Category knowledge key to driving vaping back into growth

Young lady vaping

Despite the fact that vaping and reduced risk products continue to grow massively, sales in convenience are flatlining – but a wave of positive recent news may be just what the sector needs to kick start fresh growth and it all begins with training.

When the vaping category exploded onto the UK scene in 2007, it launched a huge wave of excitement and enthusiasm among a lot of people – not least many hundreds of thousands of smokers who viewed the new-fangled products as a potentially more effective way of kicking cigarettes.

Before long, local retailers too had latched onto the market, viewing it as a ready-made replacement for the declining traditional tobacco category – and with much better margins thrown into the bargain.

A lot has happened since then but the seismic shift to vaping among consumers has been one thing that has remained constant. By 2012 there were already 700,000 vapers in the UK and this figure has now reached nearly three million people, over half of whom have given up smoking entirely.

On the face of it, this should have been hugely welcome news for Scotland’s local retailing sector – but something has gone badly wrong. While the vaping and reduced-risk products market has continued to rocket, sales in convenience stores have flatlined as shoppers have moved either online or to specialist vaping shops.

Sophie Hogg, Head of Next Generation Products at Imperial Tobacco, explains: “The total UK vaping market currently worth over £1bn [Nielsen, Oct 2017]. Vaping is on trend at the moment and many independent retailers already have done well to capitalise on its popularity. However, most e-vapour sales – around 75% – still stem from online stores or specialist vape shops, as they tend to be seen as the go-to category experts.

“There’s huge headroom for growth in the more ‘traditional channels’, which currently account for just shy of £160m, so Imperial is keen to educate and support any independent retailers interested in getting involved with the category.”

How did it all go wrong?

The big and awkward question here is how did the convenience sector get it so wrong? Local retailers have for a very long time been seen as the ‘go-to category experts’ in tobacco thanks to a combination of factors: the sheer number of stores, their convenient locations, their speed of service and so on. So it’s not easy to understand why the local retailing sector has failed to capture a much bigger slice of what is effectively a very similar category in most respects.

There are of course many answers to this tricky question but they can probably be summed in in just a few words: range and lack of category knowledge.

The massive proliferation of suppliers in the market over the last decade hasn’t helped retailers or consumers. Consider that a big Tesco store stocks around 24,000 SKUs, then consider that there are more than 44,000 vaping SKUs currently available in the UK.

The situation was improved, however, by the introduction of the EUTPD2 regulations in 2017. The new legislation helped strip out some of the lower-quality suppliers and the fast-buck brigade that tend to accompany the birth of every new and potentially lucrative category.

But it’s the lack of in-store knowledge that is likely to be the biggest and most concerning reason behind the poor vaping sales in convenience. Vapers are often looking for sound advice and knowledgeable support as part of their buying experience, which is where vape shops currently seem to excel. Online mops up the rest by offering convenience and value.

Trend watch: nicotine salts

Unlike so-called ‘freebase’ nicotine, the ‘purest form’ of nicotine that’s been used in most vaping liquids for over a decade, nicotine salts are made using crystals extracted from the tobacco leaf. The result is a product with a much more pronounced ‘hit’ that more closely resembles the cigarette experience by being more quickly and easily absorbed by the body that also leaves the user feeling more satisfied for longer.

The US megabrand Juul uses nicotine salts, as does the myblu range of Intense Liquidpods. Sophie Hogg, Head of Next Generation Products at blu UK, says: “With 57% of new vapers opting for closed systems [Fontem, 2016], we’re excited about the possibilities for myblu and our unique Intense Liquidpods. The latest myblu product offering has been created to help adult smokers in their journey towards something better by offering a rapid delivery of nicotine that will remind them of smoking a traditional cigarette. Its unique Nic Salt-infused proposition means it’s the smoothest, most satisfying and intense myblu experience yet.”

So is the opportunity gone forever? No, of course it’s not and a recent wave of positive news around the category is perhaps just the catalyst the sector needs to reinvigorate its approach to vaping and reduced risk products.

The long-awaited e-cigarettes report from the House of Commons Science and Technology Committee was published last month and almost literally couldn’t have been any more positive about the category.

The inquiry concluded that the government is missing significant opportunities to tackle UK smoking rates. The Committee is urging the government to consider tax breaks for vaping products, to allow wider use of vaping in public places and to reconsider the regulations around e-cigarette packaging and advertising.

The report also states clearly that restrictions on nicotine strength, tank size and bottles are not founded on scientific evidence and should be urgently reviewed.

Specifically, the report said that “the Committee is calling on the Government to consider risk-based regulation to allow more freedom to advertise e-cigarettes as the relatively less harmful option, and provide financial incentives, in the form of lower levels of taxation, for smokers to swap from cigarettes to less harmful alternatives such as e-cigarettes. Further, it is calling for a reconsideration of: their use in public places; limits on refill strengths and tank sizes; and the approval systems for stop smoking therapies such as e-cigarettes.”

Clean bill of health

It’s as close to a clean bill of health as the category is ever likely to get with multiple reiterations of NHS England’s much-quoted finding that vaping is 95% safer than smoking.

Norman Lamb MP, Chair of the Science and Technology Committee, said: “E-cigarettes are less harmful than conventional cigarettes, but current policy and regulations do not sufficiently reflect this and businesses, transport providers and public places should stop viewing conventional and e-cigarettes as one and the same. There is no public health rationale for doing so.”

