There’s no disputing the growth of the vaping category, in particular the meteoric rise in sales of disposable vapes.
According to The Grocer’s Top Products Survey 2022, the vaping category is number one in its Top 10 risers list with sales up £434m to reach £793m. That’s some growth and a huge market to boot, but it is still way, way behind the total tobacco category which, while in decline, is now worth £14bn (before tax) per year, according to Imperial Tobacco epos data for retail and wholesale.
Of course, the anti-smoking campaign continues, and every day there seems to be news of some new plan to tackle the hard core of traditional tobacco product smokers out there.
A new report published by Cancer Research UK says the government is almost a decade behind achieving its target for England to be ‘smokefree’ by 2030.
The report warns that, if recent trends continue, the target will not be met until 2039. The charity is now calling on the Secretary of State for Health and Social Care, Steve Barclay MP, to publish a plan for tobacco control. It says this must include more action to prevent young people from smoking, and more funding for the measures and services needed to help people quit.
Meanwhile, Shadow Health Secretary Wes Streeting has been widely reported as saying that a Labour government might phase out the sale of cigarettes as part of ‘radical fresh thinking’ to ease pressures on the NHS. There is talk of a New Zealand-style ban where they are bringing in new laws which would make it illegal for anyone born after 2008 to buy tobacco. This means that nobody now under the age of 14 will ever be legally permitted to buy cigarettes.
Needless to say, ASH (Action on Smoking on Health) supports a consultation on raising the age at which you can buy cigarettes. It said the New Zealand option could be considered, but it would be simpler just to raise the age to 21.
Headline-grabbing move
However, vaping is not without its critics either. In a headline-grabbing move, Waitrose announced last week that it was stopping selling single-use aka disposable vapes and had removed them from sale.
The supermarket retailer said it had already made the decision not to enter the “burgeoning market for brightly coloured, fashionable, single-use vaping devices, but had now gone a step further by delisting imitation cigarettes containing lithium, which it had historically sold under the Ten Motives label.
Waitrose said its decision was made for two reasons: the risk these products pose by appealing to younger people as well as their environmental impact with plastic and lithium ending up in landfill. In its statement it added: “Our move comes as reports suggest that the market growth is being fuelled by the popularity among those who haven’t previously smoked.”
Charlotte Di Cello, commercial director for Waitrose, said: “We are a retailer driven by doing the right thing, so selling single use vapes is not something we could justify given the impact on both the environment and the health of young people.
“We had already decided it wasn’t right to stock the fashionable bright coloured devices which are seeing rapid growth - so this decision is the final jigsaw piece in our clear decision not to be part of the single use vaping market.”
It’s a bold move but one has to wonder what sort of a demand there was for such products in Waitrose as you don’t tend to see crowds of youngsters shopping there.
Crowds of youngsters aren’t typically seen in forecourt stores however that hasn’t stopped some retailers from benefiting from the disposable vape trend.
Tom Highland, managing director of the Highland Group, says their award-winning Potton site has seen huge growth in vape sales.
“In December 2021, we took around £1,500 from vape sales. Last month (December 2022) we took just over £13,500 in vape sales!
“We rebuilt the site in October last year so a small amount can be put down to general sales growth as we were 28% up across the board. But tobacco including vapes now accounts for almost 20% of our sales with vapes being half of that. However, most of the increase is from disposable vapes, these really took off at the start of 2022 with the Geek Bar.
“We were so impressed with the sales that we expanded the range. We added Elf Bars which quickly became the most dominant brand and now outperforms Geek 20:1. A new brand (also owned by Elf) is Lost Mary which we have seen a large uptake in over the last three months. Vape juices (refillable devices) for us have seen a decline as people prefer the ease of a disposable.
“I think the biggest drivers for these brands are flavours and fashion. The Elf Bar became very fashionable thanks to platforms like TikTok. I think another driver is that people can smoke them inside most places compared to cigs, where people have to go outside. They all retail between £5-£5.99, and the margins are very healthy compared to the traditional cigs’ margin of just 7%.
