Your chance

03 February, 2012
With the display ban hitting big stores in April, this could be your chance to cash in on tobacco sales
Page 33 

Yet another big change for smokers and retailers comes into force in a matter of weeks when large stores (more than 280sq m or 3,000sq ft) across England will no longer be able to display tobacco products. From April 6, smokers going into a Tesco superstore to buy their ciggies will not be able to choose from a gantry display but will instead have to ask a kiosk assistant for their preferred brand by name. It may be off-putting and more time-consuming at first, but it's something smokers will have to get used to.

However, some people are saying this massive change will benefit smaller retailers, for whom the display ban does not come into effect in England until 2015. Richard Hayhoe, marketing director at Palmer & Harvey, says: "I'm absolutely sure there will be some benefit to smaller retailers as their customers will still be able to see cigarettes in their stores. This means they will also have the competitive edge on NPD (new product development) and on price-marked packs. Whether smaller stores will become destination shops for the tobacco category is hard to say, but we have reason to be optimistic."

Mike Laney, head of the convenience channel at Imperial Tobacco, also believes there is an opportunity for small stores. "We have put a huge emphasis on highlighting to forecourt retailers the true value of sticking to sound business practices that make shoppers realise the points of difference that you can offer.

"I urge retailers to continue to focus on meeting their shoppers' needs as we head towards 2015. If they realise the true value of their tobacco shoppers and truly understand their behaviour, they will be in a great position to retain their loyalty and their valued custom."

Meanwhile, Christopher Street, head of grocery at Imperial Tobacco, reckons there will be winners and losers in the multiple grocery channel when the tobacco display restrictions come into force. "The key focus for all stores affected by the restrictions will be on meeting shoppers' needs. These are availability, information, and purchase experience.

"Shopper research, carried out by Him, has consistently shown that availability is the number one consideration for shoppers. Additional research into shopper insights by AMR found that 52% of adult smokers will leave a store if their favourite brand is not available.

"When the display ban was implemented in Australia, the 'out of stock' rates of some leading brands increased by 600% overnight. To ensure this doesn't happen in multiple grocery stores in this country, retailers will need to ensure their units and store rooms are well-stocked, effectively merchandised and their range is always available."

Street says Imperial Tobacco has been running trials in large stores across the UK and has found that over time, tobacco sales volumes do not decrease.

"Serving times tended to increase at the start of the trials but once staff became accustomed to the modified units, they returned to normal. This highlights the importance of staff training. By implementing and following appropriate planograms, the retailers ensured they had the correct range in place and the right levels of stock in their store rooms."

Hayhoe says the delay in the display ban for smaller stores will allow forecourt retailers to learn from the impact of what happens in the supermarkets. "There will be an opportunity to look at best practice for space and sales, and be better prepared. Forecourts could benefit from impulse purchases as their customers will still be able to see cigarette brands and they could be prompted to buy.

"Whatever happens, tobacco is still going to be an absolutely key category in a forecourt shop there's no two ways about it. If someone is filling up and they are a smoker, you wouldn't want to miss that sales opportunity."

He advises forecourt retailers to watch what happens in the larger stores what works and what doesn't. "We can then come up with a sensible solution that has minimal impact."

Display guidance

Guidance on the display and pricing of tobacco products was issued by the Department of Health on December 16, 2011. It outlines what stores exceeding 3,000sq ft can and can't do when it comes to selling tobacco products. It is well worth a read as it will give you an idea of what's about to happen. Key points are listed below. The guidance states that the display ban legislation does not set out how tobacco products must be stored or covered.

Retailers are therefore free to choose for themselves the "most appropriate and efficient means" of removing tobacco products from sight. This could be by fitting covers, sliding doors or curtains to an existing gantry.

Tobacco products can also be kept on open shelves under, over, or beside the counter, provided they face the staff and are only open to view by staff, so that the products cannot be seen by the public.

The law allows temporary displays of tobacco products in some limited circumstances:

following requests to buy or see tobacco products by customers aged over 18 (described as a 'requested display' in the legislation);

incidental displays while staff are actively assessing stock levels for stock control; re-stocking; undertaking staff training; cleaning, maintaining or refurbishing the storage unit; following a request by an enforcement officer.

The guidance states: "In all cases of 'incidental displays', the temporary incidental display must arise as a direct consequence of the activity in question being actively carried out and must only last as long as is necessary for that activity to be completed.

"The display must end if the relevant task is interrupted for any reason and is no longer actively being carried out.

"More than one temporary display may take place at a time, provided that the tasks being carried out are totally independent of each other and last only as long as is necessary to complete each task."

When it comes to 'requested displays' retailers must take the appropriate steps to satisfy themselves that the customer is in fact aged 18 or over before displaying a product to them.

It is not an offence if other people in the shop (including children) see a tobacco product as a consequence of a 'requested display', while a customer is being served, or for other tobacco products in a storage unit to be visible (for example, through an open cupboard door). This is provided that the display is only a result of the requested display by a customer and lasts for no longer than is necessary to remove the requested product from the storage unit, and also provided that the area of tobacco storage unit opened to serve the customer does not exceed 1.5sq m.

