Imperial Tobacco says it is helping fight the illicit tobacco trade with its new JPS make-your-own (MYO) cigarette kit. MYO cigarettes have been available before in the UK but without the backing of a big brand name like JPS. However, don’t get too excited just yet as the product was launched into the grocery multiples in March but will not make its way into the independent trade until later in the summer.
The new JPS cigarette-making kit has a current recommended retail price of £6.99. It consists of a 14g pack of JPS tobacco, 100 king-size cigarette filter tubes and a cigarette maker. Each element of the kit is also available individually. If sold individually, the current recommended retail prices are: JPS tobacco £3.67; make-your-own tubes 99p for 100; and make-your-own cigarette maker £3.09.
Sue Tranter, consumer marketing manager at Imperial Tobacco, comments: "We are continually researching the preferences of adult smokers in the UK, and other similar markets, to ensure our portfolio accurately reflects the category dynamics. In the current economic climate, the prevalent down-trading trend has accelerated as more adult smokers are moving down through the cigarette price sectors and a significant number now prefer cheaper alternative tobacco options.
"Insights gained from this process have told us that the UK is ready for JPS tobacco which, after purchasing the cigarette maker, allows smokers to create 20 quality king-size cigarettes for £3.87 (based on the recommended retail price for 14g of JPS tobacco and king-size cigarette filter tubes, using the equivalent of 0.7g of JPS tobacco per cigarette).
"Twelve million UK adults currently smoke and the economic conditions have forced many to look at illegal sources. This brand launch will ensure that cost-conscious smokers, who purchase tobacco from illicit tobacco traders, will consider buying from legitimate retailers again as the JPS brand gives them a quality reassurance backed up by the heritage and value of JPS."
Meanwhile, JPS roll-your-own (RYO) tobacco has been available for just over a month and is already proving a huge success with strong sales through UK wholesalers. Iain Watkins, Imperial Tobacco’s UK communications manager, comments: "The trade’s reaction has been extremely positive. Price-marked packs have been retailers’ preferred choice, particularly as these still carry the pre-Budget price point of £2.79."
Also available are price-marked 25g packs for £5.47 while stocks last. Standard packs are available for retailers who prefer them.
Another big brand cigarette name that has launched into RYO is Benson & Hedges in gold and silver variants.
At the time of the launch, brand owner JTI’s head of communications, Jeremy Blackburn, said: "Benson & Hedges rolling tobacco will appeal to both male and female adult smokers who demand quality from a brand they know and trust."
Mark Alldred, marketing manager at Republic Technologies UK, reckons that forecourt retailers looking to boost profits from tobacco sales should ’gear up’ for more demand for RYO products. "RYO is the best-performing sector of the tobacco market by far, but there is plenty of opportunity for forecourts to accelerate sales," he says. Alldred cites combi-packs (papers and filters) as a good example of how forecourts can supply what their customers want.
"Motorists are acutely aware of the high cost of fuel and are looking to make savings on other regular purchases in forecourts, such as tobacco. Combi-packs designed primarily for convenience are perceived as offering better value but have really low availability in forecourts," he says, adding that all Swan branded combi-packs offer margins of 50%-plus.
Filter tips is another area of growth potential in forecourts. The category is growing at 15%, with the Swan brand doing even better, up 17.4% (Nielsen Market Track March 2011).
And while menthol tips the fastest-growing sector of the filter tips market are performing well in forecourts, up 22.1%, they are still under-performing versus the total market, which is up 27.9% (Nielsen).
"This is in part due to a lack of availability," says Alldred. "Where they are stocked they are fast-selling, but many forecourts do not yet offer smokers menthol tips and are missing out as a result."
He says RYO multipacks are gaining in popularity in all channels, but under-index massively in forecourts where they account for just 1.6% of total sales versus a market average of more than 23%. "That said, forecourt retailers are now recognising the potential of multipacks sales of regular multipacks are up 50.2% and king-size multipacks are up 68.2%, highlighting the potential for further growth."
