Menthol ban sparks innovation wave

This information is for tobacco traders only

The impending ban in May on flavoured tobaccos – including menthol – has sparked a wave of innovation and a flurry of activity as manufacturers gear up to help retailers exploit the new opportunities coming their way.

May 20th this year will mark a very important development in the UK tobacco market as all flavoured tobacco products – most notably menthol – will be outlawed. With around a quarter of all UK cigarette sales being crushball variants, this clearly presents a major challenge. The ban is part of the European Tobacco Products Directive (EUTPD) which places limits on the sale and merchandising of tobacco products in the EU.

While the ban is viewed by many as simply another barrier to overcome, the major manufacturers are encouraging local retailers in Scotland to view the ‘menthol ban’ as a fresh opportunity. Indeed, many of the most notable manufacturers have used the impending ban as a springboard to launch some of their most innovative NPD in recent years, none more so than the new Sterling Dual Capsule Leaf Wrapped cigarillos from JTI.

By launching a cigarillo product, the company has effectively side-stepped part of the EUTPD regulations as cigarillos are not subject to the same tight rules that apply to cigarettes. Hence why the product is available in a smaller 10-pack that is branded.

The King Size Cigarillos contain a Virginia blend tobacco and, unlike conventional cigarettes, are wrapped in tobacco leaf. Sterling Dual Capsule Leaf Wrapped has a mentholated capsule in the filter, which existing adult smokers can click to release a peppermint flavour. The cigarillos join the successful Sterling Dual family, which has a sector share of over 40% [IRI, Sep 2019].

JTI says Sterling Dual Capsule Leaf Wrapped will also allow retailers to tap into the current value trend, with an RSP of £4.50 and 10 pack size.

Ross Hennessy, Head of Sales at JTI UK, says: “We are committed to providing retailers with as much choice as possible by launching innovative new products that respond to current trends. We expect that Sterling Dual Capsule Leaf Wrapped cigarillos will become a popular choice for adult smokers and appreciated by those looking for value-for-money tobacco options.”

JTI is not the only company to be getting busy around the menthol ban, however, with rival manufacturer Imperial Tobacco also unveiling a suite of new products.

Duncan Cunningham, UK Corporate Affairs Director at Imperial Tobacco & blu, comments: “We estimate that menthol and crushball sales are collectively worth 26% of the total UK tobacco market, which means they make up nearly one in four cigarette sales. Given its sizeable share of the tobacco market and store sales, this is an important change that retailers and their customers need to be prepared for to avoid missing out on sales.”

Clearly the ban on menthol tobacco products will leave many existing adult smokers without their product of choice.

Cunningham says: “Some adult smokers may simply switch to other traditional tobacco alternatives although many menthol consumers may also use this as an opportunity to explore new ways to stick with their flavour preference and move into vaping. However, this shift in consumer purchasing behaviour may present significant sales opportunities for retailers who are prepared for the changes and engage with shoppers ahead of the ban. Using the insight from conversations with smoker customers, retailers can shape their range and ensure it’s fit for purpose post-ban.”

Talk to your customers

The key here is in talking to your customers well ahead of the ban to get a handle on what they want and intend to do as an alternative.

For smokers that are keen to stick with their flavour preference, says Cunningham, there are several innovative solutions available. “These include our new Rizla Flavour Infusions,” he explains. “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.”

The Rizla Flavour Infusions range includes two variants: Menthol Chill which provides a stronger, more intense flavour and Fresh Mint which is slightly smoother and more mellow. These are packed and wrapped separately, allowing retailers to sell them individually at an RSP of 25p.

Cunningham also highlights crushball filter tips as an option for adult smokers. He says: “As a stand-alone smoking accessory product, these remain unaffected by the menthol ban, so products such as our Rizla Polar Blast Crushball filter tips present another great option for these shoppers.”

Republic Technologies has also launched two new crushball filters for menthol fans, under its popular Swan Brand. The Swan Cool Burst Crushball Filter releases a cool menthol flavour sensation, while the Swan Fresh Burst Crushball Filter contains a strong peppermint flavour capsule. Both are available in packs of 54 with an RSP of £1.29.

They are joined on the market by four more new Swan filters: the Swan Cool Menthol Filter (RSP: £1.09, 120 per box) comprises cellulose acetate fibres and delivers a cool menthol sensation; the 100% biodegradable Swan Graphite Filter (RSP £1.14, 120 per box); the Swan Long Extra Slim Filter (RSP £1.03, 80 per box), which is 50% longer than the standard 14mm Extra Slim Filter; and the Swan Eco Loose Filter (RSP £1.39, 200 per box), which degrades three times faster than a standard cellulose acetate filter.

Be prepared

As with the other big upheavals in the tobacco category ¬– the Retail Display Ban, Plain Packaging and Track & Trace – it is important for retailers to be ready for the changes that the Menthol Ban will bring; those who prepare well will experience the least disruption to their business.

Mark Yexley, Head of Communications at JTI, comments: “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 will be providing support and guidance through several channels in the build up to the menthol ban, via sales reps,, and the trade media.”

JTI does however expect that 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, cigarillos in the form of Sterling Dual Capsule Leaf Wrapped, or vaping products including JTI’s Logic range and Nordic Spirit nicotine pouches.

“As May 2020 draws closer, retailers should ensure that they are aware of the alternative options available to existing menthol and capsule smokers by speaking to their local JTI sales rep or visiting JTI’s dedicated menthol ban microsite,” says Yexley.

The menthol ban aside, the wider tobacco market remains huge and a significant contributor of footfall, sales and cash profits for retailers. The value of tobacco in the UK totalled £14.5bn in the last year [IRI, Dec 2019], with the Ready-Made Cigarette market accounting for £11bn [IRI, Oct 2019].

The long-term trend towards value and the steady growth of RYO is also as evident as ever. JTI’s Yexley comments: “The value segment continues to grow as consumers seek out value for money products. As a result, the RYO category has grown 6.5% year on year, now generating sales of £2.8bn [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].

Imperial Tobacco’s Cunningham highlights the heritage of the Lambert & Butler brand as key to ongoing success of its RYO lines: “With its strong tobacco heritage and brand recognition, Lambert & Butler is well placed to respond to this trend with its new RYO variant. The Lambert & Butler brand was first launched in 1838 and since then, the brand has grown its share through sales of its factory-made cigarettes and now accounts for 4% of the total market [HBT, Oct 2019]. Today, the brand awareness of Lambert & Butler is at an impressive 51% HBT, Oct 2019], highlighting the popularity of the range within the UK.”

Another brand in growth is Imperial Tobacco’s Riverstone. Cunningham explains: “Despite launching just a year ago as a new economy RYO brand, Riverstone has already become one of the fastest growing tobacco brands in the market [ITUK estimates] as it taps into this trend with its high quality, easy-to-roll blend and affordable price.

“Our research has shown that the handy box formats currently available on the market tend to compress the tobacco inside, making it difficult to separate and roll. We are addressing this issue head on with the launch of our new combi pouch solution for Riverstone. As the first brand to bring to market such an innovative packaging solution, we’re confident this latest launch for Riverstone will attract even more interest and sales from adult smokers looking for great quality RYO tobacco at an affordable price.”

Providing everything adult smokers need to roll the perfect cigarette, this latest packaging innovation will be the first ever combi pouch to hit the UK market. The Riverstone Combi Pouch (RSP £11) includes 30g of easy-to-roll tobacco and 60 papers and 60 filters, ticking all the boxes for both dualists and new entrants into the fine cut tobacco category.