The guidance says the important point to bear in mind is that the law defines a 'requested display' as being " to an individual following a particular request by the individual to purchase a tobacco product, or for information about a tobacco product".

If a customer makes a more general enquiry about the range of tobacco products on offer, it may be appropriate to show them a pictorial price list.

Staff will also need to understand that tobacco products must not be left on display after any request to see them has been met, or after any other activity involving a legal display has been completed. Local councils are being advised to take an "educational and advisory approach both before, and for a period of time after, the new law comes into force".

Tobacco accessories for example tobacco papers, pipes and lighters can continue to be displayed and kept in public view.

The guidance says retailers will need to consider new arrangements if accessories (or any other non-tobacco products) are currently kept in a tobacco gantry or tobacco storage unit that will, in future, need to be covered.

It will be an offence to open a tobacco storage unit and to display tobacco products when serving customers with non-tobacco products such as accessories.

To download the complete guidance document, log onto: www.businesslink.gov.uk/Horizontal_Services_files/DisplayGuidanceFINAL.pdf

The rest of the UK

Implementation of the tobacco display ban varies across the rest of the UK:

Wales The implementation date for large stores has not yet been confirmed. A recent, unofficial report states that the Welsh Assembly is looking at a proposed implementation date of October 2012. However, the original date of April 2012 is still a possibility. The implementation date for small stores is currently down as October 2015; however changes to the regulations may be made at any time.

Scotland The Scottish government is awaiting judgment and final resolution of the Scottish 'Reserved Matters' Challenge. The implementation date for large stores has not yet been confirmed but it will not be April 2012. A date will be announced by the Scottish government in due course. On a separate note, the original display ban proposals for Scotland restricted the permitted display size area to just 120sq cm, an area the size of one cigarette packet. This has now been amended to 1,000sq cm, equivalent to about 12 cigarette packets, but this is still much smaller than the permitted display area in England. The implementation date for smaller stores has not yet been confirmed.

Northern Ireland The implementation date for large stores has not yet been confirmed, although an unofficial report states that the Northern Irish Department of Health wasn't looking to introduce the tobacco display restrictions before October 2012. The implementation date for smaller stores has not yet been confirmed.

Plain packaging

The government will hold a consultation on plain packaging for tobacco products in the spring. Manufacturers are against plain packaging for fear that it will make it easier for counterfeiters.

Imperial Tobacco's senior corporate and legal affairs manager, Colin Wragg, comments: "Removing all logos, graphics and designs from tobacco product packaging will make it significantly easier for counterfeiters to produce and sell potentially dangerous and unregulated packets of cigarettes to UK smokers.

"Tobacco packaging has never been identified as a reason why young people start to smoke or why adult smokers continue to smoke. Imperial Tobacco shares the government's objective that young people should not smoke and we remain committed to helping prevent young people from accessing tobacco products."

JTI's head of communications, Jeremy Blackburn, adds: "We expect any consultation to be a genuine and transparent process, which takes into account the best contemporary scientific thinking on how minors and adult consumers think and act.

"The introduction of plain packaging would have serious and widespread negative effects: it would damage competition by creating an increased focus on price; and it would also exacerbate illicit trade as counterfeit and contraband products will become easier to make, distribute and sell, and it would create consumer and retailer confusion at the point of sale."

Blackburn continues: "Other products that retailers sell in their shops are under the microscope of the health groups too, and the template for the control of sale for these other categories could possibly follow a similar one to tobacco. The tobacco industry is at the forefront of legislation at the moment, but recent media coverage shows that other categories are under pressure.

Retailers should engage in the debate with government to protect their legitimate business interests."


RETAILER view

Mark Carsley, managing director, Carsley Group:

"Tobacco is a very important category to our business it accounts for approximately 12.5% of our shop profit. Best sellers are Lambert & Butler and Marlboro Gold.

"I'm worried about the display ban although I understand that the effect in Canada on the overall level of smoking by all ages has been very minimal.

"As for smaller stores benefiting because smokers will be more comfortable going into shops with traditional cigarette displays, apparently there is a precedent which shows that they will benefit, but I expect that effect to be insignificant.

"The proposals for plain packaging will make life harder for the manufacturers, who will find it very difficult to introduce new brands, but people who want to smoke will continue to do so. I think that marketing will simply come down to the issue of price, with some people wanting the cheapest cigarette that you sell, with others prepared to pay more for premium tobacco. I would expect the number of brands to decline quite rapidly over a five-year period.

"I find the whole concept of the display ban very difficult to understand. Indeed there is the danger that the young will regard it as 'cool' to smoke as 'authority' doesn't want them to."


BRAND NEWS

Following the launch of Lucky Strike Click & Roll late last year, BAT is this month introducing the Pall Mall Click On cigarette in a bid to offer adult smokers a low-price brand with a premium innovation. The capsule technology within Pall Mall Click On gives smokers the option to 'click' the capsule in the filter to release a burst of liquid that delivers a fresh taste. If the cigarette remains 'un-clicked', it retains the same taste and characteristics as the current Pall Mall 7mg variant. Pall Mall Click On is available from February 6 in kingsize 19s with a special launch price-marked pack of £5.33 (while stocks last) before moving to the regular recommended retail price of £5.47.

