Gone are the days when cigars were regarded as the exclusive preserve of the rich and famous, says Gaelle Walker, and retailers should join the club
Bond villains puff them menacingly, lords draw on them languidly, and lottery winners pose with them pretentiously. Even the late, great Winston Churchill famously admitted to always carrying a little piece of Cuba on his lips. We’re talking cigars, of course, and the multimillion pound sales opportunity that they represent, not just to specialist tobacconists, but increasingly to the average convenience store retailer.
As the following pages show, dramatic shifts within the category have meant the door into the cigar market has been flung wide open, and it’s no longer just socialites and super-villains who are stepping through.
Worth £293m, the total UK cigar market is still clearly segmented into three sectors according to size - miniature, small and large. Within independent retailers, large varieties account for just 3% of the market’s volume, smalls around 36.7%, while miniatures are showing strong growth, commanding a dominant 61.1% share and rising, according to Nielsen Market Track data for the year to August 2011.
While the rest of the category has shown something of a drought in sales, driven primarily by a freefall in demand for small and medium to large cigars, miniatures are continuing to flourish, sparking numerous other exciting trends.
So why the growth? Experts agree that popularity of miniature cigars can be attributed to a combination of factors, not least the ban on smoking in public places. On July 1, 2007 adult smokers were snatched from the cosy confines of pubs, restaurants and boardrooms and forced out onto the streets. Now, with many large cigars taking about an hour or more to smoke, it’s immediately clear why their miniature counterparts soon came to be regarded as reasonably attractive substitutes.
“The public smoking restrictions have undoubtedly had an impact on the cigar segment - especially in pubs, restaurants and in the workplace,” says Imperial Tobacco UK communications manager Iain Watkins. “Since the implementation of these restrictions adult smokers are increasingly stigmatised and have fewer options for locations in which they can enjoy a cigar. A nice meal out can no longer be concluded with a brandy and a cigar, while large cigar brands are no longer deemed an everyday smoke, because smokers prefer to enjoy them in a relaxed environment where they don’t have to rush. Miniature cigar brands are growing their share of sales as they can be smoked in the same time it takes to smoke a cigarette outside a pub or workplace.”
And as latest research from JTI demonstrates, their more accessible size is now prompting a growing number of younger adult cigarette smokers to dabble in the segment, dualing between miniature cigars and cigarettes, or even premium RYO brands.
“Recent JTI research found that the UK is moving away from the traditional stereotype of older gentlemen smokers, with more than half of retailers surveyed citing 30-50 years as the typical age profile for cigar customers in their store,” explains Jeremy Blackburn, JTI head of communications in the UK. This trend is particularly prevalent in London (67%) and Scotland (75%).
“More than a quarter of retailers are also noticing adult cigarette smokers purchase cigars alongside cigarettes, highlighting an opportunity for retailers to sell more cigars to dual smokers and generate incremental profits,” Blackburn adds. Interestingly, this trend is most prevalent in the North East of England, where more than half of adult smokers are choosing to dual smoke.
Independent retailer Kris Parry, who runs The Black Swan Shoppe in Scarborough, North Yorkshire, can certainly attest to this. “Our cigar sales are up, which is partly due to us increasing our range, but I would also say people are starting to move away from smoking 20 cigarettes a day with the associated price tag, towards a couple of more enjoyable cigars at home on an evening.
“Going back 10 years I would have said that the typical cigar customer was male, and about 50 years of age, but in the past three to four years this has begun to shift. We now have a good number of 18-30s buying into the miniature cigars category on a regular basis,” he says.
The dualism trend explains two further shifts being noticed within the miniature cigar category. First, the move towards Blue or smoother varieties, and the growth in sales of cigar products that contain filters, such as Café Crème Filter Arome.
As such Royal Dutch Miniatures and Café Crème Express Blue are both enjoying volume and value growth.
However, perhaps the most interesting new trend starting to make waves within the cigar category is the emergence of a value for money (VFM) segment, particularly within miniature cigars. “It’s now becoming apparent that even cigars have not been able to escape the effects of the macro-economic climate,” explains Scandinavian Tobacco Group UK (STG UK) marketing manager Alastair Williams.
“While the recession has made consumers evaluate what VFM really represents in some categories and alter their purchasing decisions accordingly, up until recently the trend had not fully established itself in cigars. However, we’ve realised that the market has moved on and a VFM segment has clearly developed in the category in the past few months,” he adds.
