Some 24% more Brits are planning to tackle DIY projects this year than last, and will invest an average of £865 in the tools of the trade to get the job done, a recent poll by B&Q revealed. But it’s not just home improvement where shoppers are splashing out on the right tools. As the number of cash-strapped adult smokers choosing to roll their own tobacco continues to grow, demand for many of the tobacco market’s own tools of the trade (papers, filters and rolling machines) are also on the up.
That’s how much UK smokers are spending on rolling papers each year in stores, according to Imperial Tobacco
This surge in popularity has not gone unnoticed by convenience retailers, with many stores now taking the category much more seriously and moving products out from among the sundries to more prominent positions on the main tobacco gantry, or placing them on the counter itself.
This has been particularly true of many large convenience stores (3,000sq ft and up) in England, Wales and Northern Ireland, which are all now complying with tobacco display ban legislation.
With the exception of Scotland, where accessories are covered by display ban legislation, large stores in other parts of the country are now using the high-margin tobacco accessories sector to signpost the fact that they still sell tobacco.
“Tobacco is a major pull for shoppers and we sell almost £3,000-worth a week. Our store is technically in a rural location, but we are between two large towns so get quite a bit of passing trade and our customers tend to come from two main camps - either quite affluent, or less well-off. It means we sell quite a few high-end cigarettes and large volumes of RYO tobacco.
“Sales of Gold Leaf, Amber Leaf and Golden Virginia are all performing really well. We also sell quite a lot of JPS Rolling tobacco, but it tends to be bought in large quantities by just three or four customers. Sales of papers and accessories are also up, in line with higher RYO sales.”
Walter Bush, Baginton Village Stores, near Coventry
So says Eleni Koulara, marketing manager at Republic Technologies (UK) Ltd. “The display ban affecting larger convenience stores has led to more retailers using accessories to help shoppers adjust to the changes and to signpost the category. This is accelerating the growth and profit opportunities that filters and papers such as Swan and Zig-Zag provide,” she adds.
Their pocket-sized credentials also make tobacco accessories one of the easiest and cheapest ways for convenience store retailers to add interest or a point of difference to their tobacco gantries. While big brands such as Rizla and Swan undeniably account for the lion’s share of sales, it’s important to remember the plethora of smaller, yet no less innovative UK brands that exist for stores to choose from.
“Whether it’s 66 papers in a pack (32% more than the average), or paper that extinguishes itself when you set the cigarette aside, at Mascotte we’ve worked hard to ensure that our products have some sort of USP to add excitement and interest for adult smokers,” explains Mascotte sales and marketing director Sean Glynn.
The increase in RYO sales has had a positive effect on the popularity of rolling papers, with UK adult smokers currently spending about £100m on them each year in stores.
Heightened consumer and retailer education about the different paper options and their uses has also helped to boost paper sales, and with a raft of activity from a number of key brands planned for this summer, should continue to do so.
Category leader Rizla, for example, was given a facelift late last year and is now available to buy in nine new packs with designs that illustrate both the varying levels of thickness among the papers, as well as their taste intensity, to assist adult smokers.
Rizla papers, which racked up more than £80m-worth of retail sales last year, now consist of regular papers in green, red, blue, silver and liquorice, in king size narrow green and red, and king size slim blue and silver.
Cigarette price definitions
Premium: typically £7.50+
Sub Premium: £7+
Sub Economy: about £6
Republic Technologies’ Zig-Zag papers brand also increased its market share to 4%, according to Nielsen Market Track data for February 2013, and is hoping to continue doing so with the help of a major new consumer sampling campaign which will reach more than 100,000 consumers this summer. Mobile Zig-Zag sampling crews will focus on music venues and gigs, as well as clubs and bars at major cities throughout the UK.
Mascotte has also invested in the production of a new educational pamphlet for convenience store retailers which outlines the key features of its 30-strong range of tobacco accessories, including rolling papers as well as filter tips, hand-rolling machines and more.
Innovation has also featured highly at Mascotte of late, with the company having launched a variety of new products which purport to make the rolling process easier and to save adult smokers money.
