Top 20 Tobacco
Source from: Talking Retail 08/03/2018
Tobacco is a category that underpins the day-to-day business of many convenience retailers, because it generates shopper loyalty and also stimulates secondary purchase of a range of other products.
Retailers have had to deal with a succession of challenges to this key area of business in recent years. The first was the display ban, which put all brands out of view of shoppers, which was followed more recently (May 2017) by the European Tobacco Products Directive (EUTPD2) introducing standardised packaging and minimum pack sizes.
During this period of constantly changing trading conditions, retailers have also had to contend with the growth of illicit tobacco as shoppers seek out cheaper options at a time when regular duty increases have continued to push up retail prices of legitimate cigarette brands.
Despite the many issues facing the category, tobacco still generates massive business for convenience operators, who also value its role in attracting regular shoppers to their outlets. This time around, impulse business on factory-made cigarettes alone added up to ￡6.5bn in the 12-month period, although this was a 7.7% drop on the category’s performance the previous year. Cigarette sales through all retail outlets in the same period added up to ￡11.6bn, although that also declined by 4.6%. It means impulse outlets accounted for well over 50% of total business in the 12-month period, which underlines the key role this category plays at the heart of convenience retailing.
The roll-your-own (RYO) category has benefited as regular duty increases have pushed up the retail price of cigarettes and encouraged more smokers to explore cheaper alternatives.
RYO has enjoyed several years of growth as more shoppers have switched. This time around, RYO business through impulse outlets amounted to ￡1.4bn, which was 3.8% up on the previous year.
Once again, this is a big share of a business, worth ￡2.5bn in total and highlights how important RYO has become for convenience operators.
Among the top 10 cigarette brands, JTI’s Sterling retains top spot once again with total business of ￡766m, although the brand was down 13.3% during the period. Next up is Players from Imperial Tobacco, which moves up one place in the rankings from last year with sales of ￡734m, which was 42.8% up – the fastest growth rate of any of the top 10 brands.
Another major mover is Benson & Hedges Blue, which has surged to third from ninth place last time around following a 39.6% sales increase, giving it impulse business worth ￡479m.
It has been almost a year since the European Tobacco Products Directive (EUTPD2) regulations came into effect and it has already made an impact on the impulse channel. The new pricing and minimum pack sizes contributed to the already declining category in value terms and in impulse, cigarette sales saw a 7.7% decline compared with last year. The impulse channel represents more than half of the sales of the category but has suffered more than the total market, which decreased by only 4.6%. The impact from price increases has been harder for premium brands in this channel as consumers have switched to cheaper brands, leading to category devaluation for cigarettes. The low-priced brands are the ones driving most of the growth in cigarettes. If smokers were already
price-driven, this trait intensified after last year’s category transformation.