The Scandinavian Tobacco Group is launching Moments, a new range of miniature cigars that capitalises on the rapidly growing consumer demand for value-for-money products. Available in crush-proof tins of 10, there are two variants: original and blue. Recommended retail price is £3.10. Also new from the company is Café Crème Grande, available in a crush-proof tin of five, with a recommended retail price of £4.24.

Lambert & Butler is now available in a 'Glide Tec' slide-open pack. Sue Tranter, consumer marketing manager at Imperial Tobacco, comments: "The Glide Tec pack's contemporary design and innovative opening mechanism delivers added value and the brand is perceived to be enhanced by this change, reassuring consumers and providing retailers with a high-quality product for their customers."

The Glide Tec packs have been developed to sit alongside the existing 'holographic' Lambert & Butler packs.

JTI has launched its first value roll-your-own (RYO) brand, Sterling Rolling. It is available in 12.5g and 25g packs, with a recommended retail price of £3.37 and £6.60 respectively. As the RYO market continues to grow, it has divided into three distinct sectors premium, mid price and value, with Sterling Rolling positioned in the latter segment. Value RYO currently accounts for 9% of the total UK RYO market (Nielsen data), and JTI reckons it represents a real profit opportunity for retailers.

At the tail end of last year, Tor Imports launched Clubmaster Mini cigars in two variants: superior blue and superior Sumatra. The cigars are available in tins of 20 price-marked at £5.99. Tor Imports managing director, Scott Vines, says: "Our research showed that smokers were looking for a quick and quality cigar but that value is becoming more important in their decision making. Clubmaster is being launched in a 20-pack representing terrific value for the consumer and will be the first cigar to be price-marked, ensuring the smoker can see the value proposition on the shelf."

New Silk Cut Choice is a capsule filter cigarette that allows smokers to individually tailor their smoking experience by deciding when they release a menthol flavour. Jeremy Blackburn, JTI's head of communications, says: "Silk Cut Choice offers smokers on-demand menthol via the latest innovation in the tobacco market. By placing a menthol capsule in the filter this gives adult smokers the opportunity to customise their smoking experience."

New from the Golden Virginia stable is a handy combo pack containing a zip-lock tobacco pouch, rolling papers and filter tips all in one flip-top box. The new packs are available in both original and smooth tobacco variants. They have a recommended retail price just 20p above the cost of a standard Golden Virginia 12.5g pouch, which means consumers save 79p compared to purchasing the individual components separately.

Mayfair has a new look. Packs feature a new background, graduated silver edging, as well as the introduction of a new white logo with red accent and a silver base. The new look is designed to emphasise the quality of the brand.

Another line from Tor Imports is the TorJet lighter which offers smokers a wind-proof jet flame at a price of just £1. Tor Imports managing director, Scott Vines, says trade acceptance and sales have been "incredible".


retailer view

Paul Sykes, managing director, Shaws Petroleum:

"Tobacco still accounts for almost 30% of our shop sales and so is a huge category for us.

"Even though the margins on tobacco products are smaller than on some other product categories, cigarettes are a big driver of footfall.

"The best sellers vary from one site to another, from one side of town to another, and even from one side of the street to another.

"It is very important to know what the best sellers for each site are and not to rely on the tobacco suppliers to tell you!

"They can only give averages usually based on co-co sites and they won't have a clue! They will do as they are told.

"Tobacco does lend itself to premium pricing. Some sites will take this to 'insult' levels but they are usually, though not always, motorway sites or co-co sites.

"Heaven knows what will happen when the supermarkets go dark. That legislation is bad enough.

"The proposals for plain packaging are just another example of our political masters assuming that they really are an elite, that we cannot make reasoned decisions (fair point when we elect them) and that they know best especially when it comes to spending other peoples' money."


THE ELECTRONIC ALTERNATIVE

You'll all have heard about electronic cigarettes but do you know how they work? Describing his Freshcig product, Freshcig managing director Ben Wilson says: "Our electronic cigarettes vapourise a clean nicotine solution which the user inhales giving them a similar sensation to smoking, without carcinogens, tar or carbon monoxide.

Wilson says that originally electronic cigarettes were mainly available to buy online, but they are now available in retail outlets including Tesco and Spar, which he says is driving sales and awareness.

"There is a big opportunity to forecourt retailers to diversify their cigarette displays and pick up incremental sales and generate bigger margins by stocking e-cigarettes."

Freshcig has developed a new point-of-sale kit for forecourts to help them build their electronic cigarette sales. The kit, which costs £99, consists of nine Freshcig ecopack electronic cigarette starter kits (containing a charger, battery and five cigarette refills) and nine Freshcig disposable electronic cigarettes (including battery and refill). The starter kits have a recommended retail price of £14.99 while the disposables retail at £7.49 and are the equivalent of around 40 conventional cigarettes.





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