If you're not, you're not alone as research from Palmer and Harvey reveals that a third of retailers have still not heard of the EU Tobacco Products Directive (EUTPD II) legislation. But in addition, its survey found that 75% of these retailers don't think their customers are aware of the changes in the law either. Even though there's no need to panic, as the sell-through process means smokers probably won't have noticed any changes yet, they will do soon.
This latest EU legislation means 10s packs of cigarettes are banned as are smaller packs of hand-rolling tobacco. And the Brexit vote will have no bearing on this as both EUTPD II and the standardised packaging legislation, are already in UK law.
New packaging regulations came into force on May 20, 2016. This means that since then only new products with the new packaging are being produced. Any old packaging stock can still be sold to the trade until May 19, 2017 so you may receive old stock for a time before the new packaging filters through. But only products in the new packaging can be sold from May 20, 2017 onwards.
The Packaging Regulations restrict on-pack descriptors and ban information about tar/nicotine levels. This means that the variant names and other on-pack text/wording for some tobacco brands may change.
Cigars, cigarillos and pipe tobacco will remain branded packs but with bigger health warnings.
The minimum individual pack size for cigarettes is now 20 sticks. The minimum for hand rolling tobacco is 30g.
Price-marked packs are no longer allowed. The Packaging Regulations state that the wrapper of an individual packet must be clear and transparent, and should not be coloured or marked. Nothing should be attached to the wrapper or pack.
Flavoured and menthol cigarettes will be banned in 2020.
Help is at hand
The tobacco manufacturers have made websites, videos and apps available to help retailers understand the changes.
As part of its 'Your Guide Through Change' initiative, JTI has launched both EUTPD and e-cigarette training modules on its trade website (www.JTIAdvance.co.uk). JTI's head of communications, Jeremy Blackburn, advises store staff to speak to the company's sales force, visit its website and take the online training modules so they're fully aware of the legislation and can communicate the changes to consumers.
The new JTI Advance app features an innovative barcode scanner and fingerprint sign-in, a shopping list, a margin calculator and training modules. The barcode scanner allows retailers to scan all tobacco and e-cigarette products, providing them with the latest product information and retailers can directly add scanned products to their digital personal shopping list.
JTI's digital marketing manager, Peter Kelleher, says: "Not all retailers have the luxury of being able to leave the shop floor and work from an office in fact, 45% of JTI Advance website users access the site through their phones so we have put key functionality of the site and more on the app." Retailers can download the app from the relevant app stores by searching 'JTI Advance'.
At Imperial Tobacco, its Partnering for Success initiative has been designed to offer retailers guidance around the TPD as well as standardised packaging legislation. The company has recently released a video. Retailers can view it at www.imperial-trade.co.uk, as well as via Imperial's retailer reward programme www.imperial-ignite.co.uk.
The video explains how the legislation is likely to affect the tobacco category. It also addresses issues around potential retailer and customer confusion such as the Packaging Regulations' restriction on on-pack descriptors and information about tar/nicotine levels.
This means that the variant names and other on-pack text/wording for some tobacco brands may change. This can make it more difficult for retailers and consumers to tell the difference between full flavour and smooth products.
The Start packs contain guidance to help retailers understand the different descriptors and the strength of each product.
Andrew Miller, Imperial Tobacco UK and Ireland's head of field sales, says a recent Tobacco Manufacturers' Association survey suggested around half of UK adult smokers were totally unaware of any changes to tobacco pack sizes, formats and branding before May 20 2016. "The next May 20 deadline remains some time away, but standardised packs will clearly begin to appear in the market before then. We'd therefore advise that retailers get up to speed with the latest legislative and operational advice via our Partnering for Success trade communications platform. Then, we'd recommend they spend as much time as possible speaking to both their adult smoker customers and staff to communicate the changes sooner rather than later to avoid confusion down the line. Being proactive and demonstrating their category knowledge will not only earn their customers' appreciation, but also help build trust and foster loyalty. To assist retailers, we've developed a range of informative point-of-sale material which we'll be distributing over the coming months."
