display potential

After successive waves of legislation intended to depress tobacco sales wholesalers believe there may be a potential windfall from the next change, but it is also causing a significant headache for cash and carries.

New display restrictions are due to come into force on April 6 (a planned implementation date of of April 1 in Scotland has been postponed and still not decided in Northern Ireland), and will ban the display of tobacco in larger stores, but smaller stores have been given an additional three years to comply. Many in the industry believe this could mean that smokers will be put off by the inevitable disruption this will cause in the larger stores and will switch to buying from their local store instead, boosting sales of both tobacco and other impulse products, giving the wholesalers who supply the stores a welcome uplift.

Booker has dubbed the introduction of the new regulations ‘D-Day’, and sales director retail Steve Fox comments: “D-Day is the biggest opportunity since the national lottery. We estimate that an extra two million shoppers each week could transfer to independent retailers, bringing with them an extra £1bn of sales. This could result in £140m in extra profits for small stores.”

But it also looks as if cash and carries are going to have to make significant changes to the way they handle and sell tobacco, with the added complication that the precise rules are unlikely to be published until March, just one month before they are implemented. The FWD intervened on behalf of its members and was given guidance by the Department of Health, and it is expected that cash and carries will have to ensure that only tobacco traders can see tobacco products on their premises.

This will mean that tobacco rooms will have to be equipped with doors and controlled to ensure non tobacco traders do not enter. In addition any tobacco products being moved through depots, whether they are being delivered or they are on customers’ trolleys will have to be covered up so they cannot be seen. The guidance was only published shortly before this feature was written, so cash and carries said it was too early to say precisely how they would be dealing with it. One cash and carry boss summed it up as “bags, doors and personnel”, and also pointed out that it would mean considerable expense and there was very little time in which to implement the changes.

The tobacco companies opposed the display restrictions, arguing that they will make business more difficult for retailers and wholesalers, without having the intended effect of deterring underage smokers or reducing tobacco consumption. Patrick Toms, head of the distributive channel at Imperial Tobacco, says: “The recently published guidance, which places a requirement on tobacco retailers to cover tobacco products within cash and carries, highlights how impractical this piece of legislation is.

“Imperial Tobacco is currently engaging with our partners in the distributive channel to ascertain how the mechanics of the proposed display ban restrictions will affect their businesses and we are committed to supporting them throughout the process.”

He says that if retailers are to meet the increased demand caused by the new regulations availability will be a key issue, and he urges cash and carry depots to lead by example by ensuring they have availability of all the major brands and especially new launches.

While the final details of its latest legislation are still awaited the Department of Health has already announced plans to consult on its next tobacco restrictions plain packaging. JTI head of communications Jeremy Blackburn says JTI hopes that any consultation will be genuine and transparent. Martin Southgate, managing director of JTI UK, comments: “Plain packaging will make it easier for the underworld to manufacture fakes; putting money in the pockets of criminals and taking money out of the tills of community shopkeepers across the UK.”

Another government policy has strongly influenced the biggest trend in the tobacco market with high levels of tax and duty leading to downtrading with growth in sales of lower cost cigarettes and smokers migrating to rolling their own.


In the cigarette sector the downtrading trend has resulted in declines for the three biggest brands but strong growth for all the economy brands.

According to SalesOut the biggest selling economy brand in the wholesale sector is JTI’s Sterling, and it is closing fast on the top three, Imperial Tobacco’s Lambert amp; Butler and Richmond and JTI’s Mayfair. JTI has also reduced the cost price of its Berkeley brand to reposition it in the value for money segment of the market.

Imperial Tobacco’s two economy brands, JPS Silver and Windsor Blue also grew also grew strongly and in November the company also introduced a new ‘Glide Tec’ pack for its Lambert amp; Butler brand.

Pall Mall is BAT’s economy brand of cigarettes and it increased its share of the wholesale market by 68% for the year to August 31 according to SalesOut, bringing it up to 3% of the overall sector.

The latest innovation in the market has come from JTI and BAT, which have both launched products which enable smokers to change the taste of cigarettes while they are smoking them by crushing a capsule embedded in the cigarette filter.

JTI has introduced Silk Cut Choice in a King Size 20s pack format. The cigarettes have a mentholated capsule in the filter, which can be crushed to introduce the menthol flavour at any stage while smoking the cigarette, or not at all.

Blackburn says: “Silk Cut Choice offers adult 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.”

Lucky Strike Click amp; Roll is BAT’s new launch, with packs of 20 replacing Lucky Strike Blue 20s. Lucky Strike Blue 10s will continue to be available.