The first was the launch earlier this year of the Mascotte Magnetic king-size booklet, which uses an innovative magnetic closing mechanism to keep papers fresher, and, most importantly, flat and means that the last few papers in the pack can be used and not discarded as tends to happen with other brands, Glynn explains.
“My tobacco sales are holding their own despite the economy. They dipped slightly in the days following the Budget, but have now returned to normal.
“RYO brands are the big winners for sure - sales are increasing all the time, and as a result I recently moved them from the bottom of the gantry to the upper-middle section.
“Cutters Choice and Amber Leaf are my best-selling RYO brands. Packs of 11g Pall Mall Rolling, priced at £2.99, have also picked up of late, although I’m not sure that smokers realise the packs are smaller than the traditional 12.5g!
“Accessories are also selling well, and sales of papers and filter tips have picked up in line with the growth of RYO sales. Smokers don’t tend to deviate from their paper of choice - they always ask for the same things. I have tried introducing other paper brands, but people tend to just ask for Rizla. Green or blue are the most popular papers, although I do sell quite a few liquorice ones too.
“When it comes to filter tips, slim tips are by far the biggest seller. People are trying to save money by smoking smaller quantities so more than 90% of my filter tip sales are slim.”
Manny Patel, Manny’s, Long Ditton, Surrey
And with the money-saving dynamic also prompting more UK adult smokers to roll smaller and slimmer cigarettes, Mascotte also recently launched Mascotte Green 66 Slim. The packs of 66 cut-corner slimmer rolling papers have been designed to limit the amount of overlap that occurs when the paper is rolled, and contain an ‘only 10 papers left’ warning sign.
Mascotte is also the producer of the Slim Handroller machine. Sold with free pack of papers, Mascotte claims that the machine is “the only adjustable machine on the UK market that can make slim or extra-slim roll-ups,” saving smokers further money by not having to buy more than one machine.
While sales of rolling papers are put at an impressive £100m a year, it’s important to note that this figure would be even higher were it not for the damaging impact of the illicit tobacco trade, and the criminal fraternity, which is now targeting tobacco accessories as well as tobacco products.
The filters market is also showing impressive growth, now valued at £62.4m and growing at 12.3% year on year. The sector continues to be dominated by the Swan brand, which has a volume share of almost 90%, according to recent Nielsen Market Track data.
As cost control continues to influence purchasing decisions, size of filter is becoming increasingly important to the UK’s adult RYO smokers.
Sales of slimmer papers and filters, which enable smokers to roll smaller cigarettes, in turn making their tobacco - and money - go further, are on the up.
Illicit RYO and papers
Data from the tobacco industry’s MS Intelligence Empty Pack Survey (EPS) reveals that 21% of cigarettes consumed in the UK in 2012 were non-UK duty paid, but sales of illicit RYO tobacco are thought to be much higher, at more than 50% of the market, driven by the high price of legitimate product and relative ease of production.
Even more worryingly, intelligence from JTI suggests that packs of counterfeit RYO are now even being assembled on UK shores. “Post offices are picking up reels of counterfeit RYO packaging. The criminals are using the postal system to send it out to addresses, where it is then married up with counterfeit tobacco and packs are assembled by hand in illicit tab houses,” JTI’s Jeremy Blackburn says.
The problem isn’t limited to tobacco alone. Intelligence suggests that large quantities of the UK’s leading paper brand Rizla are now being counterfeited in China before being smuggled into the UK and other European countries.
“Illicit traders’ activities cost the average c-store more than £40,000 a year in lost sales - equating to more than 100 missed purchases a week,” Imperial’s anti- illicit trade manager Pete Nelson concludes.
“Due to high prices the UK consumer tends to rolls 0.25gm compared with the continental smoker at 0.45gm,” Mascotte’s Glynn explains.
Mascotte’s Extra Slim Filters are 5.3mm in diameter and packed in bags of 150 with an rrp of 59p.
However, last month saw Republic Technologies attempt to grow its share of the filter tips market with the launch of a Swan-branded ‘Ultra Slim Filter’, also at just 5.3mm thin, and priced at 95p for 126 filters.
“One of the reasons people choose RYO is that it enables them to make thinner cigarettes, which in turn means they smoke less,” marketing manager Eleni Koulara says. “Size of filter is becoming more important in the RYO sector, particularly among people looking to reduce smoking for health or cost reasons, and the Swan Ultra Slim filter is the product that addresses those specific consumer needs.”
