Okay, so it's Gallaher and Imperial Tobacco saying that and it could be seen as a case of 'they would say that wouldn't they?', but if you look at the statistics you'd be hard pushed not to agree.
The number of adult smokers in the UK stands at 14.3 million, or 29.5% of the population, who between them spent a huge £12.8bn on tobacco products last year.
Furthermore, despite the UK tobacco category being a 'dark market', where advertising is not allowed, manufacturers have been bold enough to launch new lines.
For example, Gallaher's Sterling brand was launched into the independent sector in January after being available through the multiples since 2001. Sales through the multiples gave it a 2.2% share of the cigarette market but since January that figure has leapt to 3%.
Sterling is classed as a 'cheap' cigarette, so is popular with adult smokers looking for branded cigarettes at the lowest price. Gallaher trade communications manager Jeremy Blackburn reckons Sterling will potentially be the best-priced brand on a c-store retailer's shelf.
"The trend is for consumers to down trade and the primary driver for this is price. However, style-conscious consumers still want a quality brand and this is why Sterling will thrive," he says.
And Imperial Tobacco, too, recently launched a cheap branded cigarette - Windsor Blue - in pricemarked packs. Imperial trade communications manager Iain Watkins says pricemarking is popular but adds: "No way is pricemarking a promotion - it's just a way of highlighting quality and value to smokers, which is important in a dark market. With pricemarking, it's usually a long-term activity for us. With Richmond, for instance, we have an ongoing programme and constantly monitor sales levels to make sure it warrants it."
Gallaher's Blackburn reckons pricemarking works best in the value, economy and cheap sectors by indicating to smokers that they are getting value. "And for retailers, it encourages customer loyalty because smokers know they are getting
a good price," he says.
Although both Gallaher and Imperial are keen on pricemarked packs, non-pricemarked packs are always available for retailers who prefer them.
While it's difficult to launch a new brand in a 'dark' market, it's easier to extend an existing brand that can capitalise on that brand's credentials. Gallaher is doing this with the launch of a limited-edition Benson & Hedges Silver pack - Slide. Blackburn reckons it will provide retailers with a valuable profit opportunity by adding interest and excitement to the market. Slide is all about the packaging - instead of the conventional flip-top box, the new Silver Slide pack slides open horizontally.
Says Blackburn: "B&H Silver appeals to young adult smokers and research shows they will buy into innovations such as unique packs. The limited-edition nature of the pack will encourage popularity through word of mouth and ensure strong sales.
"The packs create a talking point and we've had a lot of interest from the trade. Marketing restrictions make the pack the 'hero', so I expect more innovation around the pack."
Gallaher, too, has limited-edition designs on its Camel cigarettes. New Art packs are designed to stand out and draw attention to the gantry. To take advantage, retailers are advised to give them a prime position.
Camel is the third most popular cigarette brand in the world. In the UK the brand performed well last year with Camel Subtle 20s sales growing by 2%.
Says Blackburn: "You don't need to appreciate art to understand that stocking these new packs and displaying them prominently will be good for your business. Camel is a 'top quality' American blend cigarette and provides retailers with a valuable profit opportunity."
Camel is not the only brand with limited-edition designs. For the third year running, Philip Morris has launched a Marlboro Racing Edition on its Reds King Size 20s. The special packs, which feature racing car imagery, are distributed by Imperial Tobacco.
Roll up, roll up
The roll-your-own (RYO) tobacco sector has always been the most vulnerable to smuggling because of the huge price differentials between the UK and other countries. However, last year the sector performed particularly well, with duty paid volumes up 11.7%. According to RAL data, RYO sales reached just shy of £600m last year, with independent c-stores accounting for 38% of those sales and multiple c-stores a further 16%.
Both Iain Watkins and Jeremy Blackburn agree that RYO has undergone a huge image change in the past few years. Says Watkins: "Five or six years ago the stereotypical RYO smoker was a middle-aged man in a cloth cap but now RYO tobacco is much more accessible, particularly to women. RYO smokers only ever used to do it at home, or in working men's clubs, but now they aren't afraid or embarrassed to roll their cigarettes anywhere."
