The Cigar category is confounding expectations with its continued growth, with Miniatures responsible for the overwhelming bulk of sales.
The cigar market in the UK is currently worth £199.6m and the category is growing at 0.8%, according to IRI MarketPlace data from September. This growth is driven principally by an increase in demand for Miniatures (up 4.5%) and Medium/Large cigars (up 5.6%).
Miniature cigars continue to dominate the market, accounting for a huge 72.6% of the total cigar volume and £103.5m in value sales. Within this segment, the Scandinavian Tobacco Group UK (STG UK) portfolio of miniature brands is the runaway leader, contributing 70% of all value sales.
The company is hoping to develop this segment even further with a relaunch of its market leading Café Crème brand. Jens Christiansen, Head of Marketing & Public Affairs STG UK, explains: “We’re really excited to be continuing the evolution of Café Crème, one of the world’s leading cigar brands, with the launch of its new Signature brand name. While the cigar itself will remain wholly unchanged, the new name has been proven to resonate exceptionally well with consumers, offering them reassurance on the exceptional quality synonymous with the brand.”
The new Signature brand name will be rolling out in stores from February 2019 with a phased transition to ensure high awareness amongst retailers and consumers alike. This will include the launch of new transition packs, available now, which feature an on-pack flash highlighting that the name will soon be changing to Signature. Each pack will also include an inlay inside the tin with additional details informing consumers of the name change and reassuring them the cigars will remain the same.
The rebranding covers Signature Blue (previously Café Crème Blue) (30.1%), Moments Blue (17.7%) and Signature (previously Café Crème) (11.9%) which account for three of the top four brands within Miniatures.
But it’s not just Signature/Café Crème that’s keeping the Miniatures segment buoyant. STG UK’s miniature brands portfolio collectively represent £72m in value sales over the last 12 months – that’s nearly 2.5 times bigger than all the other miniature brands combined. Looking specifically at value for money miniature cigar brands, the Moments Blue line is bigger than all the other brands together, at a value of £14.6m, making it an important must stock.
Within the Medium/Large cigar segment, Henri Wintermans Half Corona holds the top position as the UK’s favourite Medium/Large cigar brand, reporting an increase of 2% to 73.4% market share and value sales increases to £14.6m. With a seasonal rise in cigar sales expected over Christmas, this growth may well continue.
Overall, the top 10 cigar brands account for 89% of the total cigar sales and 85% (£168m) of value sales, highlighting just how important it is for retailers to ensure they’re stocking the leading brands to take advantage of the sales and strong profit margins available within the cigar category.
But what lies ahead for cigars? Christiansen comments: “Within any tobacco category, it’s difficult to predict how the market is going to perform in the months and years to come and it’s no different with cigars. However, given the positive growth within the Miniatures segment, there is clearly still a major drive towards value and given the uncertainty of the what lies ahead for the UK’s economy, it’s unlikely we will see a shift in this trend anytime soon.”
Growth within the Medium/Large segment could well be down to a trend towards premiumisation as consumers seek out products such as Henri Wintermans Half Corona that offer shoppers a little affordable luxury in their lives.
“Given the consumer openness to trying cigars identified through our recent research, this could well be a sales trend we see continue to grow year on year if retailers can harness the opportunity effectively,” adds Christiansen.
The research he refers to here was commissioned earlier this year to examine shopper tobacco purchasing habits and the results showed that most smokers are actually very open to trying to cigars and willing to consider switching given the right factors.
He comments: “The research findings highlighted that 59% of male smokers who don’t normally smoke cigars would be willing to buy them. While 32% of traditionally non-cigar smoking males said they would buy cigars for their taste, and 27% would if they were cheaper than cigarettes. The research also showed 79% of smokers who regularly visit a convenience store would try an alternative tobacco product, such as cigars, if it was recommended by store staff.”
Christiansen says it’s vital that retailers make the most of this opportunity by training their staff. He says: “Retailers should invest in upskilling both themselves and their staff to grow their understanding on the different cigars available in each segment, and what type of consumer they are most suited for. In doing so, retailers will be able to offer customers the all-important guidance they need and desire, to help them make informed choices on what cigar would be right for them.”
Combine these insights with the fact that cigars have around double the profit margin of cigarettes (enabling retailers to possibly make an additional £250 profit for each consumer that switches to cigars) and it’s clear there is an opportunity for retailers to capitalise.