In a category beset by challenges, the forthcoming Menthol Ban in May is only the latest in a long line of major hurdles for retailers, but careful planning and good customer communications should help minimise the confusion caused by the transition.
It’s a tired refrain, but the tobacco category has been under more or less constant assault for at least the last decade with manufacturers and retailers having to fight wave after wave of legislation. The latest challenge is the menthol ban which kicks in on 20 May and is set to add even more consumer confusion and tillpoint frustration to the omnishambles that is the coronavirus. So how can retailers prepare for the ban in these very trying times? The only possible answer is that they can only do their best.
Mark Yexley, Head of Communications at JTI, says: “The Menthol and Capsule Ban is the next phase of the EUTPD2 legislation that first came into effect in May 2016. From 20 May, all Menthol and Capsule cigarettes will be banned from sale.
“It is important for retailers to be prepared for the changes that the Menthol Ban will bring. As with the Retail Display Ban, Plain Packaging and Track & Trace, those who prepare well will experience the least disruption to their business.”
As the menthol ban is approaching, JTI’s advice is for retailers to ensure the basic principles of category management are put into practice and make certain that they and their staff are knowledgeable about the impending changes.
“JTI are providing support and guidance through several channels in the build-up to the menthol ban, via sales reps, JTIAdvance.co.uk, and the trade media,” says Yexley.
As for what is likely to happen after 20 May, JTI says it expects the vast majority of adult smokers will remain within the cigarette category and that they will remain brand loyal, switching to other alternatives based on their preference, including hand-rolling tobacco such as Sterling Rolling Tobacco or cigarillos in the form of Sterling Dual Capsule Leaf Wrapped.
Duncan Cunningham, UK Corporate Affairs Director at Imperial Tobacco, also predicts that many adult smokers will remain brand loyal, even after their preferred menthol or capsule variant is no longer available. He says: “Many adult smokers are brand loyal, especially within factory made cigarettes. Shoppers that want to continue smoking are likely to keep buying the same cigarette brand and just change to the closest variant to it.
“By monitoring tobacco sales and talking to customers about the ban, retailers can more effectively advise customers on the most suitable variant for them from their brand of choice. As well as offering great customer service, retailers can use this insight to help plan their range and stock requirements in the lead up to 20 May.”
And it’s this shopper communication in the run up the ban that is key. It was always going to be a difficult task, but the coronavirus pandemic has just ramped the challenge up a notch or two.
Cunningham advises: “The ban on menthol tobacco products will leave many existing adult smokers without their product of choice. Some may move into roll your own, others may opt for a different variant of the same cigarettes brand, while others may switch to vaping. For retailers who are prepared for the changes and who engage with shoppers ahead of the ban, the insight they gain from conversations with smoker customers can help them shape their range and ensure it’s fit for purpose post-ban.”
For a category under sustained and immense pressure, tobacco continues to perform resiliently. “The value of tobacco in the UK totalled £14.5bn in the last year, with the Ready-Made Cigarette (RMC) market accounting for £11bn [IRI, Oct 2019],” says Ross Hennessy, Head of Sales at JTI UK. “JTI is currently the number one tobacco manufacturer in the UK with a combined market share of 44% [IRI, Sep 2019]. Our share of the Ready Made Cigarette market stands at 42.3% [IRI, Sep 2019] and 46.3% for Roll Your Own [IRI, Sep 2019].”
Hennessy advises that factory made cigarettes still represent a hugely important market and one that retailers should continue to focus on.
The trend towards value and the growth of RYO is one that shows no sign of waning as consumers continue to seek out value for money products. “The value segment continues to grow and as a result, the RYO category has grown 6.5% year on year, now generating sales of £2.8bn [IRI, Dec 2019],” continues Hennessy. “With 6.5 million kilograms of rolling tobacco sold in the UK each year [IRI, Oct 2019], this category offers significant opportunity for retailers to maximise sales by stocking up on value RYO products, such as JTI’s Sterling Rolling Tobacco – which is now the UK’s fastest growing tobacco brand [IRI, Sep 2019]. Other brands to stock include Amber Leaf which is the number one tobacco brand in the UK with a 30.1% share of the RYO market [IRI, Sep 2019].
James Hall, Anti-Illicit Trade Manager, Imperial Tobacco UK, comments: “Law enforcement authorities and tobacco manufacturers alike continue to demonstrate that the illicit tobacco trade will not be tolerated. It harms honest retailers and damages communities.”
Hall says Imperial continues to assist in the reporting and investigation of these reprehensible activities wherever possible. He explains: “Our dedicated anti-illicit trade app, SARA, launched in January 2018, has now received over 2100 reports of potential illegal trade activity which we have shared with law enforcement. We are aware that seizures have been made in premises reported in 176 of these and 126 social media posts have also been removed.”
“With 82% of those surveyed in the recent TMA AIT Report saying they are aware of illicit tobacco being sold in the last 12 months but have not reported it, we urge everyone to contact appropriate authorities with concerns of illegal tobacco activity in their locality or speak to their Imperial rep about SARA or phone us directly on 0800-0495992.”
For smokers that are keen to stick with their flavour preference, there are several innovative solutions available, including new Rizla Flavour Infusions. The Rizla Flavour Infusions range includes two variants of menthol flavour cards which you simply insert into a packet of cigarettes or roll-your-own tobacco and wait at least 60 minutes for the contents to mentholate.
It’s also worth remembering that crushball filter tips, as a stand-alone smoking accessory product, remain unaffected by the menthol ban, so products such as Rizla Polar Blast Crushball filter tips present another great option for these shoppers.
