Wholesalers hold the key to future growth

According to Imperial Tobacco, the tobacco category continues to make a significant contribution to the wholesale channel, generating around 54% of its sales turnover each year, while IGD figures released this year demonstrate that the tobacco category is showing 2% growth year on year.

Part of that growth has been generated by Imperial Tobacco’s continuing commitment to rolling out new products, despite the challenges presented by the ban on advertising.

The JPS ‘Silver’ range launched just over a year ago has been the most successful ever brand launch within this ‘dark’ market environment, says Imperial Tobacco.

The newcomer already has more than a 17% share of the ever growing economy cigarette price sector, according to Nielsen Market Track, and is the fastest growing brand in independent outlets.

Indeed, Silver is part of a growing economy priced cigarette sector that now accounts for 18% of total cigarette sales, an increase of over 4% since the beginning of the year. Compared with a year ago, 23% more adult smokers now purchase cheaper cigarettes and this figure equates to around three million adult smokers choosing less expensive alternatives.

Imperial Tobacco has also scored a hit with Golden Virginia Yellow hand rolling tobacco which, since its launch in March 2009, has gone from strength to strength. It has already contributed more than pound;5.5m to retail sales and has almost a 2% share of the roll your own (RYO) tobacco market, making it the fastest growing brand in the category.

Mike Laney, Imperial Tobacco’s head of the distributive channel, says that high availability levels for both JPS Silver and Golden Virginia Yellow in the distributive trade have been a vitally important factor in the success of these brands and this demonstrates the importance of the cash and carry environment to launching brands in a dark market.

“Due to the dynamics of the tobacco industry, the wholesale channel is vitally important to Imperial Tobacco, and around 58% of cigarette volumes go through this channel,” says Laney, as wholesalers have the ability to supply the changing preferences of adult smokers.

“The RYO market is one which is growing rapidly and in the last year we have seen volumes increase by 15% and retail value increase by almost 20%,” says Laney. “While this is in part due to the number of adult smokers choosing to ‘dual’ with RYO and cigarettes, the current economic situation has also played its part. Adult smokers are travelling abroad less frequently and purchase less non-UK duty paid tobacco.”

It is for this reason that Imperial Tobacco continues to see the wholesale sector as vital to its business. Its sales operation includes a team dedicated to working solely on the distributive channel and includes business account managers, account managers, multiple account executives and business development executives.

Imperial Tobacco is also an avid supporter of the Federation of Wholesale Distributors (FWD) and the Scottish Wholesale Association (SWA) and has supported the ‘My Shop is Your Shop’ (MSYS) project and the Scottish Wholesale Achievers campaign.

Imperial Tobacco provides one of the largest FMCG sales forces in the UK to ensure it can fully support wholesalers through legislative changes such as the introduction of pictorial health warnings on tobacco packs.

Laney admits the continued pressures of tobacco legislation will also be a challenge for the category but he insists that challenges can be overcome by working together.

He adds: “The legislative pressures that are consistent for the tobacco category will not recede in 2010. But wholesalers can be assured that, as category leaders, Imperial Tobacco will work closely with the trade to ensure a smooth transition.”

As for the future, Laney predicts that wholesalers and retailers can expect to see further down-trading by smokers in 2010, with one of Imperial Tobacco’s focuses being to ensure 100% availability on all brands throughout the supply chain from wholesalers to retailers so that adult smokers have the choice that is right for them at whatever price point they choose.

Imperial Tobacco says it will continue its record of both recognising category gaps and filling them with effective and successful brand launches.

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