Are cigars the last remaining tobacco opportunity?

Alastair Williams

Remarkably, the cigar category in the UK is actually in growth by value – so does it represent the last remaining tobacco opportunity for Scotland’s local retailers? SLR talks to Alastair Williams of category champions Scandinavian Tobacco Group UK to find out.

by Antony Begley

It’s an inescapable fact of life that the tobacco category is in terminal decline. Volumes are falling every year as a combination of factors combine to drive adult smokers to either quit or switch to other categories to get their nicotine hit.

The Scottish Government’s oft-repeated desire for a smoke-free Scotland is also having its effect. It’s increasingly common to see cigarette gantries disappear from behind the counter as retailers embrace this shift and seek out growing categories to focus on instead.

Yet amidst this picture of gloom and doom, one category remains remarkably resilient: cigars. Almost unbelievably, IRI data shows that the total UK cigar market is actually in growth by value. Granted, it’s small growth – 0.9% – but it’s growth nonetheless.

Within the wider category, the stats are even more striking. The Miniatures segment is growing by 4.6% while the Medium/Large segment is up by 2.7%. So is there still a profitable opportunity for local retailers willing to spend a bit of time on the category? Scandinavian Tobacco Group UK (STG) Country Director Alastair Williams certainly thinks so.

As the biggest player in the category by a country mile, STG is perhaps the best placed commentator on that opportunity and Williams is convinced there is still a lot of profit left in the cigars for retailers if they can get it right.

“The UK Cigar market may not be as dynamic and fast moving as something like vaping, but it is still worth just under £200m in annual sales and the products within it typically offer three times better profit margins than cigarettes, so it’s absolutely one that is worth getting right,” he says.

First, let’s have a look at the facts. The key trends in the cigar category have remained pretty consistent over the last few years. There is the continued rise in Miniature cigars, which now account for nearly 74% of total sales. This is up 5% on last year, and features Signature, the jewel in STG’s crown, which is the number one cigar brand and easily the best-selling miniature.

Secondly, for a while now there has been consistent growth in adult smokers looking for good quality, value for money propositions. Williams cites STG’s Moments brand as proof of that, as it’s currently the UK’s fastest-growing cigar.

Build a profitable cigar category: the basics

Cover all segments

Make sure you include the top-selling brands from each segment as a minimum:

  • Miniature cigars: Signature and Signature Blue (previously known as Café Crème and Café Crème Blue) as well as Moments Blue
  • Panatella/Small cigars: Moments Panatella, and Hamlets
  • Medium/Large cigars: Henri Wintermans Half Corona and Corona Sumatra

Know your customers

  • You know your customers better than anyone else and there will always be regional differences in product performance. By paying attention to what your customers are buying and reviewing your sales data, you can see what’s performing well and stock accordingly

Maintain stock Llevels

  • Without a doubt the simplest, but most effective piece of advice to follow is to stay stocked up. If a product isn’t in stock, consumers can’t buy it so make sure you monitor stock levels carefully to avoid this happening.

But what do retailers need to do if they want to capitalise on this opportunity? “It’s all about education,” says Williams. “Our research has showed that shoppers want retailers to help them choose what products are right for them, especially if their usual brand isn’t in stock.

“If you take the time to forge a greater understanding of the products on offer and pass this knowledge onto your staff so they can effectively engage with shoppers, you will reap the sales rewards as a result.”

By combining insights on the cigar category with knowledge of your own local customer base, you can identify what cigars are right for your store. It’s important to tailor your range according to your shopper needs. But it’s not quite as simple as it sounds.

Williams explains: “Even when looking at the established value for money trend, this can mean different things for different people, so shape your range with your specific customers in mind.”

Williams also highlights another opportunity that perhaps doesn’t get exploited as often or as well as it might: the fact that cigars are exempt from the EUTPD2 restrictions on standardised packaging and 20-pack minimum.

Cigars can still be branded beyond the product name and can be wrapped and sold individually, or in 10-packs; this means some cigars are now the cheapest option available on shelf, which may attract existing smokers from other categories.

“This means that when the gantry doors are opened, the eye-catching designs may attract the attention of shoppers, offering them reassurance of a recognisable brand they know and trust,” he advises. “By grasping their attention, this presents an opportunity to engage with the shopper on the cigar products on offer, which can in turn lead to higher cigar sales.”

STG takes its category champion status seriously and, with the biggest brand of them all in Signature, it has consciously attempted to lead from the front. “Signature (formerly known as Café Crème) is easily the biggest player in the category and Scotland’s best-selling cigar. In fact, when it comes to cigar sales in Scottish Independents and symbols, Signature SKUs have three of the top four places.”

Williams admits that last year’s rebrand from Café Crème to Signature to deliver global consistency did cause him the odd sleepless night, but the success of the rebrand speaks for itself. And Williams can now sleep a lot more soundly.

“I’d be lying if I said there was no nervousness whatsoever at our end when it came to taking the decision to change the name of such a ubiquitous cigar brand like Café Crème to Signature,” he admits. “However, we have been really encouraged to see no noticeable impact on sales so far, with both trade customers and adult smokers seeming to understand that the product inside the tins is identical and very much still the UK’s favourite cigar.”

In addition to Signature, STG is also seeing huge success with its Moments Blue brand, something Williams sees continuing: “Moments Blue is the UK’s fastest-growing cigar and second best-selling Miniature cigar. And we also have our Henri Wintermans Half Corona which holds the position as the UK’s favourite Medium to Large cigar.

“By simply stocking these three core brands retailers should be able to perfectly meet the needs of each and every one of their cigar customers.”

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