Lee Graham on how you can ensure that you drive sales growth in tobacco despite market changes.
The date, May 2017, has been on everyone involved in tobacco sales’ lips since the second phase of the EU Tobacco Products Directive (TPD2) took effect one year ago. The sell-through period is now over, meaning that from 20 May, the following items are banned from sale:
- Packs of ready-made cigarettes containing fewer than 20 sticks
- Roll-your-own (RYO) tobacco in packs of less than 30g
- All ‘slide’ and ‘slim’ packs
- Packs with information on tar, nicotine and carbon monoxide yields covering less than 50% of the side of the pack.
In addition, UK government rules on plain packaging kick in, meaning branded tobacco products will also be banned from sale.
The flourishing vaping market also faces some big changes, including:
- Nicotine health warnings must be included on the two largest pack sides, covering 30% of each surface
- Liquid bottles must hold a maximum of 10ml
- Cartridge refills and clearomisers can only hold up to a maximum of 2ml
- Liquids must be produced free of specific additives and be of high grade purity
- Nicotine strength is capped at 20mg per ml.
As a consequence, the next few months are likely to be a tough period for retailers, and in turn, their wholesale suppliers – particularly those whose businesses are heavily reliant on sales of tobacco and vaping products. Indeed, tobacco shoppers spend on average an additional £9 when visiting a store, and 97% of existing adult-smoker shoppers in the traditional convenience channel said tobacco was one of the reasons for visiting a store.
Wholesalers now have an important role to play in ensuring their retail customers are making the right choices in the new era. To help you to help them, representatives from three key suppliers explain how best to approach the category.
Jeremy Blackburn, head of communications, Japan Tobacco International (JTI)
“The tobacco market is facing significant legislative changes. As always, availability, range and good stock rotation are key to successful tobacco sales – this is as true now as it has ever been.
“Our advice is to keep talking to your JTI representative about stock availability and range. At our trade website you can find a guide to what is available from JTI as well as ‘traffic light indicators’ for each SKU. We have also created the Your Guide Through Change initiative to support retailers and wholesalers.
“Right now, the value RYO segment is gaining share of the RYO tobacco category. There is also a trend towards value in the UK ready-made cigarettes market, with value, super value and ultra-value now accounting for a 60% share.
“While the value sector is showing growth, depot staff must support retailers in ensuring they maintain a good selection of brands across all price segments. Maintaining a well-stocked, well laid-out tobacco room with clear labelling and pricing is also vital. With smaller packs disappearing, wholesalers will need to adapt their tobacco room to utilise the additional space now available. JTI is working with its wholesale partners to advise on how best to use the space for both tobacco and e-cigarettes.
“It is hard to predict what effects the TPD2 changes may have, but what we do know is that those wholesalers who prepare well will be best equipped to deal with them.”
Marc Mikhail, business development executive, British American Tobacco (BAT)
“More than ever before, adult consumers need help and guidance in navigating through the tobacco category. A customer’s first point of contact is the retailer. Therefore, we recommend wholesalers encourage retailers to know each product, stock a large range, and respect RRP to ensure that they stay competitive.
“The new rules on plain packaging should have no impact on range. We know that adult consumers are very brand-loyal to their tobacco products, and we suggest wholesalers stock as broad a range as possible. It is important that they help retailers to stock across the nicotine category, which means both cigarettes and rolling tobacco, and consider next-generation nicotine products.
“We are also always trying to find new ways to offer value. As anything below 20 sticks will no longer be allowed from 20 May, we will be looking to offer the best value in innovative tobacco products, including a competitively priced capsule cigarette.”
Jennifer Roberts, customer marketing, Blu UK
“In the most part, the TPD2 legislation is a very positive step forward for the category and should help to boost consumer confidence. But wholesalers need to be aware that specific changes affecting vaping will have a significant impact on this market.
“A 2016 Action on Smoking and Health (ASH) report stated that there are now more than 2.8m vapers in the UK – an increase of 300% since 2012. With market figures reporting year-on-year increases across the board, and with consumers spending on average £1,000 each per year, vaping is only getting bigger, and wholesalers need to take advantage.
“However, it is estimated that, after 20 May, up to 84% of vaping products previously on the market will not have been made TPD2-compliant, due to the considerable investment required. This means that consumers will be unable to buy many of the products they use. It is also estimated that there will be a 56% reduction in the flavour types available, as the cost of making each one compliant was too high for many manufacturers.
“Blu is the number-one e-liquid & liquid kit brand and the number-two vaping brand overall. Almost 30% of consumers said they would choose to shop elsewhere if their first choice vaping brand was not available in-store, so make sure you are stocking two or three of the top brands. The top five brands accounted for 61% of retail sales in the impulse channel in the 12 weeks to 31 December. But it is still unclear which brands and product ranges will remain in the market post-May, so speak to your suppliers to understand their plans.
“Vaping products do not need to be stocked in the tobacco room, so we recommend wholesalers take advantage and make them as visible as possible in-depot to draw the attention of customers and ultimately drive sales. Dual-siting or promoting vaping products outside of the tobacco room are great ways to drive additional sales, particularly with those retailers who don’t visit the tobacco room.”
• Availability, range and stock rotation are key to boosting your tobacco sales
• Ensure your managers are up to speed with TPD2 legislation and that they help retailers to navigate the changes
• Encourage retailers to know their products, stock a large range and respect RRP to maintain competitiveness
• Talk to your suppliers and make use of their online and printed resources
• Note recent gains in the value and vaping categories, but maintain a good selection of brands across all price segments
• Consider moving products that don’t need to be in the tobacco room outside. According to Republic Technologies (UK), moving non-restricted products such as filters, papers, matches and lighters, has resulted in increased sales in many depots.