Smoke-free zone

There’s no doubting that the UK’s drive to eradicate smoking is working. It seems incredible now but in 1974, more than 50% of men and just over 40% of women smoked. Since then a campaign of high taxes on tobacco products and seemingly unrelenting legislation regarding their sales has led to a huge drop in smoking, with the latest figures revealing that 17.7% of men smoke and just 14.1% of women.

However, the powers that be want to see those figures reduced even further. The new report: Towards a smoke-free generation: tobacco control plan for England, published last month, outlines plans to reduce smoking in England, with the ultimate aim of creating a smoke-free generation.

The major objectives of the plan are to:

reduce the number of 15-year olds who regularly smoke from 8% to 3% or less;

reduce smoking among adults in England from 15.5% to 12% or less;

reduce the inequality gap in smoking prevalence, between those in routine and manual occupations and the general population;

reduce the prevalence of smoking in pregnancy from 10.5% to 6% or less.

And the aim is to achieve these objectives by the end of 2022.

While this is all certainly good news for the health of our nation, it has not been such good news for retailers. Cigarettes were once the biggest footfall driver in local stores but, in most outlets, that’s no longer the case. In addition, there’s been a massive problem with counterfeit and contraband tobacco products, which rob the UK government of millions of pounds in tax.

According to KPMG’s recent Project Sun report, illicit cigarettes accounted for 14.3% of all cigarettes consumed in the UK in 2016, and fake or smuggled cigarettes cost the UK government £1.84bn in lost tax.

Peter Nelson, AIT (anti-illicit trade) manager at Imperial Tobacco UK, explains: "The largest flows of illicit cigarettes coming to the UK currently stem from Poland, Belarus, Pakistan and Romania. HMRC uses a different formulae by measuring the lost tax which includes both cigarettes and hand-rolling tobacco; they calculate low, middle and upper estimates for lost revenue and estimate the mid-point at £1.8bn and upper level as £2.5bn in their 2016 report. This equates to losses of between £34m and £48m per week; in other words, incredibly substantial figures that could have a tangible positive impact within UK communities."

Nelson says the Project Sun report suggests counterfeit and contraband tobacco as a percentage of consumption fell from 16% to 14.3% between 2015 and 2016. "If true, that is to be applauded. However, Imperial is concerned that the recent introduction of standardised packaging in the UK will have a similar impact to that in Australia which has seen a 2.5% increase in the illegal tobacco trade since it transitioned in 2012," he explains.

Everyone’s heard the stories of boot fairs or ’the bloke down the pub’ selling cheap cigs but sometimes retailers trading from shops on the high street get involved too, usually just because of the profit involved and because they think they can get away with it. Nelson says the situation regarding fines and sentencing has improved somewhat in recent years but he still believes more could be done. "The key is a firm, consistent approach to enforcement, while ensuring all profits/financial benefits are recouped from those criminals involved," he says.

Gantry removals

Imperial has removed five gantries from retailers so far this year. "We usually wait until a retailer has been convicted for illegal tobacco offences before removing their gantry. However, this is at our discretion under the terms of our gantry conditions of service. Recently, for instance, we removed a unit from a Coventry retailer after the store was repeatedly (successfully) raided by Coventry Trading Standards (TS) and found to be selling illegal tobacco products."

Nelson says Coventry has one of the most active TS teams in the country, and is one of Imperial Tobacco’s busiest areas in terms of AIT activity. It is also generally recognised as one of the UK’s central ’hubs’ in terms of illicit business off-shoots.

"Imperial’s dedicated AIT team operates extensively within the Coventry area, conducting test purchases to ascertain potential illegal activity and sharing intelligence with TS.

"They have also assisted on numerous occasions with examinations and statements to support prosecutions," says Nelson. "This, allied to a rigorous approach by Coventry TS which includes the effective use of sniffer dogs, has resulted in the closure of three retail premises within the past six months."

Coventry TS have seized several million illegal sticks so far in 2017, including hauls of counterfeit Imperial products (Regal, Richmond and Golden Virginia). Raid locations have included houses, flats, self-storage facilities and vehicles in transit. Successful seizures have ranged from small retailers through to significant distributors, the latter leading to on-going investigations by Coventry Police into links to organised crime.

Meanwhile, since the start of 2014 JTI says it has removed gantries from 27 retailers who were found to have been selling illegal tobacco.

In June 2017 alone, JTI saw a total of 25 prosecutions and five seizures relating to the illegal tobacco market.

Nelson concludes: "If any retailers or consumers have suspicions around the sale of illicit tobacco in their area, please act by contacting either the Customs Hotline on 0800 59 5000, or your local Trading Standards or Police. Remember: if you Suspect it? Report it!"

Systems are go

Not only did the EU Tobacco Products Directive (EUTPD 2) regulations affect tobacco products, they also affected the vaping market. Nielsen figures value the UK retail vaping market at £159m. According to Jennifer Roberts, VP customer marketing at Blu UK, value growth slowed in the first half of 2017, leading to some value contraction in the market, as a result of suppliers and retailers selling off non-compliant stock at a heavily discounted rate, ahead of the May 20 deadline. "However, now the legislation is in place, value sales have started to stabilise and sales in the latest 12 weeks were marginally up versus the previous quarter, as the market settles down and retail selling prices return to normal," she says.

