Come home to a real smoke

Smoking is obviously not something people do only, or do particularly more of, at Christmas-time. But festive tobacco is a thing when it comes to indulging and gifting, particularly with cigars and accessories, and even regular cigarettes, where an extra supply would be greatly appreciated in these cash-strapped times.

This Christmas, as many are predicting, will benefit from being unconstrained by fears over Covid, leading to greater and noisier get-togethers with people in a mood to relax and celebrate despite economic pressures – and perhaps even because of them.

That could mean that as people indulge and enjoy themselves, there might be more lighting up than usual. Even if it doesn’t, Christmas is customarily a good season for smokes of all kinds.

Valued products

“With the country now returning to some semblance of normality in a post-COVID world, the tobacco category is proving once again to hold a substantial amount of value for retailers,” says Tom Gully, Head of Consumer Marketing UK&I at Imperial Tobacco. “The market is now worth £14bn (before tax) per year and as it stands, there is almost a 50/50 market share split across Factory Made Cigarettes (FMC) and Roll Your Own (RYO) categories – at 52 per cent and 48 per cent respectively.”

In fact, Gully points out that the sub-economy segment now makes up 63 per cent of FMC sales, while the economy segment accounts for 56 per cent of RYO, “with these value segments growing at an impressive three per cent and five per cent YOY,” which he puts down to “household costs and inflation soaring”, with shoppers now even more aware of how much they are spending. “As a result, we’re seeing a move towards low priced propositions across the entire category as a whole, resulting in the lower priced tiered products making up a majority of tobacco sales.”

Photo: iStock

It is obvious that although traditionally cigars see a seasonal spike, it is wise not to neglect cigarettes – both kinds, or should we say all three: FMC, FMC value brands, and RYO – and with RYO comes accessories, many of which can make tidy festive gifts in themselves, especially if merchandise as gifting solutions: papers, lighters and inserts perhaps marketed together as special offers.

Gully stresses that the future of the tobacco industry lies very much within the value of the product as consumers seek out ways to save money. So, if retailers are to successfully cater to the needs of today’s customer and increase sales, then ensuring they are stocking a wide range of value tobacco products is crucial. That goes double for Christmas.

“Given the growing cost-of-living crisis and rising energy costs, this shift towards value tobacco products is a trend that is likely to continue for some time and one that retailers should not ignore – especially given tobacco customers can generate much wider sales in store. Tobacco shoppers spend more, visit more and have a higher basket spend than other shoppers so are key shoppers to attract.”

So when they spend they look for value, whether in FMC or RYO.

“With this in mind,” says Gully, “we’d recommend retailers checking that they have a strong variety of leading roll-your-own brands such as Riverstone and Players JPS, to ensure they are prepared for this rising demand for value tobacco products.”

He also adds that when reviewing range, it’s important for retailers to remember that value means different things to different people: “Some customers might be focused on the lowest price point, while others may be looking for added value formats like Players JPS Easy Rolling Tobacco which offers filters and papers in one pack.” Ensuring you stock a range that caters for these different value needs is vital in order to effectively cater for your customer base.”

Factory-made cigarettes can be a gift or a self-treat for some customers and Christmas is the perfect excuse to splash out on something a bit more special than usual. From an FMC perspective, as demand for value tobacco continues to grow, many consumers are looking for a familiar brand that they know will deliver satisfaction at a low price, Gully says. “With this in mind, we’d highly recommend stocking our Embassy Signature and Richmond ranges to help unlock sales amongst adult smokers seeking out top brands at great value price points.”

And apart from price, independent retailers can also win over the big stores by treating their tobacco customers – who are likely among the most loyal – with a personal touch. As Alastair Williams, Country Director at Scandinavian Tobacco Group UK (STG UK) explains, “In general talking to your customers is key, but particularly with your tobacco customers. We all know that their associated basket spend can often be significant, so always keep their brands in stock and don’t give them a reason to shop elsewhere. Now, and for the foreseeable future, many of your customers will be searching for value propositions so let them know what products you can offer them to help them save money.”

Sometimes a cigar …

Of course and above all, Christmas sales means cigars. Again, as gifts and as self-treating, leaning on the mantelpiece in front of a log fire with a brandy balloon in one hand and a glowing cigar in the other, is for many a fond image of a happy and relaxing Christmas. Cigars are also very warming and satisfying for retailers!

“Whilst obviously not matching the sales volumes of cigarettes or RYO tobacco,” admits Williams, “cigars are an important part of the tobacco category because they drive footfall in-store and particularly as a driver of profit in tills, as they typically offer up to three times the margin that cigarettes do. For example, our Moments Blue brand offers up to 18 per cent margin when sold at its RRP.”

The festive season is the high season for cigars and cigarillos (and increasingly all year, too, as more smokers switch from cigarettes), and it is vital to stock up to take advantage.

“Our latest data shows the cigar category to be up by 7.6 per cent in value terms on last year at just under £291m.” says Williams. “This is driven by the rise in the cigarillo segment which is now worth just over £99m and accounts for over 46 per cent of all cigar volume. The more traditional cigar segments are all in decline of around 3-4 per cent 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.”

