It’s fair to say that 2012 has been a pretty good year for the UK cigar category, and with the all-important festive season skating swiftly towards us, things can only get better.

According to Café Crème manufacturer Scandinavian Tobacco Group (STG), there has been a slight decline of 1.3% in cigar volumes in the past year. However, this is a significant improvement on previous years such as 2008, when post the ban on smoking in public places volumes were down by almost 12% as smokers, appalled by the idea of standing outside in all weathers, hot-footed it out of the category.

The value of the cigar category has actually grown by 1.1% in the past year, driven by miniature cigars. Like our victorious Team GB athletes and Her Majesty the Queen, the cigar category put on a glittering performance this summer.

According to STG, nine million more cigars were sold this June compared with the last, as adult smokers sat back and celebrated national events with a cigar.

Anticipating the boost, and consumer desire for all things British, STG launched a limited-edition Henri Winterman’s Half Corona and Corona Delux that featured a special union flag and London skyline packaging. “Retailers,” says the group’s head of marketing Alan Graham, “snapped them up and the feedback that we received was that they sold really well.”

And STG was certainly not the only tobacco manufacturer to make the most of sizzling summer sales. In addition to actively promoting its Hamlet brand with retailers, JTI also introduced a new-look pack for its large whiff cigar brand King Six.

New lettering on the King Six logo and a revised cut-out crown emblem which displays the cigars have created a modern look for the value brand, which provides adult smokers with six cigars per pack rather than the standard five.

“Summer is a significant sales period for cigars - so much so that in recent years a third of all cigars have been bought during the summer months,” says JTI head of communications Jeremy Blackburn. “The warmer weather brings with it an increase in the number of adults smoking outside, and anecdotal evidence suggests it is for this reason that sales grow markedly at this time. Cigar sales performed well over the summer, particularly in convenience stores - and not just miniature cigars, but sales of larger cigars such as Hamlet Fine were boosted as well,” he adds.

retailer’s view

“Cigar sales aren’t what you’d call buoyant, but they are still worth their space on our shelves. The mass market brands such as Café Crème sell fairly constantly all year round, thanks to a core group of regular cigar smokers.

“The typical cigar smoker in my store is male and aged 35 upwards, although you do get some men in their 20s who come in for cigarettes and switch to a cigar if they’ve got a special night out.

“However, even in this premium category people are becoming more price conscious. One of my regular cigar customers who had always smoked Coronets recently switched to Panama because they have one extra.

“Specialist loose cigars also sell well, with sales lifting significantly around Christmas and the new year. People buy them as presents, or as treats. Last year we made up gift packs, such as cigars with a cutter, which went down really well. We’ll do more this year.”

Harry Haria, Seaford News, Seaford, East Sussex

And looking ahead to Christmas - traditionally a key selling period for cigars - manufacturers believe that this year in particular, convenience stores will have a sizeable opportunity to build on successful summer sales.

“There is a good opportunity for retailers to increase their cigar sales this Christmas, particularly because this will be the first year that the supermarkets, who normally take the lion’s share of larger cigar products, are now complying with a display ban,” STG’s Graham says.

Ritmeester Cigars national sales manager Lynne White is hopeful that the move could herald even greater success for its Mini Moods and Moods Filter brands, which she says offer adult smokers premium-quality mini cigars at an affordable price.

The UK’s tobacco manufacturers have been busy launching new and revitalised products to take advantage of the festive push, which saw sales rise by 6% last December. JTI recently launched three limited-edition tin (LET) designs for its iconic Hamlet brand.

The three ‘manly knowledge’ designs, printed directly inside the inner lids of Hamlet 5s, Hamlet Miniature 5s and Hamlet Miniature 10s, feature a stream of etiquette wit, designed to appeal to adult male smokers.

October also saw the launch of new Montecristo Minis from Imperial Tobacco, in selected areas of Southern England. Available in two variants - Full Flavour (Red) and Smooth (Blue) - Montecristo Minis are packed in embossed tins, each containing 10 Cuban blend cigars at the competitive price point of £4.38. The move, says Imperial, brings a “modern twist” to the historic brand, which was launched in 2001 and is sold for a higher rrp through the distributor Hunters & Frankau. Dressed in yellow packs, traditional Montecristo mini cigars are made using 100% Cuban tobacco.