“Oddly our cig sales haven’t been affected. We haven’t seen any growth, but they haven’t declined as I would say most of the people buying vapes are from the younger generations. However, you do regularly see people aged 30-plus buying cigs and a vape together. I do expect to eventually see traditional tobacco sales drop off as the younger generations take up vaping instead of smoking.”
Another reason for people switching to vaping is affordability. Indeed, new data from KAM, on behalf of Philip Morris Limited (PML), has found that UK retailers expect affordability to be the deciding factor for adult smokers choosing a smoke-free alternative in 2023.
When asked what customers will look for when choosing a smoke-free alternative, the 250 convenience retailers questioned prioritised price with over half (57%) agreeing that customers would select the cheapest products available, followed by those products offering the best overall value for money (18%). Smoke-free alternatives that offered the widest taste range available (10%) and those offering convenience and ease (5%) ranked third and fourth, respectively.
Over half (56%) said that they stock heat-not-burn products. Kate O’Dowd, head of commercial planning at PML in the UK and Ireland, says: “With the average price of cigarettes now £12.73 per pack, the data shows that retailers have listened to what customers have told them and stocked a range of smoke-free alternatives that are affordable and more importantly, a better choice than continuing to smoke.”
O’Dowd adds that she believes 2023 will be the year of the multi-category, where retailers should offer affordable smoke-free choices that don’t compromise on taste, quality or satisfaction for the user. She points to HEETS tobacco sticks which cost less than half the price of an average pack of cigarettes.
Imperial recently entered the disposables category with its blu bar range. Each device contains 20mg of nicotine in 2ml of liquid providing up to 600 puffs and features an LED indicator that lights up when in use. With an rrp of £5.99 per device, the new blu bar range includes six flavours, carefully chosen for their consumer appeal: Kiwi Passionfruit, Mango Ice, Banana Ice, Peach Ice, Watermelon Ice and Strawberry Ice.
Traditional tobacco’s value route
The traditional tobacco market is now split almost 50/50 between factory made cigarettes (FMC) and roll your own (RYO) tobacco, accounting for 54% and 46% respectively (ITUK).
Tom Gully, head of consumer marketing UK&I at Imperial Tobacco, says the future of the tobacco industry lies very much within the value of the product as consumers seek out ways to save money. “If retailers are to successfully cater to the needs of today’s customer and increase sales, then ensuring they are stocking a wide range of value tobacco products is crucial.
“Given the growing cost-of-living crisis and rising energy costs, this shift towards value tobacco products is a trend that is likely to continue for some time and one that should not be ignored – especially given tobacco customers can generate much wider sales in store. Tobacco shoppers spend more, visit more and have a higher basket spend than other shoppers so are key shoppers to attract.” (Lumina data)
He adds that there’s a move towards low-priced propositions across the entire category, resulting in the lower priced tiered products making up a majority of tobacco sales. “In fact, the sub-economy segment now makes up 63% of factory-made cigarette sales, while the economy segment accounts for 56% of roll your own (RYO) tobacco, with these value segments growing at an impressive 3% and 5% year on year.
“To capitalise on the sales opportunities these value segments offer, retailers must ensure they stock the correct products, while also familiarising themselves with the key product types so they can help their customers fully understand the tobacco category and different product solutions available to them.”
In RYO, Gully recommends retailers stock Riverstone and Players JPS. But adds: “When reviewing their range, it’s important for retailers to remember that value means different things to different people. Some customers might be focused on the lowest price point, while others may be looking for added value formats like Players JPS Easy Rolling Tobacco which offers filters and papers in one pack. Therefore, ensuring retailers stock a range that caters for these different value needs is vital in order to effectively cater for their customer base.”
In FMCs, he recommends stocking Embassy Signature and Richmond to help unlock sales amongst adult smokers seeking out top brands at great value price points.
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