Indeed, the small cigar sector is on fire, as it were, and as Williams says, it’s Miniatures which remain the engine room of the cigar category, so it is important retailers get this segment right. “By far the biggest player here is our Signature range, which is ably supported by our Moments brand, which offers a good quality smoke at a cheaper price,” he continues. He notes how the Cigarillos category barely existed three years ago but now makes up over 46 per cent of the total volume and just under £100m in value sales. “Our Signature Action brand is not the best-selling cigarillo on the market but it’s growing steadily in popularity and a good option for adult smokers who enjoy the peppermint flavour.

And is it still Christmas that is the most significant in terms of sales for these particular products?

“It’s certainly not a new trend, but retailers won’t need me to tell them that in the run-up to Christmas cigar sales go up,” he replies, “so it’s really important for them to get their range right so they can enjoy those extra sales and rewarding profit margins which are typically three times those of cigarettes. It tends to be larger cigars that people will gravitate towards as a bit of a Christmas treat when they are in celebratory mood and typically have more time to enjoy it.”

Aside from Cigarillos, he advises that retailers should also consider brands in both the Small and the Medium / Large segments to ensure they are covering their bases, so think about including the top-selling brands from each segment as a minimum. “Our Henri Wintermans Half Corona is easily the best-selling brand in the Medium / Large segment and accounts for over 72 per cent of sales in this segment.”

It is also worth remembering, says Williams, that cigars are exempt from the plain packaging legislation, and he recommends stocking 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”.

Rolling along

Just because RYO is a budget alternative to FMC, it doesn’t mean that its sales will be under-represented over Christmas. Gully says that with shoppers increasingly looking for products that provide value for money, we’re seeing a significant rise in the sale of RYO tobacco – as he says, now accounting for 48 per cent of all tobacco sales.

“We expect this consumer demand for value to increase even further in the months to come,” he says. “Given this rising shift towards value products, and rolling tobacco in general, it’s important to make sure retailers cater for this demand with the right product offering. “

He recommends that retailers check they have a strong variety of leading RYO brands such as Riverstone and Players JPS, to ensure they are prepared for this rising demand for value tobacco products, because perceptions about what represents value differs according to personal taste and calculation.

When reviewing their range, it’s important for retailers to remember that value means different things to different people,” he says. “Some customers might be focused on the lowest price point, while others may be looking for added value formats like Players JPS Easy Rolling Tobacco which offers filters and papers in one pack. Therefore ensuring retailers stock a range that caters for these different value needs is vital in order to effectively cater for their customer base.”

One thing that RYO enthusiasts will certainly need, and perhaps be delighted by if suitably wrapped up in shiny festive paper, is accessories.

Accessorise the season

Gavin Anderson, Sales & Marketing Director at Republic Technologies, told Asian Trader that the UK tobacco accessories category is currently worth £320 million and continues to show YoY growth (currently +4.8 per cent), highlighting the importance for retailers to tap into these sales.

“Cash-conscious shoppers are turning to more affordable RYO products as a way of saving money, versus factory made cigarettes,” he says. “By ensuring they are fully stocked with a range of tobacco accessories from trusted brands, retailers can cater for every customer and drive sales. As category specialists, we’re continuing to innovate. Not just with NPD but with a renewed focus on merchandising solutions, enabling retailers to highlight NPD and increase visibility of best-selling products.”

He says Republic Technologies’ brands – which include Swan, Zig-Zag and OCB – are synonymous with quality and value for money. “This, combined with our team’s valuable expertise in the category, means that we are well placed to add real value to convenience retailers.”

Imperial’s Gully concurs that with more consumers now moving towards RYO products, retailers are presented with new sales opportunities within tobacco accessories. He says it is essential that retailers cater for this rising demand by ensuring they are fully stocked up with filters, papers, lighters and other flavour-related innovations. He recommends the highly popular Rizla Xtreme Flavour Cards.

“Our Rizla Xtreme Flavour Cards range has been extremely well received by both the trade and consumers. The Rizla Xtreme range comprises flavour cards that can be used with traditional factory-made cigarettes or roll your own tobacco products. Simply insert a flavour card into a packet of cigarettes or roll your own tobacco and wait at least 30 minutes, or leave it in longer for a stronger, more intense flavour. Latest figures show they are flying off the shelves and currently selling around 400,000 packs per week as smokers look to recreate the menthol experience.”

The value trail means that accessories innovation – such as combining tips and papers in a single pack (good pressie idea, too!) are gaining traction. Gully says Imperial’s Rizla Silver Kingsize Combi has an RRP of £1.20 and offers papers and tips together in one pack for true convenience. “Thanks to its convenient format, Rizla Combi is now proving extremely popular with shoppers looking for added value product solutions.”

He adds that impulse purchases also present great incremental sales opportunities (especially at Christmas, we again note) so any tobacco stockists should ensure that they have a range of accessories on offer to take advantage of this. Should the store have a strong RYO customer base for example, stocking a wider range of filters, papers, flavour cards and lighters is key.

Clipper reports that the total lighter market is worth upwards of £78m and is therefore well-worth the economical shelf or counter-space it takes up. Clipper has 42.6 per cent of the market and the strongest brand awareness, with a significant lead in spontaneous awareness. So light up your Christmas tobacco sales!