Cigars: the great profit driver

Henri Winterman's half coronas

Cigars offer a fantastic profit opportunity in the tobacco category and there’s plenty of sales growth to aim for, says Scandinavian Tobacco Group UK.

by Alastair Williams, Country Director at Scandinavian Tobacco Group UK (STG UK)

Cigars are an essential part of your tobacco gantry and a great driver of profit so ensure you are stocking the right products to get your tills ringing! Cigar performance in Scotland is pretty flat, showing a very slight volume decline of 0.2% in the last 12 weeks to 4.69 million cigars, but the retail sales value of the category increasing by 5.2% in the same period [IRI, Mar 2021]. It’s miniatures which dominate the market, accounting for nearly three quarters of all sales. Scandinavian Tobacco is of course the main player, responsible for over 57% of cigars sold, and we also have the top two brands in Scotland, with Signature Blue and Moments Blue.

When it comes to trends in traditional cigars, I do want to flag a UK-wide trend which isn’t yet being reflected up in Scotland and that is the growth of the medium / large cigar category, which is up 23.4% in value and 17.4% in volume in the last 12 months. This is being led by our Henri Wintermans Half Corona brand, whose sales value has risen by over 25% in value terms, but this is not being seen north of the border and could well be a good opportunity for Scottish retailers. We’ve all been through a very trying time of late, and many of us will be looking forward to a summer of celebration as restrictions ease and ‘normal life’ resumes, so for some adult smokers that may well include trading up to a larger format cigar, so stock up and don’t miss out on those additional sales.

Secondly, the last 18 months has seen the emergence of cigarillos which have proved a very popular addition, due to their flavour profile, convenience and low price point. The cigarillo segment is already worth over £64m a year and our Signature Action filter cigarillo is growing steadily in popularity. It’s currently on promotion, offering the lowest price in the segment with an RSP of just £3.99 for a pack of 10.

Finally, value has been a consistent trend in Cigars for quite some time which is evidenced by the success of our Moments Blue brand, which offers a quality smoke at a low price, and is now the second best-selling miniature cigar brand in both Scotland and the UK as a whole, after Signature Blue. Of course, with the added impact of the pandemic on the economy for the foreseeable future, I would imagine this move towards value will only increase.

Retailers need to ensure they are stocking the right brands to meet consumer demand. But let’s not forget it is miniatures which are responsible for nearly three quarters of all cigars sales and are still very much the engine room of the category so ignore the top brands like Signature at your peril! In terms of ranging, it’s more important to stock the right range rather than a broad range. The top 10 cigar brands account for nearly 90% of sales. And as cigars are exempt from the plain packaging legislation, we recommend retailers stock them on the middle shelf of the gantry where they are visible.

[Source: All figures IRI May 2021, unless otherwise stated.]