BAT UK premium brand manager, Hinesh Patel comments: “Smokers want the flexibility to try something new, even when it comes to their favourite brand. Lucky Strike Click amp; Roll offers smokers the freedom to change the taste as and when they want.”


The value seeking trend in tobacco has had its most profound effect on RYO tobacco segment, which has seen strong growth with many smokers looking to reduce their costs by rolling their own.

JTI estimates the RYO sector is worth £1.3bn in the UK, and that it is the second fastest growing sector in the tobacco category, with almost one in three smokers choosing to smoke RYO. It predicts the growth will continue for the next three years as smokers seek out greater value for money, especially by purchasing larger formats such as 25g, which accounts for 35% volume share of the total RYO sector.

JTI’s Amber Leaf has overtaken Imperial Tobacco’s Golden Virginia as the top selling brand, and the trend towards lower cost products has resulted in Imperial Tobacco introducing brands such as Gold Leaf, Golden Virginia Yellow and JPS RYO tobacco, and BAT adding Pall Mall RYO to its offer which includes Cutter’s Choice.

The latest addition to the competition is JTI’s first value RYO brand, Sterling Rolling, with the aim of building on Sterling’s position as the number one value cigarette brand. Sterling Rolling will be available in 12.5g and 25g packs, with an RRP of £3.37 and £6.60 respectively. JTI says that 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.

Blackburn comments: “The launch of Sterling Rolling is a natural progression for JTI. We currently have brands which sit in the premium and mid price RYO segments, but, the launch of Sterling Rolling will give retailers an opportunity to capitalise further on the growth of RYO and the expansion of the Sterling brand.”

Smaller competitors are also carving out a niche for themselves in the market such as Fosters Distributors with its Rasta RYO. Andrew Armstrong, managing director, comments: “We have had difficulty getting listing for a new RYO tobacco with wholesalers, but once we do they are coming back quickly for repeat purchases.” He says that his product comes from the biggest independent tobacco company in Europe, and that one innovation no other company offers is a menthol variant of RYO tobacco. He adds: “With 8-9% of smokers opting for menthol cigarettes, it is an opportunity for wholesalers and retailers to charge a premium price.”

Rasta RYO is available in a standard 12.5g pack and 12.5 menthol and in a special edition tin in red, gold and green Rasta colours, containing two 12.5g packs plus Fosters’ Karma papers. Armstrong adds: “The ban on advertising has made launching a new tobacco more difficult, but it is an eye catching, fun product and wholesalers are ordering more each month.”


Cigars have been hit hardest by the restrictions on smoking in public spaces, but despite this it is one of the most competitive areas in tobacco with companies such as Ritmeester and Tor Imports entering the wholesale sector and taking on the more established companies.

About 400,000 UK adults smoke cigars spending nearly £300m a year. JTI’s Hamlet accounts for a 41% share of the cigars market in wholesale, according to Nielsen Market Track October 2011, making it the sector’s bestselling cigar brand in terms of value, but the Café Crème brand from Scandinavian Tobacco Group (STG) is the top seller in volume terms.

Miniature cigars make up nearly 60% of total volume sales across the cigar category, and continue to drive growth in the total UK cigar market, with sales currently increasing by 3%. Alastair Williams, trade marketing and communications manager at STG UK, says: “Much of that is due to the continued success of the Café Crème family and other imported cigars. The Café Crème family should have a place in every retailer’s tobacco gantry. More than one in every three miniature cigars sold is a Café Crème Blue cigar, which makes the range absolutely must-stock for wholesalers.”

Similarly to cigarettes and RYO more consumers are seeking value for money cigars, says Williams, making this the right time to roll-out the Moments brand to the wholesale sector following successful trials in the grocery multiples. Moments is available in two variants, Moments Blue and Moments Original, and is packaged in a crush-proof tin of ten cigars with a minimum RRP of £3.10 available in 10 x 10 outers.

STG has also launched Café Crème Grande, a new range of small cigars, which it describes as the first major piece of innovation in the small size segment in years.

Café Crème Grande comes in a blue crush-proof tin of five cigars with a minimum RRP of £4.24, and is available in 5 x 5 outers to minimise retailers’ cash outlay.

Williams says that as the cigar category leader, it was important that STG addressed the lack of innovation in small cigars, which continue to lose the biggest volume of share in the cigar category compared to other size segments.