Launch support includes an extensive digital media campaign focusing on sport and music.
Another small, yet growing, segment of the filter tips market to bear in mind is menthol, which now accounts for one in 10 of all filter tips sold.
Roll Your Own tobacco
With a value of £1.75bn and volumes still growing (although at a slower rate than last year), RYO tobacco continues to be the star of the show, particularly when you consider the sparkling margins that it delivers to retailers.
Tobacco display ban dates
- Large shops: (3,000sq ft plus) April 6, 2012
- Small shops: April 6, 2015
- Size of requested display: 1.5sq m
- Large shops: October 31, 2012
- Small shops: April 6, 2015
- Size of requested display: 1.5sq m
- Large shops: December 3, 2012
- Small shops: April 6, 2015
- Size of requested display: 1.5sq m
- Large shops: April 29, 2013
- Small shops: April 6, 2015
- Size of requested display: 1,000sq cm
As consumer budgets remain under pressure, growth continues to be driven by brands from the economy priced sector, and brands from this tier are currently experiencing 30% and above volume growth year on year, according to Imperial Tobacco UK December 2012 estimates. Brands within the economy priced sector tend to have rrps of about the £3.50 mark for a 12.5g pouch, and between £6.85 to £7.30 for 25g.
And with average earnings expected to lag behind inflation for at least the next 12 months, it’s a trend which doesn’t look like changing any time soon. Fully aware of this, a number of the UK’s key tobacco manufacturers have made the decision to reduce pack sizes and unveil new lower price points over recent months in a bid to bag sales.
BAT, for example, recently replaced 12g packs of Pall Mall Rolling with smaller 11g pouches that feature a sub £3 price point, while the Scandinavian Tobacco Group UK Ltd (STG UK) also unveiled a new low price point of £3.15 for its 12g packs of Salsa RYO earlier this year.
Delivering value to customers is essential in the current economic climate believes Alan Graham, head of marketing at STG UK. “Consumers are now taking more time to consider their purchases, often comparing prices of brands or weighing up promotional offers before making a decision,” he says.
Demand for pricemarked products (PMPs) will continue to rise, BAT’s Ronald Ridderbeekx predicts. “The economic downturn has driven an increase in the popularity of PMPs, which astute retailers recognise as a growing trend. PMPs accounted for 30.1% of total RYO volume to date in 2013, compared with 26.1% over the same period in 2012. In independents and symbols the value of PMPs is even more pronounced, moving to 58% of volume to date this year versus 51.9% over the same period in 2012,” he adds.
Independent retailer Manny Patel of Manny’s in Long Ditton, Surrey, says he would happily stock nothing but PMPs. “Sure, the margins are lower, but at the end of the day PMPs are footfall drivers. They bring people into the store, and when they come in they inevitably buy more products,” he says. “As long as you’re making the margins elsewhere, it works. Next week I’m introducing a new chiller to the store which will allow me to double the amount of higher margin fresh produce that I sell, so it should all work nicely,” he says.
The value sector, which accounts for almost 60% of all RYO sales, has also shown some growth in 2012 and is expected to evolve further this year. There has been a 2% volume growth in the past 12 months (Imperial Tobacco December 2012 estimates), while premium lines such as Imperial’s GV Smooth and Golden Virginia Classic brands continue to account for 28% of the RYO market.
Retailers won’t be surprised to learn that when it comes to cigarettes, the downtrading dynamic continues to prevail, leading brands from the economy and value sectors to continue rising up the popularity stakes.
For adult smokers who shop this section of the gantry, brand loyalty - many retailers now claim - has gone out of the window, with many smokers now scanning the gantry for the best deal, and comparing prices between stores prior to purchase. As a result, the number of brands jostling for attention with eye-catching pricemarked packs has continued to increase, while many brands have moved to smaller 19-stick packs in a bid to shrink price points.
Almost 60% of packs purchased by adult smokers now display pricemarks, according to Imperial.
It’s a wrap
Tobacco wraps can provide another way to add a bit of interest to the tobacco fixture and create a talking point with adult smoking customers. The wraps are made entirely of tobacco, and function as an alternative to rolling papers.
