EUTPD II and plain packaging has made the already competitive tobacco category even tougher for retailers, so what are suppliers’ strategies to help maintain and grow tobacco and e-cigarette sales? RN’s Alex Yau investigates
Supplier strategy #1: Cigarettes remain a focus for innovation
In the world of plain packaging and the dark market, selling the major features of cigarettes, cigars and rolling tobacco has never been more important for retailers. Making customers aware of unique developments of new products which offer more value for money is even more vital. And suppliers know retailers are one of the few avenues they have to communicate their investment.
Imperial Tobacco has been developing three products in its John Player & Sons (JPS) range (all RRP £8.30) to help cigarettes stand out in a restricted market. The Green Edge variant is designed to deliver a stronger menthol taste while Blue Filter aims to be more durable. Silver Stream, meanwhile, is designed to reduce the odour of smoking. Elsewhere, British American Tobacco (BAT) has added a capsule to its Rothmans range with Rothmans Blue Capsule. Each outer comes with a manufacturer discount of £1.50 while retailers are encouraged to communicate the £7.65 RRP. Simultaneously, BAT is offering retailers £2.50 off each outer off Rothmans rolling tobacco.
JTI’s Dual Superkings, meanwhile, have been launched with two capsules, providing smokers with a new, more intense experience. A pack of 20 is priced more competitively than standard-length cigarettes at £8.65.
Tom Gully, Brand manager, Imperial Tobacco
Our recent range of JPS cigarette upgrades – from firmer filters to menthol papers – prove notable scope for continued product development exists, even in a totally dark market. JPS is a key brand in our portfolio, with its variants currently commanding an overall market share of over 5%.
Supplier strategy #2: Niche flavours are going mainstream
Casual vapers used to only buy tobacco or menthol-flavoured e-liquids, while sweeter flavours such as watermelon or salted caramel were favoured more by the smaller audience of enthusiasts hunting out the latest trendy product in vaping stores. However, what was once a niche market is now becoming more mainstream. Market analyst Nielsen shows there are now two million vapers in the UK and brands such as Blu and JTI’s Logic now feature extended ranges, with sweeter e-liquid flavours available in various strength options to help retailers meet the increasing demand. The benefit for convenience store owners is they are able to offer a wider range of products for shoppers, creating more opportunity for sales.
The Blu range is a perfect example. It now has four new flavours, bringing its total number of available e-liquids up to 13. Tropic Tonic, Vanilla Crème, Peach Passion and Berry e-liquids are available in strengths of 0% and 0.8% and Blu says each 10ml bottle offers margins of 40% when sold at the £4.99 RRP. Meanwhile, Logic has increased its range of flavours to six with the addition of Cherry, Berry Mint and Strawberry (RRP £5).
Andy Stevens, Head of sales, JTI
A full range of tobacco and vaping products stocked at all times can ensure retailers become a destination store of choice for existing smokers and vapers. We expect to see vaping devices and traditional tobacco products co-existing and will continue to support retailers with quality products and merchandising to help them maximise profits.
Supplier strategy #3: Accessories and gadgets can push up margins
The famously tight margins on cigarettes and rolling tobacco made many retailers choose to price their tobacco substantially above RRP in 2017 – against supplier advice. Yet there are still areas in the market where retailers can find high margins. Top-selling tobacco accessories such as filters and lighters come with margins as high as 47% and 69% on the Booker website and have the added advantage of being exempt from tobacco restrictions. This means retailers who focus on improving their profitability can also benefit from a vital (and legal) in-store marketing strategy for the category.
Republic Technologies has refreshed its Swan, OCB and Zig-Zag brands to stand out more on shelves, aiding retailers in this process.
Yet it is not just tobacco where retailers can hunt out high margins and higher value sales. Larger e-cigarette units, and their optional attachments, are no longer the preserve of specialist shops and a smaller audience of enthusiasts.
High-tech cartomisers and accessories now come with big brands. With its Vype Pebble Starter Kit (£17.99 RRP), BAT offers a next-generation product which is larger than a traditional vaping pen, but comes in various colour options and includes all-day battery life – a feature so-far most associated with specialist products.
According to Booker’s website, retailers make £8.78 profit from each sale of Vype’s ePen and eTank starter kits, (both RRP: £19.99) highlighting the opportunity for profit.
Kingsley Wheaton, Managing director for next generation products, British American Tobacco
Our strategy is to offer consumers a range of quality nicotine products, from cigarettes and vapour, through to tobacco-heating products. This means not only developing these products but also making sure consumers have access to them. Vype Pebble is a fantastic development in our vapour portfolio and offers something that looks very different to any vaping product currently available, while also delivering a great vaping experience.
Come back tomorrow to read part two of our investigation into how you can grow your tobacco and e-cigarette sales