While some adult smokers may simply switch to other traditional tobacco alternatives, many menthol consumers may also use this as an opportunity to explore new ways to stick with their flavour preference and move into vaping.
To prepare for this potential influx of ex-menthol smokers into the vaping category, retailers should ensure they stock up on easy-to-use pod mod systems like myblu. Any devices on offer should be supported by a strong range of menthol e-liquids and Liquidpods, especially those including nicsalts like myblu Intense, to help heavier smokers switch. Regardless of the ban, the top-selling blu e-liquid flavour is menthol [Imperial Brands, EPOS 2018-2019], so these variants are already very popular within the vaping category and well worth stocking up on.
JTI’s Yexley adds: “To help tackle illicit trade, JTI have a dedicated anti-illicit microsite –jtiadvance.co.uk/DontBeComplicit – which features an easy-to-use ‘report’ function which anyone can use to anonymously report instances of illicit trade activity, including flagging any illicit tobacco posts that they have seen.
“Any retailer who is aware of anybody selling illicit tobacco should also contact the HM Revenue & Customs’ Fraud Hotline on 0800 788 887, Trading Standards on 03454 04 05 06 or the independent charity Crimestoppers anonymously on 0800 555 111.
“The key to tackling the issue of illicit tobacco is the ability to work together, from the local authorities and police to the manufacturers, retailers and wholesalers, right down to customers. Co-operation from all those involved in fighting illicit trade helps us be more effective in controlling it, both online and in stores.”
Accessories continue to shine
High levels of demand for the quality, choice and value provided by roll-your-own accessories is contributing to strong growth of the sector, believes Republic Technologies.
As the tobacco ban continues to impact on cigarette sales, accessories continue to outperform the total tobacco market, with better value for money than factory-made cigarettes remaining a key consideration for RYO smokers.
The RYO accessories market is currently worth more than £29m, up 4.5% year-on-year, outperforming total tobacco, with filters leading the charge, showing value growth of 9.2% year-on-year [IRI, Dec 2019].
“As category specialists, we’re continuing to innovate with NPD and new merchandising solutions to ensure retailers can meet the needs of the growing number of RYO smokers,” says Gavin Anderson, General Sales Manager at Republic Technologies (UK). “This is helping to maintain the strong growth the category has seen in recent years.”
The company has also invested heavily recently to ensure it has a very clear understanding about RYO smokers and their requirements.
“Most of our customers have been smoking for some time and whilst value for money is a key consideration, particularly in times of economic uncertainty, many prefer the tactile aspect of roll-your-own which for some also provides the added benefit of reducing consumption as smoking becomes less instant,” explains Anderson.
“There is quite a bit of overlap with pre-made cigarettes and vaping, but with RYO smokers this is occasion- or influence-driven as most of our consumers prefer the RYO experience.”
As environmental considerations are influencing smokers more than ever, with demand for more natural products, reduced packaging and removal of single-use plastics at record levels, Republic Technologies is accelerating its environmentally friendly NPD.
This has led to the introduction of category-boosting products such as OCB Virgin Slim and Slim & Tips, both of which are available in a slim vertical box, enabling retailers to manage shelf space more efficiently.
“We’re really optimistic about the future of the RYO accessories market,” adds Anderson. “The combination of rising cigarette prices and the higher margins offered by RYO products will continue to drive growth. Whilst the vaping sector continues to expand, it’s not inhibiting the sustained rise in demand for RYO accessories and with menthol cigarettes being discontinued from May 2020, accessories may well provide the solutions and options which consumers will be seeking.”
Meanwhile, Republic Technologies has recently unveiled its biggest ever rollout of new products, with the introduction of six new filters from the market-leading Swan brand to the UK’s £292m category.
The NPD comprises a carbon paper filter for enhanced filtration, a Swan Long Extra Slim Filter (50% longer than standard), the most environmentally friendly filter in the UK market and three menthol products, including two crushball filters.
“As increasing numbers of smokers are turning to roll your own, we’re developing a wider range of products for improved customer choice, enabling retailers to capitalise on the strong performance of the accessories category and to take advantage of the margin opportunities offered by Swan, the UK’s best-selling filter brand,” says Anderson.
“We’re confident that the introduction of six new filters from the iconic Swan brand will contribute to the sustained value growth of the tobacco accessories category in the future.”
The full range comprises:
- Swan Graphite Filter: A 100% biodegradable filter, this extra slim product is made with carbon paper. RSP: £1.14 (120 per box).
- Swan Long Extra Slim Filter: Developed to reduce the amount of tobacco required per cigarette (and more representative of a factory-made cigarette), this is the longest ever Swan filter (50% longer than the standard 14mm Extra Slim Filter). RSP £1.03 (80 per box).
- Swan Eco Loose Filter: 100% biodegradable and the most environmentally friendly filter on the UK market. Natural ‘ochre’ coloured, due to no bleaching of the paper. It degrades three times faster than standard cellulose acetate filters. RSP £1.39 (200 per box).
- Swan Cool Menthol Filter: A sister product to the current Swan Menthol Filter, it delivers a cool menthol sensation. RSP £1.09 (120 per box).
- Swan Cool Burst Crushball Filter: The embedded capsule can be activated at any time to release a cool menthol flavour sensation. These filters contain no animal products. RSP £1.29 (54 per pack).
- Swan Fresh Burst Crushball Filter: The strong peppermint flavour capsule can be crushed at any time, giving consumers full control of the taste experience. These filters contain no animal products. RSP £1.29 (54 per pack).