"It's true that RYO has much greater acceptability," says Blackburn. "It's even becoming quite trendy. I think its popularity has grown because of its acceptability, its price and the fact that there's more choice." He adds that 66% of UK RYO smokers come from just three regions: the Midlands; London and the South East; and the South West.
Although, as Blackburn says, there is more choice, the top seller is Imperial's Golden Virginia, across all trade channels. The brand was recently extended with the launch of 14g cigarette-style box packs. Each contains two individually-wrapped 7g bricks of tobacco, to ensure the tobacco stays fresher for longer. The box design means it can also hold rolling papers, filter tips and a lighter, as well as tobacco.
The increase in popularity of RYO has led to an increase in the variety of rolling papers available. And papers should never be overlooked by retailers because they offer such good profit margins.
Zig Zag reports that its sales exceeded 28 million cigarette rolling paper booklets in the first three months of 2006. Although 85% of the company's rolling paper sales are of green standard size booklets, Zig Zag offers a wide range including six standard and five king-size variants. It also offers four varieties of filter tips, all of which are packed in tamper-evident
re-sealable bags to keep them fresh - this is particularly important for menthol tips, which tend to lose flavour if they are not stored correctly.
Commercial director Andrew Armstrong explains: "Products like liquorice papers and menthol filter tips are never going to be huge volume sellers, though retailers are well advised to stock them as consumers of these lines are likely to be very loyal and will shop elsewhere if they can't buy them locally. They don't take up a lot of room on the gantry and they do add colour and interest to the fixture."
Armstrong is delighted with Zig Zag's success but admits there are distribution gaps to fill. "We are taking on four more salespeople this month and two of them will concentrate on the South East, and in particular within the M25. It has been difficult to convince some retailers in the South to take the brand but once they do they realise they're on to a winner." The Zig Zag brand is not sold in the multiple retailers so Armstrong says c-stores who stock Zig Zag are giving themselves a real point of difference.
Armstrong reckons consumer and trade marketing has been critical to the success of the brand. "Readers of magazines such as Viz, Loaded, Front, The Big Issue, Ice, Vice, Hooker, RWD and so on are familiar with Zig Zag's quirky advertising. Above-the-line is bolstered by sampling at rock gigs, festivals and film premieres."
Another relative newcomer on the papers scene is OCB, whose Premium papers are popular because they are strong, ultra-light, and so thin that they are almost transparent. OCB general manager Justin Rudd explains: "RYO smokers want lighter and lighter papers and ours are bleach-free and slower burning. And the jet-black packaging with holographic lettering is very eye-catching."
Rudd says the Premium range will shortly be listed by Oddbins. "Our brand has been popular in specialist tobacconists but now we're going for more mainstream distribution." He says OCB's Premium papers give retailers premium margins: "Retailers can buy OCB for less than some of the bigger brands but still sell at a premium and make very good margins."
Also available from OCB is 'Classic' - papers in white packets which have a flax/hemp composition.
OCB's latest launch is Top flavoured papers, which Rudd says are "good enough to eat". Available in vanilla cream, sunrise strawberry and velvet peach, they are particularly popular with women, students and clubbers.
Of course, there's more to smokers' accessories category than papers. Keen World Marketing, for instance, offers retailers the Newport range which includes lighter fluid, flints, pipe cleaners and mini-filters. The company reports that sales of Newport Mini Filters are growing at a "phenomenal rate". These are specially designed to remove up to 60% of tar and nicotine without affecting the cigarette's flavour.
The smoking ban
The ban on smoking in public places in England is likely to come into force next summer, according to Chris Ogden, director of trade and industry affairs at the Tobacco Manufacturers Association. "It was originally going to be the summer of 2008 but it's much more likely to be 2007, which doesn't give the hospitality sector much time to prepare. The timing of the ban in Northern Ireland and Wales could well be different."
