The cigar segment still generates sales for independent retailers, despite tobacco’s general woes.
By Elena Dimama
“Cigars are an important part of the tobacco category because they drive footfall in-store and particularly as a driver of profit in tills.” This is the resounding sentiment of Alastair Williams, Country Director at Scandinavian Tobacco Group UK (STG), who has spoken to SLR about the category and the role it still plays in convenience.
“They typically offer up to three times the margin that cigarettes do,” he adds, noting that – for STG – its Moments Blue brand offers up to 18% margin when sold at its RSP.
Buoyant year
It has been a good year so far for cigars in the UK, up by 7.6% in value terms on last year at just under £291m. This has been driven by the rise in the cigarillo segment, which is now worth just over £99m and accounts for over 46% of all cigar volume, according to data by IRI MarketPlace.
However, the more traditional cigar segments are all in decline of around 3-4% 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 ongoing cost of living crisis, Williams explains.
By all accounts cigarillos have been the stars of the show, with the category seeing strong growth; it is now worth circa £8m a month, with a market share of 46.4%.
Christmas around the corner
“Each year, cigar sales follow a very similar seasonal pattern, with a spike in volume in December,” Mark McGuinness Head of Marketing at JTI UK notes.
“As the winter months approach, retailers should stock up to take full advantage of this seasonal profit opportunity.”
The sentiment is shared by Williams, who believes that retailers should “get their range right so they can enjoy those extra sales and rewarding profit margins.
“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,” he adds. “Make sure you have brands like our Henri Wintermans Half Corona in stock as it is the UK’s best-selling medium/large cigar, and a real festive favourite.”
JTI also has product highlights to offer, including the Sterling Dual Capsule Leaf Wrapped, which includes a mentholated Virginia blend tobacco and capsule filter that when crushed releases a peppermint flavour. “It offers a good value and high-quality product, with an affordable RSP of £5.30 for a pack of 10 and £10.40 for a pack of 20 cigarillos. We’d recommend retailers stock up on both the 10s and 20s formats to offer more choice to customers and make the most of this successful brand,” McGuinness explains.
Double trouble
The cost-of-living crisis and tobacco’s old foe, the illicit trade, are still expected to complicate things for retailers, but cigars are providing a rare glimpse of hope this winter.
“Value will almost certainly become more important in cigars and indeed across all categories within convenience stores,” Williams says. “It’s worth reminding retailers that cigars are exempt from the plain packaging legislation. We recommend retailers stock 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.”
The issue of illicit tobacco is not going anywhere either, with the latest research from Kantar highlighting that 37% of smokers have recently bought some form of illicit tobacco.
“Law enforcement agencies depend on Scottish retailer support to take action, so the participation of retailers is crucial when it comes to tackling the problem head on,” Ian Howell, JTI’s Fiscal and Regulatory Affairs Manager says. “By encouraging more people to report suspicious activity to the relevant authorities, retailers can help protect their local communities. Educating and training staff on illicit tobacco is also vital, as the more staff who are aware of the issue and the warning signs to look out for, the better.”
