customers the all-important guidance they need and desire, to help them make informed choices on what cigar would be right for them.

"When you combine these insights with the fact that cigars have double the profit margin of cigarettes (enabling retailers to possibly make an additional £250 profit for each consumer that switches to cigars), there is a clear opportunity for retailers to capitalise on this opportunity.

"By taking time to talk to customers about their preferences and being able to offer advice on what cigars would fit their individual smoking tastes, retailers can push up their cigar sales and benefit from increased margins and higher profits."

Williams says that as the leading value-for-money miniature cigar and number two overall, Moments Blue is the perfect choice for any smokers looking for a great cigar that offers a cheap out-of-pocket spend; while Signature Blue (previously Café Crème Blue) provides the reassurance of being the number one cigar and quality brand consumers can trust. Henri Wintermans Half Corona on the other hand is ideal for smokers looking to celebrate with something a bit more special. "Having these kinds of insights at their fingertips will go a long way to helping retailers offer customers the support and advice they need," he adds.

According to IRI data, the UK cigar market is currently worth £199.7m and is reporting a minor increase of 1.4% overall, with the Miniatures and Medium/Large cigar segments reporting an increase of 5.2% and 6.3% respectively.

Miniature cigars continue to dominate the market, accounting for 72.9% of total cigar volume and £104.2m in value sales. Within this segment, STG UK's portfolio of miniature brands contributes 70% of the value sales. This includes Signature Blue (previously Café Crème Blue) (30.1%), Moments Blue (17.9%) and Signature (previously Café Crème) (11.7%) which account for three of the top four brands within miniatures. This means that STG UK's miniature brands collectively represent £72.4m in value sales over the last 12 months that's nearly twice as big as all the other miniature brands combined highlighting what a major player in the market STG UK is. In fact, when looking specifically at value-for-money miniature cigar brands, Moments Blue is bigger than the total of all the other brands together, at a value of £14.9m, making it an important must-stock for any tobacco stockist. Williams says that in terms of the core range, it's really important for retailers to tailor their cigar range to their store and customer demographic.

"By engaging with shoppers and discussing what they're looking for, retailers can adapt their range accordingly to ensure it meets their needs and aren't at risk of losing out on sales to competitor stores, or using up valuable space with products that aren't right for their store."

And he says it's worth remembering that cigars are exempt from the packaging restrictions which apply to many other tobacco products, so will naturally stand out on the shelf when doors are opened. "To make the most of the opportunity this presents, don't hide cigars away at the bottom or the top where they can't be seen," he advises. "Aside from making sure they're stocking the right brands for their store, the simplest, most effective piece of advice for any retailer, is to stay stocked up at all times. If a cigar smoker comes into their store and can't find what they're looking for, they'll go elsewhere and may not return, so it's crucial to maintain availability to ensure they don't miss out."

Meanwhile, in the cigarette sector, downtrading was a big trend in cigarettes in 2018, which led to Imperial monitoring and, if necessary, repositioning elements of its range to react to these market trends. For instance, L&B Blue shifted from the Economy to the Sub-Economy factory-made cigarette sector.

getting pricing right

Cameron Miles, market manager UK at Imperial Tobacco UK, contends that independent retailers getting their pricing 'right' is more important than ever in the current climate.

"We would argue that premium pricing by independents is an ever-decreasing circle. Retailers may be making up for drops in volume with increased prices and margins but it could potentially lead to diminishing returns as consumers eventually turn elsewhere most likely to multiples like supermarkets to buy their tobacco.

"We acknowledge that some traders have raised prices post-TPD II and standardised packaging to capitalise on the absence of price-marked packs. While this is obviously at their discretion, we believe this could jeopardise the existing relationships they enjoy with their tobacco-purchasing shoppers and potentially lead to channel shifts away from independent stores."

He says significant anecdotal evidence from retailers in the independent channel suggests that those who price competitively either at or below rrp continue to enjoy the custom of their adult smokers, plus robust sales.

"As well as the margins on the tobacco products themselves, the category also offers significant advantages to independent traders in terms of both driving footfall and potentially helping generate higher basket spends."


Retailer view Jacob Francis, retail convenience manager at The Kay Group:

"Tobacco is still very much a key player to us in terms of sales it still sits as one of our largest contributing categories.
"I am aware that for some of our peers, sales are declining. We have been fortunate enough to see some growth in the category on a like-for-like basis excluding our newly developed sites. This, I believe, has been driven by a combination of range and also some keen work on pricing. By contrast, while growth in tobacco is not huge, we are seeing huge growth in e-cigs/vaping.
"Typically our number one SKU in all sites is Sterling Dual. Benson & Hedges Blue and Dual have seen strong growth over the last couple of years, along with Sovereign and Players. Some of the older traditional lines such as Lambert & Butler, Benson & Hedges Gold etc still perform well though.
"Generally, there are now fewer customers buying on a daily basis, but there still remains a core who will purchase two to four times per week. We began to see this when 10 packs were outlawed, so rather than buying a 10-pack every day, people would purchase a pack of 20 a few times a week.
"With regards to brands, the market has definitely shifted for us. Previously people were very brand loyal and very seldom moved away from their brand. Now we find a number of customers do come asking for what's cheapest on the gantry, both for cigarettes and RYO goods.
"With some of the pricing pressures that have been forced through over the last few years, we have seen there are more people generally trading across to rolling tobacco as an alternative to sticks, as a result we have seen sales in these areas increase.
"We've made some internal tweaks to reflect this in terms of planograms and range.
"The category has definitely become easier to manage now there are substantially fewer SKUs and generally far less NPD. We have a close relationship with both JTI and Imperial.
"Both JTI and Imperial are great at keeping us informed and up to date with key market information.
"They were both very supportive throughout the transitions to dark market and plain packaging, and have continued to be with the impending Track & Trace legislation and the upcoming Menthol ban. In terms of availability, we try to make sure of full availability at all times this is driven by our field team driving the agenda with our site management teams when on site."


JUUL moves into forecourts

It is estimated that there are 1.4 million smokers who also use vaping products in the UK. While the main reason given for vaping is to quit cigarettes, almost a third of all vapers are using vaping devices to cut down or save money rather than simply giving up altogether.
In the US, JUUL is the best-selling vape brand with over 75% market share. It launched into the UK grocery channel with exclusive listings in Sainsbury's in November.
The company is now rolling out the JUUL brand to forecourts and convenience stores.
John Patterson, sales director JUUL UK, says: "While JUUL's mission is to improve the lives of smokers through converting them to JUUL and other less harmful alternatives, we realise that for some this is a longer journey and not all will instantly make the switch.
"Smokers wishing to switch prefer devices that accurately replicate the smoking ritual, satisfy their nicotine craving and are simple to use.
"It is therefore important that they have access to devices, which are simple, clean and satisfying cornerstones of JUUL. Forecourts need a solution for adult smokers looking to switch or risk losing them to other channels such as supermarkets and convenience stores."
JUUL's core range for forecourts is the JUUL Starter Pack (JUUL device, charger and a four JUUL pod sample pack, rrp £29.99) and five four-pack JUUL pod refills (Golden Tobacco, Glacier Mint, Mango Nectar, Apple Orchard and Royal Crème, rrp £9.99) with each refill pod giving approximately 200 puffs which is the equivalent of a pack of cigarettes.


When a major car manufacturer like Ford predicts that sales of its electrified cars will outnumber petrol and diesel models by 2022, does that ring alarm bells about the possible speed of change for forecourts?