Most companies, such as Fosters Distributors, make the wraps in a variety of different flavours and sizes. Sourced in the Dominican Republic, Fosters Distributors’ Lone Star Wraps are available in six fruity flavours including blueberry, grape, strawberry, kiwi, mango and watermelon, as well as an unflavoured Straight Up variant.
Distribution permitting, the company believes that wraps could be the “next big thing” in smoking accessories. “In the US, tobacco wraps have now overtaken papers in terms of number of SKUs,” says Fosters managing director Andrew Armstrong.
Lone Star Wraps are sold in resealable packs of two, rrp £1, giving retailers a margin of 50%.
“When it comes to wraps, it’s all about the flavour,” Armstrong explains. “Smokers don’t tend to just buy one, they’ll try loads of different ones. They create a talking point among smokers and also between smokers and retailers. They have the potential to be just as big in the UK as they are in the US, where there are more than 200 different SKUs available. It all depends on distribution.”
JTI recently extended its Sovereign brand with the introduction of a new cigarette range carrying a sub-£6 price point. Sovereign Blue is now available in both King Size and Superkings in 10s and 19s pack formats. Packs of 19 are available in pricemarked packs, retailing at £5.99.
In April, Imperial Tobacco expanded its Player’s cigarette range with the addition of Smooth Kingsize and Super King Size 19s, designed to appeal to “value-driven adult tobacco shoppers”.
With an rrp of £6.24, Player’s Smooth 19s King Size and Super King Size fall into what Imperial classes the ‘sub-economy’ price sector, which it expects to account for 7.6% of the entire cigarette market by the end of 2013.
JTIs Winston brand also moved to a 19-stick format at the start of the year.
Jumping to the other end of the spectrum, premium priced brands continue to hold their own, supported by an equally concerted promotional push to keep up demand for them.
Despite the challenging economic conditions, cigarettes from the premium priced sector still account for about one in four of all packs of cigarettes purchased, and even more in some parts of the UK - hence the launch of Imperial’s Davidoff iD in selected areas of South East England last year.
Premium-priced cigarette brands account for more than 40% of all sales in the Greater London area, generating about £290m a year for retailers in this region, says Imperial. The manufacturer unveiled a new look for its sub-premium Lambert & Butler brand last month, complete with a bold monochrome logo.
Elsewhere, JTI’s Camel cigarette brand is gearing up to celebrate its centenary with a new range of limited-edition packs of Camel Blue 20s and a retailer competition to win a trip to New York. Entry forms are available from cash & carries as well as in the latest of Convenience Store.
Ones to watch
Corner cut papers are to be added to Golden Virginia Classic and GV Smooth 25g packs from mid-June. Research shows that 62% of RYO tobacco shoppers prefer their tobacco to come with papers, according to supplier Imperial Tobacco. The rrp at launch will remain the same.
tel: 0117 963 6636
JTI extended its best-selling Amber Leaf brand with the launch of Amber Leaf Blonde at the end of last year. The paler coloured cigarette-like blend of premium Virginia rolling tobacco is designed to offer a smoother taste. It comes in a 12.5g crush-proof box and 25g pouch.
rrp: 12.5g, £3.87 25g, £7.57
tel: 0800 163 503
JTI’s premium Camel cigarette brand is celebrating 100 years with limited-edition packs and a retailer competition.
Special packs across Camel Blue 20s will be available for two months while stocks last. A trip to New York is up for grabs for retailers.
rrp: Camel Blue 20s, £7.98
tel: 0800 163 503
Republic Technologies is targeting ‘RYO connoisseurs’ with an Ultra Slim Swan filter. The filter is the thinnest Swan filter yet and provides RYO smokers with a smoother taste and enhanced tobacco flavour and enables them to make thinner cigarettes.
rrp: 95p, 126 filters
tel: 0800 0857 836
Philip Morris has entered the capsule cigarette market with Marlboro Ice Blast. It offers smokers the choice between a cooling to high cooling smoking experience by pressing the ‘Iceball’ capsule inside the filter and is available in packs of 20 king-size sticks only.
tel: 0207 076 6000