Light into challenges

Tobacco is still a ray of light for convenience in the current financial backdrop, despite a hostile political environment towards the category.

Worth £14bn each year, the tobacco category continues to hold a significant amount of value for retailers, despite the financial challenges households are facing.

Scottish consumers have slightly different tobacco preferences to the rest of the UK, with the factory-made cigarettes (FMC) market accounting for 66% of all tobacco sales compared to 53% for the rest of the UK, according to EPoS data. What’s more, a shift towards low-priced propositions is witnessed across the entire tobacco category, with the trend particularly prevalent in Scotland, where 21.2% of FMC sales are in the value price sector and 27.1% of roll-your-own (RYO) sales are in the value price sector.

Value prevails

According to the ITUK Report on Trade, RYO accounts for nearly half of all tobacco sales, as shoppers look to cut down on their household spending. “As the cost-of-living crisis continues, it’s likely that the need for value products is going to continue to be a dominant trend in the category for some time, so retailers need to make sure they can cater for this demand by stocking the right product offering,” Tom Gully, Head of Consumer Marketing UK & Ireland at Imperial Tobacco, says.

“With this in mind, we strongly advise that retailers check that they stock a wide range of leading roll-your-own brands, including Regal Signature, Riverstone and Players JPS, so that they are fully prepared for this continuing rise in demand for value tobacco products.”

Seeking a familiar brand at a low price point is also a focus for tobacco shoppers. “Shoppers will be keeping a keen eye out for any deals and value offers for the foreseeable future, so it is of key importance that retailers and their staff are well versed on what products they can offer while the demand for value is high.”

Imperial Tobacco has also launched its new Players Max range, featuring cigarette sticks that are 12% longer in size to cater for this extra demand in value combined with quality.

Cigar choice

“Whilst obviously not matching the sales volumes of cigarettes or RYO tobacco, cigars are an important part of the tobacco category for convenience retailers 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,” Nataly Scarpetta, Marketing Manager at Scandinavian Tobacco Group UK (STG UK), explains.

STG UK’s latest data shows that the total UK cigar category is worth £295m in annual sales and growing in value terms by 3.2% compared to the same time last year. Meanwhile, despite barely existing four years ago, the cigarillo sub-category is now worth over £111m in annual sales and is responsible for nearly half of total cigar volume sales.

“I’m not sure the Ultra Value segment is particularly prevalent in cigars, but in general the value trend has certainly been around the cigar category for quite some time now, which is evidenced by the success of our Moments Blue brand,” Scarpetta notes. “In fact, our Moments 10’s packs are the biggest brand in the value-for-money segment and are well known amongst tobacco-selling retailers as a popular choice amongst those customers who are looking to save money.”

Smoke-free illusions

The UK government’s self-described intention to create the ‘first smokefree generation’ has been taking shape in the past weeks, with plans to introduce legislation so children turning fifteen this year or younger can never legally be sold tobacco. Unsurprisingly, a whopping 86% of convenience retailers said they believed the government’s proposed generational ban on tobacco products will have a negative impact on their business.

Paul Cheema, Owner of Malcolm’s Convenience and Forecourt, Coventry, said at the time of the research: “The proposed tobacco ban will hit convenience retailers the hardest. We know from recent reports, and our own experiences, that violence or abuse towards shopkeepers is on the rise, with ID checks or refusal of sale often a common cause of this. It’s fair to say that the proposed ban would highly likely exacerbate this issue and drive a further increase in threatening behaviour against retailers.”

Meanwhile, recent research from JTI showed that 6% of retailers state that their store has been negatively impacted due to the sale of illicit tobacco and vapes by other businesses in the area, with 30% of retailers aware of one or more stores within a three-mile radius allegedly selling illicit products. In addition, 67% of retailers expect the proposed generational tobacco ban will lead to an increase in illicit tobacco activity.

The research also reveals that 72% of retailers surveyed said they would welcome more regulation around the selling of legal tobacco and vaping products. Stricter penalties and fines, more frequent visits from trading standards and strengthening border controls to reduce the supply of illegal products into the UK were the most-common responses from retailers in terms of support needed to help tackle the issue of illicit tobacco.

James Hall, Anti-Illicit Trade Manager, Imperial Tobacco UK & Ireland, explains: “Illicit trade remains a huge challenge within the category. In fact, figures show that 73% of smokers bought illicit tobacco within the last year (vs. 71% in 2021) and nearly four in ten consumers claimed that increased living costs had impacted their purchasing habits and where they now choose to buy ‘cheaper’ (illicit) tobacco).”