Both Imperial and JTI have sales forces visiting retailers. JTI's sales force is made up of 220 'business influencers' who are said to make more calls to more retailers than anyone else in the trade. JTI's head of communications, Jeremy Blackburn, says: "The retail trade can speak to our team for support on how to make the most of the tobacco category moving forwards and everything else busy retailers need to consider to make their business a success."
Meanwhile Imperial says it is building on its recent him! Convenience Tracking Programme Award win for 'Best Supplier for Sales Force Effectiveness' for the second year in a row, by recruiting new reps to help retailers plan and prepare for all the changes.
Bye, bye PMPs
There's also the demise of price-marked packs (PMPs) to consider. Says Miller: "PMPs have traditionally been a way of reassuring shoppers that they're buying a product that represents great value with almost three-quarters of independent retailers choosing to stock them. Their gradual disappearance from the market between now and May 20, 2017 means the importance of competitive pricing in the independent trade has never been greater. Our experiences in Australia, where standardised packaging was introduced in 2012, have shown us that retailers who planned and prepared for change have only seen a minimal impact on tobacco sales. We also learnt that retailers who priced their tobacco products competitively fostered customer loyalty. Adult smokers play a crucial role in driving both in-store footfall and basket spend in the independent channel, hence the importance of pricing competitively in this new environment. In the worst case scenario for forecourt traders, tobacco shoppers may gravitate towards the grocery channel instead."
Miller advises forecourt retailers to reassure their adult smoker customers that despite the loss of PMPs they are not being overcharged for tobacco.
"Stores will need to manage their own pricing strategies carefully, but for instance traders could ensure their customers are aware that they sell tobacco products at the recommended retail price or below by displaying a current price list in-store.
"Simply ask your Imperial Tobacco representative and they'll be happy to provide one. Some adult smokers might also be confused by standardised packs, so be sure to explain to them that your tobacco products still offer the same taste and value as before. By pricing competitively and demonstrating their category knowledge in the face of legislative change, retailers are putting themselves in a strong position to take advantage of rival traders who might not be as prepared."
Tony Holmes, sales director at Bestway Wholesale, agrees and says research from Australia shows that those retailers who stayed true to the recommended price of tobacco saw no discernable impact on their tobacco sales.
"If retailers choose to inflate prices to earn additional margin, they will see a decline not only in their tobacco business, but also across other grocery and impulse categories as footfall will diminish due to smokers going elsewhere to get greater value. Many retailers use several wholesalers to make sure they get the best prices why do they think smokers would behave any differently if they increase the cost of tobacco? In order to retain customers and footfall, we are therefore advising all customers to maintain current pricing at rrp and Bestway and Batleys depots will be offering 10s packs and price-marked packs for as long as they are available from manufacturers to help retailers meet the needs of their customers."
Finally, Mr Ahmed a forecourt owner from Birmingham says: "I rely on PMPs to demonstrate value in my tobacco unit.
"My intention is to ensure all my cigarettes are at rrp as I cannot afford to lose any customers to my ompetitors."
Summer cigar sales
New research from JTI's strategic insights team reveals that cigar sales increase by as much as 5.7% over the summer period, potentially creating an additional £4.6m profit opportunity for retailers (Nielsen data).
With the sales peak reaching its highest this month, retailers are advised to make sure their cigar range is ready.
Worth an estimated £234m, approximately one third of UK cigars are sold through the independent channel, so retailers should be stocking up now to make the most of these extra seasonal sales.
As the number one fine cigar brand, holding a 48.8% share of the sector (Nielsen), Hamlet is a key brand for retailers. Retailers are advised to stock up with Hamlet and other big sellers.
Clive Sheppard, director, Chartman Ltd:
"Tobacco is still a very significant category for us across our 10 sites, although enormous growth has come from the vaping market.
"With tobacco products, it's quite a confusing time at the moment as we're going through a period of change and starting to run out of certain stock that won't be replaced. Plus we've had the first new-look packs trickling in.
