If the Government intended the ban on smoking in public places to produce a major reduction in smoking it failed. The market had been in a gradual volume decline of about 2% a year prior to the ban and in the 12 months following the ban there was an additional fall of about 4%, but once the year was up the market resumed its previous trend. And while the factory made cigarettes (FMC) market has been in a gradual decline, the overall tobacco category is worth more than pound;13bn and there are still some areas which are showing strong growth.
Mike Laney, trade sector manager distributive for Imperial Tobacco, highlights roll your own (RYO) tobacco as one such area with volume up around 11%. Imperial Tobacco has a strong portfolio in this sector with Golden Virginia, which accounts for about 45% of the market, and its value proposition Gold Leaf. Laney says that since its launch in summer 2007 Gold Leaf’s growth has exceeded expectations.
Imperial also has a strong share of the FMC market. Lambert Butler is the biggest selling brand with 16% of the market, and together with Imperial’s second highest seller, Richmond, the two brands hold a 30% market share.
The dominant trend in the tobacco market is smokers down-trading to lower cost products, making economy priced cigarettes the fastest growing sector of the FMC market. Imperial’s Windsor Blue is the fastest growing economy brand climbing from 2.75% to 3.25% overall market share in the last year, and Imperial has just launched JPS Silver into the sector with the description “everything about it is premium except the price”. Laney says early sales have been exceptionally good.
Imperial’s relationship with the wholesale channel is very strong with a lot of resources devoted to it. Laney’s distributive trade sector team are dedicated to the wholesale trade offering advice and support. Ensuring product availability is one of their main aims, and he says: “We are currently operating at 99.7% availability which is unheard of for any other product.”
Imperial Tobacco also demonstrated its support for the sector with a strong showing of staff visiting retailers to help out during National Independents’ Week and a prize draw for a Rizla motorbike to support My Shop is Your Shop.
Imperial also generates ‘pull though’ for its products with a 220-strong sales force dedicated to the independent trade.
Looking ahead to next year Laney says the introduction of pictorial health warnings will be a major issue. He says: “We have an excellent track record of managing change for the trade. We can support them to ensure they are selling legal fresh product when the change comes into effect on cigarettes at the end of September. We have appointed a team as advisers to the trade.”
At the time of going to press the trade was still waiting for the Government’s response, due out on December 8, to the recent consultation on selling tobacco.
Laney says the response from right across the trade from senior managers of wholesalers through the staff and retailers was the biggest ever in support of the category. Options the Government proposed included a ban on display of tobacco and on selling packs of less than 20, but another option was to maintain the status quo. Laney says: “The response reflected a groundswell of support in opposition to the uncalled for and unwarranted proposals. It would be very disappointing if the Government tried to ignore such as strong response. It would be very damaging to the independent trade during a time of economic downturn when retailers are already under pressure. What the Government should be focusing on is stopping illicit supplies. Stick consumption is pretty steady, which suggests illicit cigarettes are not experiencing the gradual decline of legitimate cigarettes.”
For Imperial there will be some changes in 2009 with it ending its cigar distribution deal with Henri Wintermans in January after 42 years. Laney says: “We will be fully committed right up to the end of the deal. Then we have our own miniature cigars such as Castella and Small Classic filter.”
Laney says Imperial will be constantly reviewing the marketplace ready to react to any changes. A demonstration of that commitment is its move on December 1 to launch price-marked packs on 12.5g ( pound;2.94) and 25g ( pound;5.77) Golden Virginia. Laney says these are exclusive to the independent trade and reflect the growing preference among independent retailers for price-marked packs. Also available from this date will be limited edition 14g packs featuring eight different ‘leaf’ designs while stocks last.