The ban is already in place in Ireland and Scotland and the national press has been full of scare stories about how it will affect smokers in the rest of the UK. There's even been talk that the ban could extend to private homes and cars. Whatever happens, it will have a huge impact on pubs and clubs. There has been a story circulating that tobacco companies are investing in canopies for smokers in pubs but Ogden says there's no truth in that.
However, there may be some truth in the story that a smoking ban could be good news for c-stores. Says Ogden: "The anti-smokers say the public smoking ban stops smoking, but that's not borne out by the evidence."
And there's anecdotal evidence that instead of giving up smoking, smokers simply adapt. So those four mates who used to go down the pub every Monday night to watch Sky Sports with a pint and a fag now take it in turns to visit each other's houses each Monday and take their booze and their fags with them. And many of them buy these items from their local c-store.
Finally, as if the smoking ban was not enough, Ogden reports more legislation on the way. He says
it looks likely that we will get pictorial warnings on cigarette
packs here, plus there's still talk
of raising the legal smoking age
from 16 to 18.
Around the world
? A company in Quebec has developed a cigarette with added vitamin C. Vi-taCig is also said to have less odour than other brands and is not meant to stain the smoker's teeth.
? New Zealand could be the next country to get graphic warnings on packs of cigarettes. Images of rotting gums and teeth and gangrenous feet are being considered in a bid to reduce smoking.
? Germany is cracking down on teenage smoking by introducing age restrictions for the purchase of cigarettes from vending machines. From January 1, 2007, anyone buying cigarettes from a vending machine will have to use a debit card embedded with a microchip that contains a youth protection symbol. Anyone under the age of 16 would be rejected automatically.
? According to the BBC, the remote Himalayan kingdom of Bhutan is thought to be the first country to introduce a total ban on tobacco sales. Shops, hotels, restaurants and bars cannot sell tobacco and those who flout the law could lose their business licence.
John Inglis has two stores in Southampton city centre. Tobacco accounts for 25% of sales in his East Street store and 22% of sales in the Frobyshire House store, so it's an important part of his business.
The best-selling cigarette in both stores is Marlboro Lights, followed by Benson & Hedges. "It's a university town," says John, "with a lot of students who are fussy about what they smoke. They often buy 10s but they always want the better cigarettes."
Although many retailers like to offer pricemarked cigarettes, John has no time for them: "If we stock pricemarked packs we have no influence over the selling price, so we choose not to stock them - the profit margins are just too low. Also there's the use of credit cards to consider. We have a £5 minimum spend for credit card sales. Five years ago cigarettes weren't that dear, but now that they are more and more cigarettes are bought on credit cards. Once you've paid the credit card charges the margins are too low."
Apart from students, John's typical customers are office workers and distress shoppers. "We cater for the distress purchase - smokers run out of cigarettes and come to us for them because they need them now."
Tens packs are popular with these customers too. "I'm an ex-smoker and I know that a lot of smokers feel happier about buying their cigarettes in 10s than 20s, because they think they're smoking less."
John knows the importance of availability when it comes to cigarettes: "I can honestly say that we have never been out stock on the popular brands like Marlboro and B&H in the past two or three years. And that's because we were caught out in the early days of running the shop. Now we know customers are making emergency purchases here we make sure we are always in stock. There's no excuse for being out of stock because we've got a good computer system and I look at the figures three times a week."
John says the percentage of turnover for tobacco has been the same over the past few years: "Even if we've had an incredibly busy week because it's a bank holiday, for example, tobacco sales stay at the same 22% or 25% of turnover."
John's gantries are supplied by Imperial Tobacco and he says he has a good relationship with the reps. "They come in regularly and actually do all the work, which suits me fine. Firstly, they check that we have all the key brands in stock then they talk about new products. They make sure all the brands are displayed in the right proportion with the right number of facings, and they never deliberately try to squeeze out their competitors. It's like they have a gentlemen's agreement to be fair about it - so we've always got a balanced display."