"The new packaging means all the packs look very similar so you've got to know the products to ensure you give customers the right things. But the tobacco market has been changing for years and us retailers are very adaptable and resourceful so I don't foresee a big problem."
Top 10 PFS tobacco lines
1 Amber Leaf 12.5g
2 Amber Leaf 25g
3 Golden Virginia Classic 25g
4 Sterling King Size Dual 17s
5 Marlboro Gold King Size 20s
6 Mayfair King Size 19s
7 Lambert & Butler King Size 20s
8 Sterling King Size Dual 10s
9 Golden Virginia Classic 12.5g
10 B&H Gold King Size 20s
Source: Nielsen Market Track multiple forecourts YTD June 2016 *Thanks to the bans on smaller pack sizes, this chart will look verydifferent next year
Accessories with a loyal following
Despite sweeping changes in the tobacco market, the UK's RYO accessories market still commands a loyal following, with filter tips firmly among the best-performing products.
Gavin Anderson, general sales manager for Republic Technologies (UK), says the combination of value, choice and quality of RYO accessories is compelling.
He says: "The EU Tobacco Products Directive II and introduction of plain packaging in the UK mean forecourt retailers must think long and hard about how to promote and maintain tobacco sales against the backdrop of an increasingly regulated environment.
"Many retailers now feature accessories on display stands and off-gantry fixtures, using them as a signpost for tobacco in-store. The additional prominence given to them is boosting demand for well-established RYO products such as Swan filters and Zig-Zag papers."
Filters is a booming sector in the UK's accessories market, now valued at nearly £72m and growing at 3% (IRI data).
Anderson says the importance of market-leading Swan, Britain's 'favourite filter', shouldn't be ignored, with demand for the Swan brand having been accelerated by the launch of the 'Eco' Swan filter.
The most environmentally-friendly Swan product ever, extra slim 'Eco' Swan filters are biodegradable, featuring a naturally coloured filter and an unbleached paper wrap. Each pack contains 120 tips, has an rrp of 99p, with 20 packs per outer.
Anderson adds: "RYO smokers are more discerning than ever before and many of them take environmental considerations into account in their purchasing decisions. We're confident that Swan Eco filters has broadened the appeal of the Swan brand, providing a really rewarding smoking experience in line with other Swan filters."
He says the Zig-Zag unbleached paper range is another example of category-boosting NPD, providing RYO enthusiasts with a smoother taste and richer tobacco flavour.
May 2016 Last date of manufacture of ready-made cigarettes packs of less than 20 and RYO tobacco packs of less than 30g
May 2017 Packs of less than 20 ready-made cigarettes and packs of less than 30g of RYO tobacco can no longer be sold in the UK. Only standardised packs can be sold ie with no branding
May 2020 Ban on menthol ready-made cigarettes
crackdown on Online crime
Imperial Tobacco has unveiled the latest instalment in its Suspect it? Report it! anti-illicit trade campaign.
The new poster shows a criminal huddled in front of a computer, peddling illegal tobacco via social media sites like Facebook while hiding behind the alias 'Baccy Boy'. However, this seller is not as faceless as he thinks; Imperial Tobacco not only monitors the activity of online sellers, but shares any ensuing intelligence with law enforcement.
Imperial Tobacco anti-illicit trade manager, Peter Nelson, comments: "Online isn't an area that's traditionally associated with the illicit tobacco trade, but Imperial Tobacco has observed a notable increase in the volume of illegal cigarettes and hand-rolling tobacco being offered for sale through various social media platforms and is taking steps to crack down on offenders. For instance, we've recently lent our support to the latest stage of Operation Jasper, a joint initiative by the National Markets Group alongside trading standards, police and other brand holders, which is cracking down on the online sale of illegal, counterfeit goods.
"Through Jasper, thousands of infringing images/pages have been reported to Facebook for removal and numerous fake products were also seized over a
two-week period, with further enforcement action already planned."
If you've any suspicions around sales in your area you can contact the Customs Hotline on 0800 59 5000, or your local Trading Standards or police.