As part of a recent major brand refresh, Republic Technologies UK is differentiating its rolling papers from others by offering smokers a textile paper which, according to independent market research, consumers prefer.
"Textile papers are easier to roll, smoother and slower burning than 100% wood papers and these are all factors that people look for in RYO products. This clearly sets Swan apart from its main competitor and offers consumers a clear choice," says Alldred.
Other innovations across the Swan papers’ range include a flap which reseals the pack and helps to keep the papers at their best.
The Scandinavian Tobacco Group UK is renowned for its best-selling cigar brands, such as Café Crème and Henri Wintermans. However, its portfolio stretches wider than brown sticks.
Alastair Williams, trade marketing and communications manager at the company, says: "RYO really is proving to be the silent hero of the tobacco category at the moment. It’s currently in growth as smokers look for an alternative to the large duty tax levied on white sticks. Our Crossroad brand is a different variation on traditional RYO products, meeting consumers’ desire for a smoother smoke by offering a distinctive full-flavour, light-colour tobacco that contains no artificial additives or chemicals and is made purely from natural tobacco.
"Crossroad original and Crossroad Virginia Blend is proving a success with more discerning adult smokers who want a premium rolling tobacco at mainstream prices. We have been pleased with how it has been received by the market since its launch in late 2009 and see it forming an integral part of the RYO category."
According to Nielsen Market Track data, premium cigarettes account for 36% of sales through forecourts in volume terms, followed by the mid-price sector with a 33% share. Mid-price Mayfair is the number one range through forecourts, accounting for a 19% volume share.
Meanwhile, the value cigarette sector is the fastest-growing in the UK tobacco category but it accounts for just a 6% volume share (JTI estimates/IGD data) of the forecourt tobacco market versus 23% for the total UK tobacco market.
Fourteens packs are the newest size on the gantry. Last November JTI extended its 14s line-up to include Mayfair and Silk Cut, which joined B&H Gold and Silver. "The average daily consumption of cigarettes is 14 so these packs allow smokers to control their daily consumption," says JTI’s Blackburn.
This month sees the launch of limited-edition ’V-shape’ packs of Silk Cut king-size 20s. Available for four weeks, the packs feature a "unique structural design with an innovative opening and inner frame". "Silk Cut is a brand that adult smokers associate with breakthrough design and innovation these new V-shape packs reflect this and retailers should look out for the limited editions while stocks last," says Blackburn. "Like all premium cigarette brands, Silk Cut provides retailers with the opportunity for generous profit margins, so they should be in stock at all times."
Onto legal matters, and the industry is very concerned that banning retail displays of tobacco will exacerbate the problem of the illegal trade in cigarettes across the UK.
Blackburn says: "The proposed display ban is likely to further increase illegal activities while impeding and restricting lawful ones, by making illicit tobacco products easier to distribute."
However, HM Revenue & Customs (HMRC) has published new plans to tackle the illicit tobacco trade. Under the new strategy, supported by the UK Border Agency, the government has provided additional investment for more officers to target organised criminals who smuggle tobacco. There will be increasing numbers of prosecutions, more illicit tobacco will be seized, and smugglers will face fresh hard-hitting financial sanctions. Minimum indicative levels for travellers bringing tobacco into the UK from the EU will also be reduced to 800 cigarettes and 1kg hand-rolling tobacco in the autumn, bringing the UK into line with all other EU member states. These levels are used as a guide for determining whether tobacco products imported from the EU are for personal use.
Justine Greening, economic secretary to the Treasury, says: "Tobacco fraud costs tax payers more than £2bn a year. "We have made an additional £917m available to HMRC to tackle evasion, avoidance and criminal fraud across the tax system, and that includes illicit trading in tobacco."
And although, the tobacco display ban or ’dark market’ does not come into full effect until 2013, Scandinavian Tobacco Group UK’s Alastair Williams advises forecourt retailers that engaging with their customers now is key. "Continue to bring them up to date on new products and legislation so they are aware of their rights and are kept informed. Also educate your staff. Ensure they know what exactly the ’dark market’ is, when it’s coming into effect and what actions they must take to ensure compliance."