“The smalls segment has not evolved like the miniatures segment has in recent years, where we recognised that consumers have changed. In smalls, where has the trend for tins been addressed? Where has the trend of a smooth smoke been met? Where has the trend of consumer image in products been catered for? We understood that there was an opportunity for a smooth, imported brand, like Café Crème, to come in and make an impact on this size segment and give retailers a reason to believe in smalls again. We urge wholesalers to stock up now to capitalise on the potential sales opportunity.”

STG’s brands also includes Henri Wintermans, which are available in Miniatures, Royales, Slims, Half Coronas and Corona de Luxe. The Henri Wintermans Half Corona is the top-selling brand in the medium / large segment, with 50% market share. Williams comments: “The Henri Wintermans range is always popular, so wholesalers should therefore ensure that their shelves are always fully stocked up with these top selling brands.”

Ritmeester is a major multinational player and after establishing itself in the UK’s multiples it is now looking to develop distribution in the wholesale channel. Lynne White, national sales manager at Ritmeester Cigars UK, says: “The biggest challenge that we face is brand recognition within the wholesale, convenience and independent sectors. During 2012 I will be working to gain more brand awareness in these three sectors. The work we are carrying out in the wholesale sector means that the brands are growing and there’s still a great deal to go for.”

Royal Dutch Miniature and Royal Dutch Miniature Blue are Ritmeester’s most successful products, and will be the priority. White says: “In 2012 we will still be looking to promote the Royal Dutch Miniature brand family, including Royal Dutch Aromatic, which we launched in August 2011. There will also be activity on Ritmeester Mini Moods a cigarillo that appeals to both cigar and cigarette smokers and we will build on the strength of the Moods brand family, which is the number one Aromatic cigar in Europe.”

Imperial Tobacco’s cigar range contributes more than £80m a year to retailers’ turnover and includes Classic, Panama, Castella Panatellas, King Edward Coronets and King Edward Crowns. Patrick Toms says it is strongest in the small category with Classic holding 25% market share and, along with Panama and King Edward Coronets, Imperial Tobacco brands accounts for nearly 40% of all small cigar sales. In the large cigar category, Castella Panatella accounts for just under 20% market share.

Scott Vines, managing director of Tor Imports says that during November, Tor launched Clubmaster Mini Cigars at £5.99 for a pack of 20 mini cigars. He says: “We believe this to be the first cigar to be price marked, ensuring the smoker can see the value proposition on the shelf. The trade margins are very attractive, and the outer consists of only five packs of 20 providing the retailer with a lower stocking opportunity. We are supporting the launch through cash and carry demonstrations and car sales in key geographical areas to drive volume through the wholesale trade.”

Paper amp; Accessories

Competition is also increasing in papers where newer entrants are challenging the established players such as Imperial Tobacco’s Rizla brand, which is the long-standing market leader. The increase in RYO sales has had a positive effect on the popularity of rolling papers with smokers currently spending more than £100m a year on rolling papers.

Fosters Distributors is a recent entrant with Karma Papers, and its managing director Andrew Armstrong has a lot of experience in the sector having previously run Zig-Zag. Karma variants are regular green, a green multi-pack of eight, and green kingsize and blue slim kingsize, which are also available in multi-packs of three.

Armstrong comments: “It is probably down to the economic climate but multi-packs are growing particularly strongly.” The company also supplies slim and menthol filters in resealable plastic bags.

Papers are not covered by the advertising restrictions on tobacco products and Armstrong says its website is introducing people to the brand.

The company is also running a 1999 Benneton Formula 1 car with Karma livery in the Euroboss championship, and Armstrong says this is a great marketing tool. He is also planning fly posting campaigns, which he pioneered when he ran Zig-Zag, in locations where Karma has distribution

Armstrong says: “Wholesale is vital to this sector as it accounts for most of the sales. I already knew the market well from my time at Zig-Zag. We have signed up a number of cash and carries and have a hit list of the best depots in each region to build distribution.”

Mark Alldred, marketing manager at Republic Technologies (UK), suppliers of the Swan, Zig-Zag and OCB brands, says: “The importance of offering value for money to customers cannot be underestimated. Wholesalers who understand the benefits of offering added value products such as RYO combi-packs, multi-packs and category-boosting lines such as menthol filter tips stand to benefit most in 2012.”

During 2011 Swan introduced new packaging, a new brand identity and new products. It has introduced new, slimmer combi packs (rolling papers and filters) with a slide and catch opening mechanism, in a wider variety of options, and new regular and king size rolling paper multi-packs. Swan rolling papers now feature a closable flap to keep the papers at their best. Alldred says Republic Technologies UK has differentiated its rolling papers from the competitive set, introducing a textile-blended paper that is easier to roll, smoother and slower burning than 100% wood papers.

