Tobacco may well be a tougher category than many to manage but doing so correctly remains well worth it.
by Gaelle Walker
Tobacco remains a key product category for many local retailers across Scotland and beyond, helping to drive all-important footfall, associated sales and overall margins.
In fact, according to a recent ASH-commissioned survey of 27,950 small tobacco retailers from across in the UK, 47% said that profit from tobacco products was an important part of their overall profits.
In Scotland specifically, 31% of Scottish retailers said that profit from tobacco was an important part of their overall profits.
Furthermore, 69% of Scottish retailers said that tobacco was important to their business because shoppers bought another product at the same time.
With stats like that, it’s clear to see why keeping up with the latest developments driving sales in this valuable category remains important.
Read on for our roundup of the key trends set to continue shaping sales now.
Des Barr, Sinclair Barr Newsagents, Paisley
“Our tobacco sales remain down on where they were prior to the pandemic but despite the fall, tobacco remains an important category for our store and a key footfall driver.
“The decline has been driven by a fall in very early morning trade since the pandemic. We used to be very busy between 4.30am and 6.30am but with many people still working from home and shopping habits having changed, that early morning trade has suffered.
“Ultra-value and economy-priced cigarettes remain our biggest selling tobacco category, fuelled by brands such as Kensitas Club along with Players and Chesterfield. Adult smokers are incredibly price conscious when it comes to tobacco, especially female adult smokers who are definitely more willing to chop and change between brands in order to get the cheapest price. Male adult smokers are far more brand loyal and stick to what they know.”
Demand for low-priced tobacco keeps growing
As the cost of living soars, ultra-value and economy-priced tobacco products are continuing to grow their share of sales.
“Overall, we’re seeing continued movement towards low-priced propositions across the entire category as consumer demand for value continues to drive tobacco purchasing patterns,” Imperial Tobacco’s Head of Consumer Marketing Tom Gully says.
As part of this shift, the lower price tiers now account for the majority of sales, with the sub-economy segment making up 63% share of Factory Made Cigarettes (FMC) and the economy segment accounting for 56% of Roll Your Own (RYO) with these value segments growing at 3% and 5% year on year according to Imperial.
The market is split between FMC and RYO
There is now almost a 50/50 market share split across FMC and RYO categories – at 52% and 48% respectively according to Imperial Tobacco.
Looking at RYO in particular, the consumer drive for value remains a big factor, with the economy segment accounting for well over half of all sales.
The sales and profits of legitimate responsible retailers are continuing to be hit by the illicit trade, which rose by 4.2% last year according to the most recent stats from KPMG’s annual survey, commissioned by Philip Morris International.
The increase is being fuelled by counterfeit cigarettes, consumption of which grew 34.1% in 2021, topping three billion cigarettes for the first time since the study began 16 years ago.
According to Imperial Tobacco’s calculations, a retailer selling £5,700 of cigarettes and £1,300 in RYO products a week could lose £1,233.43 a week in turnover from illicit tobacco sales. Responsible retailers and shoppers are being urged to report all instances or suspicions of illicit sales in a bid to crack down on the crime.
Police and Local Trading Standards teams across Scotland are also continuing their efforts to stub out the illicit trade, with a string of large-scale seizures made in October.
More than 360,000 illicit cigarettes were seized by police from a van on the M74 after officers received intelligence about alleged counterfeit goods. Other seizures made in October included the discovery of 211,000 illicit cigarettes and 4.6kg of hand rolling tobacco worth a total of £90,000 in a property in the Govanhill area of Glasgow.
Retailers and members of the public can report illicit trade anonymously online via the Crimestoppers website or by calling 0800 555 111.
Accessories present new sales opportunities
With more adult smokers moving towards RYO products, sales of tobacco accessories including filters, papers, lighters and other flavour-related innovations are continuing to climb.
Imperial’s Rizla Xtreme Flavour Cards, which can be used with RYO products as well as FMCs, are currently selling at a rate of 400,000 packs a week as smokers look to recreate the menthol experience.
Pouches pack a punch
When it comes to the tobacco alternatives market, the UK’s nicotine pouch category is continuing to grow at “a phenomenal rate” according to JTI and is now worth £2.6m a month.
Just under half of all UK nicotine pouch sales are currently made through convenience and independent channels, with that figure on the climb.
“A key trend within the nicotine pouch category is the continued demand for higher nicotine strengths,” JTI’s Portfolio Brand Manager Bruce Terry says, with Strong and Extra-Strong now making up 76.3% of nicotine pouch sales. Extra-Strong is also the fastest-growing strength.
Demand for mint and menthol products also continues to grow, with the market currently split 80.2% menthol and 19.5% fruit, according to JTI.
With nicotine pouch sales continuing to gather pace, Scandinavian Tobacco Group UK has launched its first ever non-tobacco product: STRÖM. Inspired by its Scandinavian heritage, the product has been designed to offer a premium and plant-based alternative to conventual nicotine pouches.
Launching in three flavours (Fresh Mint, Minty Orange and Juicy Berry), STRÖM will first be trialled in Manchester, before being rolled out to other cities across the UK throughout 2023 and beyond.
The plant-based nicotine pouch also features a unique resin formula and comes in a 100% plant-based plastic container.
STG’s UK Country Director Alastair Williams said: “Retailers would be forgiven for thinking that the nicotine pouch category is already quite crowded, but we’re coming to the market with something more authentic, premium and sophisticated than what is already out there.
“STRÖM offers a prolonged taste delivery which enables an extended flavour sensation for your mouth and throat, as well as providing an equal nicotine release for a consistent and smooth experience.”
