Innovation is the key in a changing market

Despite increasing regulatory pressure on the pound;13bn UK tobacco market, it has proved resilient and Imperial Tobacco is confident it has the brands and expertise to keep it that way in the future for wholesalers and independent retailers.

The biggest challenge faced this year was the bans on smoking in public places introduced in Northern Ireland, Wales and then England. The ban in England saw sales in July drop by about 5% compared with the previous year, but Imperial Tobacco is confident that it will follow the pattern established following the introduction of bans in Irish Republic and Scotland. In both markets there was an initial dip in sales but then recovery to pre-ban levels. In addition some sectors have benefited from the ban, with many retailers experiencing increased tobacco sales to people socialising at home.

With other legislation raising the minimum age for purchasing tobacco and specifying lighters must be child resistant, and plans to introduce pictorial warnings, retailers have faced a barrage of changes, but Imperial Tobacco is confident it can guide them through the changes.

The company has one of the largest sales forces in the UK covering every postcode and aiming to call on every outlet selling tobacco 10 times a year. Mike Laney, distributive trade sector manager, says: “We remain hugely committed to supporting our trade customers in their management of the tobacco category, which is an important turnover contributor for their businesses. As the leader of the UK tobacco category, Imperial Tobacco will also support retailers through all legislative changes which affect their trading practices to ensure their businesses are fully compliant.”

Laney is also proud of the way Imperial Tobacco has successfully innovated to adapt to changes in the market. One of its latest launches was Gold Leaf rolling tobacco, which has already achieved a 2.5% share of the RYO market and is predicted to be a pound;20m brand by May 2008. Laney says the sales force is key when launching a new brand into a dark market where advertising is banned. They can raise awareness of the brand by highlighting it to retailers on their visits.

The RYO market is one of the strongest parts of the market, and Imperial’s Golden Virginia is the leading brand with a 47% market share. Imperial is also the leading rolling paper supplier with its Rizla brand, and recently launched Rizla Smooth, which has perforations in the paper to produce a smoother taste.

In the cigarette market, Imperial has the UK’s largest brand Lambert Butler, which is worth almost pound;2bn. It also has Richmond, which has grown to a 15% share of the market, despite being launched into the dark market. Windsor Blue is Imperial Tobacco’s most recent national introduction. It is the fastest growing cigarette brand and has a 2.8% market share.

With independent stores and forecourts accounting for more than half the UK tobacco market, the wholesale sector is a crucial distribution route for tobacco companies, and also acts as a communication channel for the tobacco companies to reach retailers.

Laney says Imperial’s commitment and support for the sector is demonstrated in many ways. In addition to its sales force and work in tobacco rooms, it has invested in price-marked packs for the independent trade. Laney says: “This is a very valuable tool for the retailers. It is a good way for them to signpost value and we have maintained their cash margins.” The company has also been a supporter of FWD initiatives such as My Shop is Your Shop and National Independents’ Week.

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