When it comes to cigarettes, these days less really is more. Demand for products which offer better value for money have surged over the summer (maybe it had something to do with all those stressed out footie fans smoking more) and manufacturers have moved into overdrive with an array of new cheaper brands and variants, smaller pack sizes and repositioned ranges.
In fact, within convenience you would be hard pushed to find another grocery category that has been subject to such a radical shift in demand, appearance and ranging in such a short space of time and, if predictions from Imperial Tobacco are to be believed, there is still much more of the same to come in the near future.
Imperial believes that by 2012 value and economy-priced brands (products with a rrp of £4.50 to £4.85 per 20) will account for well over half of the total cigarette category, while the popularity of standard and premium-priced products will have dwindled to 19.4% and 22.9% respectively.
In addition to redesigning its value-priced Richmond brand, Imperial also revamped the economy-priced Windsor Blue in the spring, and added new King Size Menthol 10s to the range.
JTI, meanwhile, launched its value brand Winston across the UK in July. The cost price was also reduced at the same time so that retailers could choose to reposition the brand within the value cigarette sector, and just last month the manufacturer also announced that it was introducing a 14s format to the Mayfair and Silk Cut houses.
Joining existing Benson & Hedges Gold and Silver 14s, the latest additions create a whole new 14s range, providing more choice to price-conscious adult smokers and offering an alternative to those who choose to downtrade, JTI says.
BAT was no less frenetic when it came to preening its lower-priced offering. “So far, 2010 has seen extensive redesign and repackaging for some of BAT UK’s key brands,” says Ronan Barry. “In addition, we have launched limited-edition packs for the Royals and Pall Mall brand families.”
But, of course, all this chopping and changing alongside economic instability has meant that most retailers have had to carry out comprehensive reviews of their cigarette ranges to ensure that they reflect ever-changing shopper needs.
And with the cigarette market intensely sensitive to regional differences as well as national trends, this is no mean feat. However, it can be made stress free by fostering and maintaining a good working relationship with tobacco sales representatives.
“The recent economic downturn has ensured a much more challenging environment for everyone,” Imperial’s Watkins adds. “Our highly trained sales force contains representatives who call on independent outlets about 11 times a year. They act as Imperial category consultants, advising trade on legislative developments and important local tobacco trends to enable them to better manage their tobacco category as a whole.”
Steven Denham was one retailer who was forced to undertake a dramatic range review following a sudden and sizeable shift in demand at his store.
“I used to sell about £1,500-worth of tobacco each week, which is not bad for a small rural store like mine, and value brands formed a reasonable part of that due to the high proportion of builders and tradesmen who worked on the large houses around here. However, when the recession hit and the return on savings became so appalling, all of a sudden the wealthier home owners found themselves without the spare income that they needed to do up their houses. It meant that all the trade I used to get through tradesmen and builders who smoked cheaper brands more regularly, just died out virtually overnight.
“I had to totally reassess my range and reconfigure it to ensure that I was still making the best possible use of the gantry space.”
Fortunately for Steve, “normality” is now starting to return to his business. But with the spectre of a UK-wide tobacco display ban still looming, for just how long it will be business as usual remains uncertain.
However, it doesn’t hurt to do as boy scouts and be prepared. Retailers would be wise to keep adult smokers up to date on product news and legislation while also educating staff about how they would need to ensure compliance should a dark market become a reality.
Maintaining a close relationship with your sales representatives will also be key over the coming months, and utilising them as a resource to ensure your store is in tip-top shape when it comes to merchandising, stock rotation and dark market legislation could make a huge impact on your business.
At the time of going to press display ban regulations were still awaiting parliamentary approval in England, and consultations have now closed in Wales and Scotland with results expected later this month. Draft regulations and a stakeholder consultation from the Northern Ireland Executive is also expected shortly.
Vital statistics: Cigarettes
- Market value £10bn declining at just under 2% per year as smokers downtrade to RYO brands
- Going up Value brand sales up 0.6% and economy brands up 42%
- Going down Mid-priced brand sales down 10.9% and premium priced down 2.6%
- Best-selling cigarette brand Lambert & Butler King Size.
Source: Nielsen Markettrack 12 months to December 2009
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