Lamb also highlighted how concerns that e-cigarettes could be a gateway to conventional smoking, including for young non-smokers, have not materialised and flagged up e-cigarettes as a “key weapon in the NHS’s stop smoking arsenal”.

He added: “E-cigarettes are a proven stop smoking tool and, while uncertainties undoubtedly remain about their long-term health impact, failing to explore the use of e-cigarettes could lead to the continued use of conventional cigarettes.”

Only days after this report was published the Scottish Government then announced that it was to offer free vaping kits to Scottish prisoners who smoke as part of a drive to make Scotland’s prisons smoke-free by the end of November. Prisoners will receive free kits for two months then be able to buy subsidised kits until April 2019.

This move appears to be the first public action by the Scottish Government that perhaps reflects a softening of its line on vaping. Emma Logan, Edinburgh-based Communications Director of JAC Vapour, the company that will be providing the kits for Scottish prisons, seems to think so: “We hope this is the beginning of a more relaxed approach to vaping as a method of harm reduction and can be replicated across other government led areas.

“With over 5,000 Scottish smokers aged 35+ reported as dying of smoking related diseases each year and with nearly 20% of the adult Scottish population still smoking, more education via relaxed advertising restrictions surrounding the benefits of vaping would also go a long way to aid the health of the nation.”

Trend watch: CBD

The CBD category first hit the headlines around a year ago when Holland & Barratt started selling CBD products. The market has since exploded, with a number of companies now offering CBD vaping liquids. The cannabis-based product is much misunderstood but potentially represents a big opportunity for local retailers.

In a nutshell, cannabis contains a whole range of what are known as cannabinoids of which two are the most important: cannabidiol (CBD) and tetrahydrocannabinol (TCH). TCH is the psychoactive substance that provides a high. CBD does not and the law states that CBD products on sale in the UK must contain less than 0.2% TCH.

Many users have found CBD to be extremely helpful in tackling inflammation-based pain such as that caused by fibromyalgia, multiple sclerosis and arthritis.

Craig Johnston of Hamilton-based Hope CBD, sponsors of the Hamilton Accies football stadium, told SLR: “Cannabidiol is non-psychoactive and non-addictive, and has been shown to provide many benefits, with more people understanding the benefits of having a healthy endocannabinoid system. We always advise our customers to do their research on the benefits and if they want, then Hope CBD can provide a lab-tested, certified organic product.”

The massive media hype surrounding the phenomenal growth of the Juul brand in the US is also helping to keep vaping on the front pages. The brand has taken the country by storm with 800% growth in the last year alone, taking the company’s annual sales to Jun 16 this year to a whopping $942.6m, according to Nielsen data. That gives Juul a 72.2% share of the US market.

The growth is not without its detractors, with many citing the ultra-sleek and discreet design of Juul’s device – the company is frequently referred to as ‘the Apple of the vaping world’ – as a factor in the growth of younger people taking up vaping despite never having smoked tobacco. The company exclusively pitches its product, however, as a tool to help smokers get off cigarettes.

So, with the stars apparently aligning for another period of huge growth, what do retailers need to do to get themselves back in the game?

George Tucker, Communications Manager at Imperial Tobacco, tells SLR: “To a certain extent the convenience sector has been left behind by the development of the vaping market. The overall image of the vaping category has been defined by the almost cult image of tattooed, bearded vapers in lumberjack shirts blowing huge clouds of vapour, but the reality is that this is not representative of the mainstream market – and it’s the mainstream market that is most important to local retailers.”

Tucker highlights that while there around seven million or eight million cigarette smokers there are now over three million vapers, around half of whom are dualists, switching between cigarettes and vaping.

“While the category continues to grow massively and there seems to be good reason to assume that it will continue to grow strongly in the future, sales in convenience have hit the buffers,” says Tucker. “But there are plenty of reasons to be optimistic and plenty that local retailers in Scotland can do to start driving growth back into the category. For one thing, around 40% of smokers haven’t even tried vaping yet. I think we can conclude that the majority of those who were going to try it have already done so, so one of the key challenges now is to talk to that 40%.”

Room for growth

Even for those who have tried it, however, there may still be scope for growth. In a market awash with products of hugely variable quality, it’s understandable that many smokers may have tried vaping but been put off by a low-quality experience. Vaping technology has advanced massively in recent years however, so the time may be right to try to encourage these smokers to give the category another go.

At the risk of sounding like Tony Blair, Tucker says the number one priority for local retailing is “education, education, education”.

He advises: “The golden key to unlocking vaping growth is staff training. Store staff need to understand the category in the same way that their customers do. They need to be able to offer informed advice and support to give shoppers the confidence they need the keep coming back. It can be a complex category but the effort to really get to grips with it will be more than rewarded in the till.”

After staff training, the next most important issue is providing a strong core range of products that are in line with the demands of modern vaping shoppers. All of the major manufacturers have been busy of late, with blu launching and enhancing its myblu range of pod-based ‘closed system’ products’ and launching its most powerful ‘open system’, the blu ACE while Logic has revamped its range of LQD e-liquids.

There’s no shortage of products and advice out there to help retailers and it certainly seems to be the right time for the sector to take a long, hard look at the category and what we can do to grab a bigger slice of the vaping cloud.