Major brand support last year was spearheaded by Swan’s sponsorship of motorbike racing and a £1m marketing investment to support and build the brand.

Tor Imports has been the UK agent for Smoking Papers since the beginning of 2009, and, says managing director Scott Vines, has achieved three years of growth through an aggressive activity campaign of face-to-face cash and carry demonstrations and through the use of third party car sales to drive volume into the wholesale trade.

During October this year Tor also launched the TorJet refillable lighter, which retails at £1. “After a year of research and development we designed and manufactured the Jet Flame lighter, which can be used by smokers in all weather conditions,” says Vines. “It is early days and the trade acceptance has been extremely positive, the more we make, the more the trade are buying.”

Vines says Tor has a key account team with national coverage, which works closely with wholesalers to build business in the independent sector. He adds: “Tor has exciting plans to further develop and launch more quality, low price brands over the coming months, with full support packages in place for the wholesale trade.”

myo (make your own)

The trend towards lower priced products has been taken to its logical conclusion by Imperial Tobacco, which has introduced kits to enable consumers to make their own cigarettes. Patrick Toms explains: “The threat from the illicit trade is having a major effect on consumers, wholesalers, retailers, manufacturers and the economy. Last year, around 21% of all cigarettes consumed in the UK were non-UK duty paid and around 17% of that total is as a result of illicit trade, costing the Treasury between £2bn and £3bn a year in lost revenue.

“With this in mind, we recently launched JPS Tobacco, specially developed for smokers to create their own JPS cigarettes using a ‘cigarette making’ kit and the accompanying cigarette makers and tubes. Our new JPS Tobacco enables smokers to create 20 quality king size cigarettes for £3.87 after purchasing the accompanying cigarette makers and tubes. The product provides cost-conscious consumers, who may purchase tobacco from illicit tobacco traders, an incentive to buy from legitimate retailers as JPS gives them a quality reassurance backed up by heritage and value.”

Category management

Alastair Williams says STG UK takes category management very seriously. While sales representatives will be able to provide wholesalers with individual advice tailored for their specific depot, he offers the following advice to make the most from their cigar sales:

Make sure that you stock a balanced assortment of quality imported cigars as they stimulate the tobacco category and drive incremental sales and impulse purchase

Although cigars sell in smaller volume than cigarettes, cigars generate more profit than cigarettes and are equally important to the tobacco category

Imported brand leaders such as Café Crème and Henri Wintermans and their cigar families are growing the UK cigar market, so make sure you stock these brands

Invest in effective category management. Brand block imported cigars and double face the miniature segment leaders, Café Crème Brand Group (Café Crème, Café Crème Blue, Café Crème Filter Arôme, Cafe Creme Express, Express Blue and Express Arome)

Larger imported cigars like the Half Corona and Corona De Luxe drive incremental sales and provide excellent profit margins

electric alternative

With smoking banned in public places and tax and duty hiking prices, electronic alternatives are growing in popularity. Michael Ryan, co-founder and director of E-Lites, says: “The growth of the electronic cigarettes market in the UK has been astonishing. Overall, we estimate there are about 250,000 regular buyers of electronic cigarettes in the UK. E-Lites has about a third of that market, and we’re seeing average monthly sales rises of 18%.”

He says that E-Lites contain a pure liquid form of nicotine that, when someone inhales from the device, is converted into a vapour. Since there is no smoke and no smell, E-Lites can be legally used anywhere, whether indoors or outdoors.

Ryan says that margins on E-Lites are much higher than for tobacco products, and the company has tailored its products to wholesalers and retailers needs. “From the size of the packs, which are very similar to conventional cigarette packs, to the price points and customer support lines, we have prioritised convenience. Initially, we will be introducing the E40 disposable electronic cigarette. These provide the equivalent of about 40 cigarettes, which, at less than £10, is a very attractive proposition.”

Ryan says E-Lites has arranged promotional campaigns with its official partner, the National Federation of Retail Newsagents (NFRN), and is currently agreeing a campaign with Booker to help with the launch of its E40 product. The company also arranges roadshows in the US for BJ’s wholesale club, and this is something it will be considering for the UK.

He adds: “Booker is just the start for us here in the UK. We’re rapidly approaching a tipping point. In the next year to 18 months, we expect electronic cigarettes to become fairly widespread among smokers. We need to ensure that the wholesale market is prepared for this by making our products more widely available.”

Get Our E-Newsletter - Wholesale News stories in your in-box, delivered weekly.
Will be used in accordance with our Privacy Policy

About The Author