We’ve seen continued move-ment in the market towards open (tank) systems and e-liquid refills. To the extent that nearly half of all sales are now through open system products (52.8% in the 12 weeks to June 17) versus 40% in the same period last year, with the Blu Pro kit being the number- one-selling open system. Sales of e-liquid refills also reflect this shift towards open systems with value sales up 37% year-on-year."

Roberts explains that the market has been going through lots of changes because of EUTPD, meaning some brands have disappeared from the market altogether, while others have been ’reinvented’. "Market consolidation has continued and this, combined with the restrictions and costs of meeting the EUTPD II rules, means that it’s likely that a lot of smaller suppliers will have left the market in recent months."

She says that overall, EUTPD II has forced everyone to take a fresh look at what they are making and what they are selling. "The result should be higher quality products and better safety across the market, which can only be a good thing. Since May 20, retailers have been reporting that trading standards have been out checking stores and there have already been incidences of non-compliant stock being seized."

One of the biggest complaints by consumers, revealed in recent research commissioned by Blu, is that availability of the brand or product they like is very poor and often leads to frustration. "Consumers expect to be able to walk into any store and pick up the brand they want, even within the convenience market," says Roberts. "The vaping category is still very fragmented and overall brand distribution is still relatively low for most brands. However, more consistent range distribution across convenience retailers will be hugely beneficial to consumers and will help alleviate this issue for both retailers and consumers alike."

Roberts explains that the good news for retailers is that, apart from ensuring the stock they sell is compliant, there are very few restrictions on how the category is sold in-store at the moment. "Retailers can merchandise the category wherever they want and put up as much pos as they like around the store and in shop windows, although all material must comply with guidelines on content (for instance, they must not target or feature children, or include elements that could be construed as promoting tobacco products). Retailers can be assured that all materials supplied by Blu already comply with all advertising rules. Consumers can sample in-store too and Blu has developed in-store sampling stations that retailers can use to encourage trial of vaping products."

Roberts says restrictions on the promotion of e-cigarettes only come into play when communicating digitally to consumers. No advertising or promotion of e-cigarettes is allowed on retailers’ websites, however factual information about products, ’how to’ videos and range/price lists are permitted. Promotional leaflets that get sent out, or door dropped, to consumers are also prohibited unless you can guarantee that the recipient is a smoker and over the age of 18.

out on display

"UK retailers can actively display their vaping ranges," says Roberts. "They don’t need to be behind the tobacco shutters. In fact, they don’t even need to be behind the counter.

"Consumers want to be able to see what is stocked and it is often difficult for people to see what is on sale. In particular, the e-liquid boxes are challenging to see from a distance.

"Counter-top units are great for displaying liquids so that consumers can see what is stocked without having to lean over the counter or queue up and feel pressurised to buy.

"A large back wall display of a retailer’s whole range is also a good way to show consumers that a store is a stockist and that they are a good place to shop for their vaping needs." While this is still an option, you wonder why more retailers aren’t doing this.

Success with accessories

With the introduction of EUTPD II, it’s now more important than ever for forecourt retailers to find ways of signposting the category to promote and maintain tobacco sales. Republic Technologies shares the following tips to help forecourt retailers maximise sales:
Stock a broad range of products (filters, papers, matches and lighters) and the latest NPD to tap into changing shopper needs.
Space-saving packs such as Zig-Zag King Size vertical packs (50% space saving compared to traditional King Size packs) and Poppell 45 packs help retailers to merchandise more effectively, while convenient pack formats such as Swan Slim Pop-a-Tip Filters offer an alternative pack format (vs Swan Slim Loose Filters) for on-the-go consumers.
As with tobacco products, if your customer’s desired product is not stocked you may lose them. Be sure to stock a core range of papers (Green, Blue and Silver in both standard and King Size variants) plus other options such as unbleached and flavoured and make sure you have multipacks available to combat the discounters.
Using display stands and off gantry fixtures will help to signpost the tobacco category in-store while additional prominence will also boost sales of RYO products.
When it comes to stocking lighters and matches, it’s not just about smokers. Household and candle matches can help deliver additional value, particularly during the barbecue and winter seasons. Locating these products adjacent to barbecue deals and winter fuel will help drive additional spend.

Glo’s roll-out continues

British American Tobacco’s (BAT’s) Glo tobacco heating product has been such a success since its launch in Sendai, Japan late last year that it’s being rolled out to other territories. It is now available in Tokyo, Osaka and Miyagi as well as in Vancouver and nationally across Switzerland. A South Korean launch will follow.
Designed in the UK, the ’one unit, one button’ device is said to be simple and intuitive, with one single charge lasting more than 30 sessions based on back-to-back usage. Glo heats Kent Neostiks to approximately 240oc to provide a taste similar to that of a cigarette, with around 90% less toxicants. It also has no burning or ash and less odour.
Kingsley Wheaton, MD of next generation products at BAT, says: "Glo delivers on taste, it delivers on consumer experience and delivers on our commitment to provide consumers with inspirational next- generation products."

