Rolling in profits

Just over one in three tobacco sales in the UK involve a roll your own (RYO) product but many Scottish independents are letting profits slip through their fingers

by Iain Hoey

To non-smokers, roll your own cigarettes can seem more effort than they are worth. It is a fiddly process which, to the inexperienced hand, ends up with a sad, usually damp excuse for a cigarette. And almost every RYO smoker will testify the unrelenting presence of stray filter tips in every pocket they own. But not only does the market for RYO remain strong, it is a category in growth in the increasingly uncertain tobacco market following the EUTPD2 legislative changes.

The reason it is so popular? For a start, it’s significantly more cost effective than buying pre-rolled cigarettes, and value RYO brands are seeing some of the strongest growth. It is easier to stretch a bag of tobacco out and determine the size of a cigarette if you roll it yourself. There is also a public perception that RYO cigarettes are better for you than pre-rolled as they contain less chemicals and produce less smoke. Plus there is an incomparable satisfaction that comes from rolling a perfect cigarette yourself.

And so, despite the sweeping changes in the tobacco market, Scotland’s tobacco accessories category remains in growth of over £25.7m. By failing to offer what the nation’s growing number of RYO smokers are looking for, independents are letting crucial sales slip through their fingers in a category that continues to shed its social stigma.

The Value roll your own segment is gaining shares in the RYO category, holding 22.8% of total volume sales in the market as existing smokers are seeking out ways to reduce the amount of money they spend on tobacco. This shift in consumer spending is likely due to the new EUTPD2 legislation, where larger packs of tobacco, such as the 50g pouch, are providing smokers with the option of improved value for money.

“With the current trend towards value, larger RYO packs are expected to become increasingly popular,” says Jeremy Blackburn, Head of Communications at JTI. “The continues growth of many of JTI’s RYO brands such as Amber Leaf can be attributed to the face that in recent years many existing adult smokers have chosen to switch to products which offer greater value for money – a trend which has manifested itself in the considerable growth of the Value RYO within the UK tobacco category.”

Recent trends in the roll your own market have included an increase in the popularity of the box formats, which sees an increased sales value of 7.1% in the last year, growing to encapsulate over 30% of the RYO pack sales. In order to take advantage of this trend, Blackburn advises that retailers stock both pouch and box variants for every RYO brand that has this option available.

Slimming down

While there may have been huge changes to the way tobacco is sold, the continuing popularity of rolling tobacco means the accessories market remains buoyant. From papers to filter tips, lighters to rolling machines, it pays for retailers to have a wide range, and like the rest of the tobacco category, availability is key.

IRI market data shows that filters are the best-performing sector of the UK’s accessories market, last valued at £70m. Size of filter has risen up the RYO smokers’ agenda and many people are opting for slimmer roll-your-own filters because they enable them to make thinner cigarettes. The Zig-Zag Unbleached paper range, featuring transparent and unrefined rolling papers, for example, provides RYO enthusiasts with a smoother taste and richer tobacco flavour.

Gavin Anderson, General Sales Manager for leading RYO accessories supplier Republic Technologies (UK) Limited, says the combination of value, choice and quality of RYO accessories is proving attractive to consumers. “The display ban means retailers must think long and hard about how to promote and maintain tobacco sales,” he says. “Size of filter has risen up the RYO smokers’ agenda and many people are opting for roll-your-own filters because they enable them to make thinner cigarettes.”

Republic Technologies is meeting this demand for innovation with products designed to cater to changing shopper needs. Recognising the need for greater choice, the company launched Swan Ultra Slim; the thinnest ever Swan filter and a premium quality product aimed at smokers looking for a smoother taste while reducing the amount that they smoke.

“RYO smokers are more discerning than ever before,” says Anderson. “Many of them are taking environmental considerations into account when making purchasing decisions.”

In 2016, Republic Technologies responded to this demand and introduced more choice to the filters market with the launch of the first ‘Eco’ filter from Swan. What has been deemed by Republic Technologies as the most environmentally-friendly Swan product ever, Swan Extra Slim Eco Filters are biodegradable, featuring a naturally coloured filter and unbleached paper wrap.

In addition to consumer demand for environmentally-friendly RYO products, there has also been increasing demand for ‘make your own’ products from cash-conscious consumers looking for an alternative to ready-made cigarettes.

Republic Technologies has recognised this demand with the launch of Swan Kingsize Cigarette Tubes. New for 2017, the Swan tubing machine allows consumers to roll cigarettes with ease, with packs available featuring both 100 and 200 tubes in both Standard and Menthol variants.   In 2016, Republic Technologies also announced the launch of a combined Zig-Zag Silver Slim Papers and Tips product, exclusive to the Scottish market. The combined packs of 32 papers and 32 filter tips are designed to be displayed vertically, taking up less shelf-space in comparison to competitive packs.

In addition to filters and papers, there is also an active demand for matches and lighters, with IRI market research valuing this segment of the accessories market to be worth £87m in total value sales. Alongside its Swan and Zig-Zag brands, Republic Technologies also supplies matches and lighters under its Cricket, Poppell, Scottish Bluebell, Vulcan, Cooks and Bryant and May brands.

In the face of change

These progressions come, of course, on the backdrop of the recent changes in the cigarette scene: EUTPD2. EU Tobacco legislation came into force from May 2016, at which point the manufacture of packs of less than 30g roll your own tobacco ceased. Since then there was been a year’s sell through period, meaning retailers had until 20 May of this year to sell current branded stock. In addition to these EU rules, the UK government passed plain packaging legislation, which meant from May 2017, retailers lost the ability to sell branded distinctively tobacco products. As a result, it has become far more difficult for retailers to promote and maintain tobacco sales in their stores. So how should retailers adapt?

“Now that RYO tobacco under 30g is no longer available, we predict that sales of larger packs sizes will increase, so keeping range and availability 24/7 is key,” says Blackburn. “Multiple facings of 30g and 50g packs on your gantry will help make sure you meet your customers’ needs.”

Keeping gantries consistent and easy to navigate post legislative change is important for staff in order to ensure they remain accustomed to where the stock is currently merchandised. “We recommend,” says Blackburn, “that retailers maintain their current planograms to avoid confusion and keep spare stock in branded outers in the stock room to help quickly identify packs.

“Retailers should ensure their gantry is easy to navigate in a post EUTPD2 environment. Multiple facings of bestseller will help maintain space and ensure customer needs can be met.”

JTI recommends that retailers ensure tobacco is in a visible, easy to access location to maintain best levels of service and to avoid loss of customers. “We suggest that retailers promote best practice customer service and manage sales out to avoid returns and unhappy customers, which could result in lost sales long term,” Blackburn advises.

Overall, in the face of legislative changes and the rise of e-cigarettes, the RYO category remains a strong one, but like any other it needs maintenance. Ensuring that gantries are stocked up with a range of products (filters, papers, matches and lighters) as well as the latest NPD are fundamental to driving sales. And be sure to stock a core range of papers (Green, Blue and Silver in both standard and King Size variants) plus other options such as Unbleached and flavoured and make sure you have multipacks available to combat the discounters. If a RYO customer’s desired product is not stocked, it is highly likely that they will take their business elsewhere.