The Department of Health has announced its intention to hold a consultation on plain packaging of tobacco products.
Imperial Tobacco’s UK communications manager, Iain Watkins, comments: "Plain packaging legislation has never been implemented by any government worldwide.
"In April the Australian government announced plans for the plain packaging of tobacco products with effect from July 2012.
Imperial Tobacco believes measures of this kind are unreasonable and unjustified and we will continue to robustly challenge them in court if necessary.
Making all tobacco products available in the same, easy-to-copy generic plain packaging would potentially lead to a significant increase in counterfeit product. This was recognised in the UK Government’s 2008 consultation document which stated: "....plain packaging may exacerbate the illicit tobacco market as it could be easier for counterfeit products to replicate the plain packages than current tobacco packaging".
TOP 10 BEST SELLING CIGARETTES IN FORECOURTS 2010 BY VALUE
3.LAMBERT & BUTLER
Source: JTI epos estimates forecourts
David Cox, Saintfield Road Service Station, Lisburn, Co Antrim:
"Cigarettes are an extremely important part of my business as they’re a big footfall driver. I sell them at a premium price so I make a decent margin of 9.3%. People say there’s not much profit in them but I think there is.
"Cigarettes are easy to stock, they don’t take up much space and they don’t go out of date!
"I’m definitely selling more economy brands than I used to and that’s because the likes of Mayfair and Sterling are more than £1 cheaper than premium brands.
"I’m very worried about the changes the government is going to make to displaying tobacco because I think it is going to be really awkward for us and I don’t think it will stop people buying cigarettes."
DISPLAY Ban UPDATE
The Health Act 2009 introduced a ban on the display of tobacco products and vending machines in England, Wales and Northern Ireland.
The Coalition government published its Tobacco Control Plan in March confirming that implementation of the display ban would go ahead but:
The size of the display allowed while serving customers or carrying out the other authorised activities will increase from 0.75 to 1.5 square metres for retailers in England.
Retailers in England will have greater flexibility so that they can carry out the day-to-day running of their businesses without breaching the law. For example, being able to undertake stock-taking or maintenance work while there are customers in the shop.
Retailers in England will have additional time to prepare particularly small shops.
The regulations will commence on April 6, 2012 for large stores (3,000sq ft-plus) and April 6, 2015 for all other shops.
The prohibition of vending machines will still come into place in October 2011 across the UK.
The Welsh Assembly government’s response to its display ban consultation has yet to be published. It has not been confirmed whether Wales will follow the changes announced by Westminster.
Northern Ireland has indicated that it intends to introduce a tobacco display ban for all shops, regardless of size, from July 1, 2011, however time is running out for this to happen.
The Northern Ireland Department of Health, Social Services and Public Safety’s (DHSSPS) has yet to publish its response to its display ban consultation. So far it has not been confirmed whether Northern Ireland will follow the changes announced by Westminster
There is an appeal against the display ban which has been delayed until October.
Tobacco and Primary Medical Services (Scotland) Bill:
The Tobacco and Primary Medical Services (Scotland) Act 2010 prohibits tobacco displays and vending machines, and introduces a register of tobacco retailers.
Following Westminster’s announcement about its delay to the implementation of the display ban in England, the Scottish government has announced it will delay its implementation dates to:
April 1, 2012 for large shops9
April 1, 2015 for small shops.
The Act specifies a requested display size of 120 square centimetres. In Scotland an appeal against the ban is due to be heard at the beginning of this month
On April 1, the Scottish government launched a register for retailers of tobacco products they have six months to register. After October 1, it will be an offence to sell tobacco in Scotland without being on the ’Register of Tobacco Retailers’.
Those in breach of the law will face a fine of up to £20,000 or six months in jail.
Retailers can register online for free at www.tobaccoregisterscotland.org