While new entrants to the market and pack refreshes will undoubtedly add interest, additional sales won’t be served up to retailers on a plate, as Imperial Tobacco head of convenience Mike Laney explains. He maintains that availability and visibility will be key to boosting sales: “Ensuring constant, on-shelf availability is always a priority for retailers, and at Christmas this is particularly pertinent as tobacco shoppers may be coming in more often to buy their chosen brands, as well as purchasing snacks and drinks for parties,” Laney adds. “Often during the Christmas period, adults who choose to smoke will trade up from their usual tobacco brand as a special treat, so retailers will need to carry more stock or risk going out of stock.”

Larger cigar brands, in particular, experience higher demand during the festive season as people indulge themselves and purchase larger cigars as stocking fillers and presents for adult smokers.

Retailers who can talk confidently about the different cigar brands that they stock will also do well, STG’s Graham asserts.

“Talking to customers about the category is also key to boosting sales and upselling. However, you obviously have to understand the category and recognise the different types of cigar buyers to be able to do this successfully.”

STG has identified four key types of cigar smokers. First, there are the connoisseurs cigar-only smokers who have a good knowledge of the category and the cigars that they choose to smoke.

Then you have the social cigar smokers adult smokers who buy cigars to smoke when out with their friends or at social gatherings, but wouldn’t necessarily buy them to smoke on their own. According to STG, this is probably the most pronounced category, certainly within convenience stores.

Then you have the dabblers those adult smokers who regularly smoke cigarettes, but still like to try different sizes and flavours. Last come the beginners. In their mid- to late-30s, these people are never new to smoking, but they’ll be trying a cigar for the first time.

Stocking the correct lighters and matches is also important if you want to capture those extra pounds and pence. High-powered lighters that quickly burn off the butane are a must for cigar smokers as the taste of the butane can spoil the cigar flavour. Large quality wood matches are also a must stock.

Miniature cigars

The UK cigar market is still clearly segmented into three sectors, according to size: miniature, small and large. Sales of small cigars make up about 34% large cigars 3% and miniatures 64%, up from 62% in 2011, according to Imperial Tobacco data.

“Miniature cigar brands are rapidly growing their share of sales as they can be smoked in the same time as a cigarette outside a pub, or workplace,” Imperial’s Laney adds. “This added convenience factor means that cigar smokers can enjoy a taste of luxury in a social setting, or if they are on the move or have limited time.”

Like the cigarette market, miniature cigars have gradually become segmented into three clear price sectors: value, mid-priced and premium. Sales of value-for-money brands such as JTI’s Calisto Miniature cigars and STG’s Moments are on the up, while Imperial is hoping to take a bite out of the mid-priced market with Montecristo Minis.

Away from the big tobacco players, interest in more specialist miniature products, which tend to command a slightly higher price tag, is also growing, as retailer David Worlsford of Farrants Cobham, in Surrey, explains: “What I’m noticing in my store is that adult smokers are increasingly moving away from the big brands into more specialist products. Yellow Montecristo Minis from Hunter and Frankau, for example, which in my store have an rrp of £6.56, are selling at a rate of 20 to 24 packs a month. That is more than double that of some of the bigger brands such as Café Crème Silver. I think that there are a number of reasons for this, not least the fact that mine is the only store in this area that has created a point of difference by stocking these additional specialist lines.

“However, from what adult smokers tell me, the main reason for this growth is that people are choosing to smoke less, but have a higher quality experience when they do choose to smoke.

“I encourage this behaviour and will always make a point of asking adult smokers who come in to buy mainstream miniature cigar products if they’ve thought of trading up to some of the more premium specialist brands, which are often no more than £1 or so higher in price.”

And, just like the cigarette segment, regionality plays a crucial role, something which manufacturers are taking even greater stock of. Imperial Tobacco’s two new red and blue variants of Montecristo Mini cigars, for example, were launched only in a specific part of the South of England, where it had found that sales of miniature cigars were rising. Stretching from Cambridge in the north to Godalming in the south, Imperial dubbed this area, which has a higher level of international diversity, ‘The International Brand Zone’.