Responding to JTI’s high-profile launch of Calisto Miniature cigars in April, and Ritmeester’s Royal Dutch Miniature Aromatics a couple of months later, STG UK ordered the rollout of Moments into the independent trade last month.
With an rrp of £3.10 for one crushproof tin of 10, Moments Blue and Moments Original have instantly become serious players in the emerging value-for-money segment. And just as C-Store was going to press we received word that Tor Imports was set to launch Clubmaster Mini cigars as a direct response to the growing VFM trend. Clubmaster Minis are initially being launched in two variants - Superior Blue and Superior Sumatra - in packs of 20, pricemarked at just £5.99.
“I’m loath to admit it but JTI’s launch of Calisto has been the driving force behind this exciting trend towards VFM products,” adds Williams. “However, we’ve come back strongly with the launch of Moments. The range will appeal to a type of consumer that is ultimately more mindful of where their money is going than ever before, yet still wants a quality, smooth cigar.”
And the launch of Moments is not the only npd that’s been keeping Williams busy.
In an attempt to reverse the declining fortunes of the smalls segment, STG UK also launched Café Crème Grande, a new range of small cigars, in June.
The launch, Williams claims, was one of the first major innovations within the smalls category for a decade, although we’re sure JTI and Imperial would both beg to differ.
Speaking at the launch, Williams said: “Historically, the Smalls segment has been dominated by British brands, but they have not innovated in this size segment for decades, which has meant it has got pretty stale for both retailers and consumers. It is important that we address this lack of innovation as small cigars continue to lose the biggest volume of share in the cigar category compared with other size segments.”
As a result, Williams is hopeful that the popularity of the Café Crème brand, and Grande’s smooth Blue credentials, will be enough to prompt some adult cigar smokers to dip their toes into the smalls category, an occurrence which would most definitely make waves.
It’s still too early to say how well the launch has been received, but two smalls brands that are clearly being applauded by adult smokers are Ritmeester’s Royal Dutch Elites and Royal Dutch Panatellas, which are showing volume growth of 6.8% and 3.7% respectively.
Imperial Tobacco’s Classic brand has also managed to hold on to its 25% market share within the small cigar sector.
So, if all of the above has tempted you to look again at your cigar range, or at least the miniatures segment of it, now is most definitely the best time to do so.
With the margins on cigars often double or in some cases triple those earned on premium cigarette brands, it can certainly pay to do so. The festive season has always brought good tidings to the cigar category, and further research commissioned by JTI recently revealed that almost half (48%) of UK retailers experienced a seasonal sales increase in cigar products, as adult smokers relaxed and took the time to smoke a cigar at home, or give them as gifts.
Last year in fact, cigar volume sales in December increased by more than 7% compared with the preceding month. This volume growth was equivalent to an extra three million cigars sold and a gross retail value increase of £1.8m.
According to JTI, its Hamlet house is the largest contributor to these additional cigar sales over Christmas, accounting for 1.3 million of the extra sales. And keen to grab an even larger portion of the Christmas pie this year, JTI has just launched three limited-edition tin designs for Hamlet Miniatures.
The three ‘manly knowledge’ designs, printed directly onto the inner lids of the cigar tins, feature a stream of gentlemen’s etiquette humour, including tongue-in-cheek rules related to the art of conversation, hand-shaking and shoe-wearing.
But the festive season is not the only event set to hand convenience store retailers an opportunity to grow their cigar sales.
Next April large stores and supermarkets will be forced to cover up their tobacco gantries when a nationwide display ban is enforced. Small stores, however, will have a further three years before their own gantries must go dark. The lag will present convenience store retailers with a golden opportunity to grow their sales of cigars and, of course, of other tobacco products, STG UK’s Williams adds.
“Independent stores will become an increasingly important segment of the market going forward,” he says. “Multiple retailers currently have a 53% volume share of the cigar segment and independent and symbol group stores about 33%, but this is likely to increase after the tobacco display ban comes into force on April 6 as, from that date, convenience stores and specialist tobacconists will be the only places in which adult smokers will still be able to see their brands on the shelf.”
It’s a fact which means that stocking the best-sellers, ensuring high levels of availability, and listening to the needs of local customers is an absolute must for retailers hoping to cash in, Williams adds.