Moments boosts Miniatures category

STG UK plans to reinvigorate the small cigar segment with its latest new product launch, Moments Panatella. The new product is available in an Original variant and is rolling out to stores now. It comes in packs of five with an rrp of £4.20, making it the cheapest product on-shelf within the small cigar segment.
And, thanks to its exemption from the plain packaging restrictions, the range will benefit from an eye-catching yellow design to help stand out on-shelf.
STG’s head of marketing and public affairs, Jens Christiansen, reports that the Moments brand has already seen significant success in the Miniatures segment thanks to its value-for-money positioning. Indeed since its launch five years ago, it has become the fastest- growing cigar brand in the UK, accounting for a 15.7% market share of Miniatures (IRI data).
"We see a gap in the market for a value-for-money proposition that we can fill with our latest product launch and drive growth back into the small cigar sector and deliver strong sales," he says.

For the vaping journey

Many forecourts have stuck to selling early ’first generation’ vape products which do not offer the same level of performance and user experience as some of the newer products on the market. But supplier Jac Vapour says that as the customer’s vaping journey evolves, it has products to suit every stage, including the Series-S Vape Pen starter kit which offers high level performance in a simplistic form and doesn’t require expert product knowledge to sell to customers or to use. Rrp is £24.99 (includes a battery, tank, charger and coil).
The Series-S caters for both new users who like to mirror the inhalation process of a traditional cigarette (known as mouth-to-lung vaping) as well as those who prefer a looser direct-to-lung inhale (know as sub-ohm).

Cigars are still stars

Despite the implementation of EUTPD 2, cigars still benefit from being exempt from the restrictions around minimum pack sizes and standardised packaging.
Jens Christiansen, head of marketing and public affairs at Scandinavian Tobacco Group UK (STG UK), explains: "Cigars can continue being branded beyond the product name, not be the standard green colour, or be restricted to a minimum pack size, meaning they can still be wrapped and sold individually or indeed in 10 packs.
"This means some cigars are now the cheapest option available on-shelf which may see them attract existing smokers from other categories."
He says cigars benefit from much greater visibility than cigarettes due to their exemption from the Plain Packaging legislation.
"This presents a massive opportunity for tobacco retailers to use this to their advantage by stocking a good range of cigars, in all size segments, as some smokers look to switch to a value alternative to cigarettes, or indeed just a cheaper price." Accounting for over half of the entire cigar category and equipped with a portfolio of leading brands, including the number one cigar in the UK, Café Crème, Christiansen says STG UK is well positioned to help retailers take advantage of this sales opportunity.

RETAILER VIEW

"Last year we invested £1.5m in a total transformation of the site. Tobacco had always been a big seller so, when planning the new store, to maximise retail floor space and adhere to changes in tobacco law, we decided to introduce a state-of-the art tobacco gantry system. The bespoke system was designed and installed by Navarra Retail Systems.
"Ours is a two-storey building with one of the upstairs offices doubling as a stockroom for tobacco, ensuring that all tobacco stock is secured away from customers. Each slot in the unit is reserved and numbered for a different product line.
"At the tills on the ground floor, staff use their touch-screens to request customers’ choice of tobacco. The product is then dispensed from the secure vending unit upstairs through a chute to the till.
"The system is a bit like a very sophisticated vending machine. Staff simply click on the product icon on the till and the pack is in their hand within seconds. It’s fast and secure, but it also frees up space behind the tills for non-tobacco products and ensures that I’m adhering to the latest tobacco display legislation."

MultiVape’s success

According to Nielsen data to April 2017, MultiVape was the UK’s top-performing e-cigarette brand in 2016 and 2017, with annual retail sales of £9.6m and £9.65m respectively.
MultiVape products, display cabinets and pos are available to stockists on a sale or return basis, which creates risk-free revenue for retailers.   
Christian Mulcahy, business development director, says: "Our business has grown through word of mouth. We cater for everyone from the vape newbie to the vaping enthusiast and, because we are an independent company offering only premium products, we have become one of the UK’s most trusted vaping brands."

Kingsize tubes for the cash-conscious

New from Swan, the Kingsize cigarette tubes tap into the £1.9m tubing market, meeting demand from ’cash-conscious’ consumers looking for a quality alternative to ready-made cigarettes, with a product that allows them to make their own.
The Swan tubing machine (rrp £3.64) allows consumers to roll cigarettes with ease, with packs featuring both 100 and 200 tubes in both Standard (100 pack rrp 99p/200 pack rrp £1.98) and Menthol variants (100 pack rrp £1.25/200 pack rrp £2.50).
"With Swan Kingsize cigarette tubes, consumers can save at least a third versus purchasing pre-made cigarettes," says Gavin Anderson, general sales manager for Republic Technologies (UK) Ltd. "We’re giving consumers a simple, cost-effective way to roll their own while providing retailers with an additional opportunity to signpost the tobacco category in-store and maximise sales," he explains.
This latest launch follows last year’s introduction of the environmentally friendly Swan Extra Slim Eco Filters. These feature an unbleached paper wrap and are biodegradable.