Cigarettes

With just about every single cost heading skywards, it’s little surprise that the price of cigarettes is under even greater scrutiny from manufacturers, retailers and smokers alike. The past few months have witnessed a significant acceleration of sales growth for brands at the lower end of the pricing spectrum. According to JTI, more than one in three cigarettes sold in the UK is now a value brand, and the value sector is now the UK’s fastest-growing tobacco sector, accounting for 37% volume share of the total cigarette market, and growing. It’s a fact which has led pretty much all of the UK’s major tobacco manufacturers to invest in the category in the past six months alone. Just this month JTI launched a new capsule variant of its leading value cigarette brand Sterling. Philip Morris International (PMI), meanwhile, expended its Chesterfield brand with Superking size Red and Menthol, pricemarked at £5.75 for 19 sticks.

“One of the key trends we are witnessing in tobacco retailing is adult smokers down-trading,” says PMI UK marketing manager Zoe Smith. BAT UK also launched the Rothmans Gold and Silver range in March 2012 and upgraded packaging for the Pall Mall range in September 2012.

However, with premium cigarettes still accounting for almost a quarter of sales, and boasting much more attractive margins for retailers, the premium category has certainly not been left out of manufacturers’ new product development drive.

“Premium cigarettes, such as JTI’s B&H Gold, Silk Cut and Camel, account for 22% volume share of the total cigarette market,” JTI’s Blackburn says, just weeks after it launched a new curved pack design for its Camel premium brand.

Another interesting development has been the more targeted launch of premium products. Imperial Tobacco, for example, launched its new premium cigarette brand Davidoff iD (rrp £7.75) in selected areas of the South East of England. Imperial had found that sales of premium-priced cigarettes were growing steadily in the Greater London and South East area, with 41% of retail cigarette sales accounted for by premium brands. This bucks the national trend for growth in solely economy and value-priced cigarette brands.

However, despite these opportunities, retailers should try to resist the temptation to price premium cigarettes beyond their given rrps, Martin Inkster, managing director of Philip Morris International (PMI), recently warned.

With research also showing that even in the premium segment adult smokers are shopping around for the best price and switching to the stores that they think are offering them the most competitive price, retailers would be wise to price products competitively, he said.

“Today’s shopper is more savvy than ever before, and in tough economic times it’s of paramount importance that retailers price their products competitively.”

Philip Morris has decided to offer pricemarked packs of its premium cigarette brand Marlboro for the first time, in a bid to establish a sustainable pricing structure for premium tobacco.

From late November, packs of Marlboro Gold will be pricemarked in the Greater London area at £7.75 for 20s and £3.94 for 10s. Unmarked packs will still be available.•

Plain packaging

The government is expected to make an announcement relating to the plain packaging consultation by the end of this year, or in early 2013.

The unprecedented number of responses and late availability of translated versions of the consultation documents are thought to have contributed to the extended closure date of August 10.

Despite the fact that the consultation is now closed, retailers can still continue to visit, call, email or write to their local MP to explain how plain packaging would impact on their business.

A recent plain packaging trial by the Rural Shops Alliance (RSA) in four test stores revealed significantly longer queuing and service times, burdens which the RSA says could cost retailers £40m and £100m a year.

If you’re unsure who your local MP is, visit www.writetothem.com, or telephone 020 7219 3000.

Retailers fear that with their smart embossed tins and luxury status, plain packaging could have a particularly negative impact on the cigar category.

The Association of Independent Cigar Specialists (AICS) is hoping that the government will heed its calls to exclude all premium cigars from plain packaging. “Hopefully, common sense will prevail and the negative image of plain packaging on premium cigars will not happen,” says AICS chairman Mitchell Orchant. “The UK cigar trade in general supports our view that premium cigars should be treated like any other luxury products - and to continue to be treated as a special case. We’re talking about comparing luxury premium product to cigarettes and rolling tobacco. It’s the difference between chalk and cheese.”

Stocking advice from JTI

l Availability is key - never run out of top-selling cigar brands. Some 23% of shoppers will go elsewhere if their favourite is unavailable

l Ensure top-selling brands are well stocked - top-selling brands should be well stocked and given enough space

l Stick to your recommended planogram, which has been created according to the best-selling cigar brands in your region

l Keep a clear and tidy gantry at all times so existing adult smokers are aware of the choice and range of cigars on offer. This will also make re-stocking easier

l Re-stock regularly, particularly each morning and prior to peak traffic times

l Speak to your local sales representative - nearly a fifth of retailers claim that merchandising advice direct from manufacturers helps to increase sales. Offer a wide range of cigar sizes including miniatures, small cigars, panatellas and large cigars.