1. Tobacco sales declined by £1.2bn in the past year while vaping grew by £897m.
2. Cigars have grown by 5% in the past year, driven by cigarillos
3. Value is the dominant force in all tobacco segments
4. In independents and symbols the vape market is now worth £1.67bn
5. Pod systems and hybrids will grow in the wake of the disposables ban
6. The new vape tax is set to drive up prices
7. Flavours are driving growth in nicotine pouches, with mint making up 80%
8. Heated tobacco is now worth £105m, with a growth of 26%
1. Tobacco sales declined by £1.2bn in the past year while vaping grew by £897m.
The rise of the vaping market has revolutionised how smokers consume nicotine. Now, retailers are facing a ban on disposable products, which is set to shake up the market once again.
For the meantime, vaping continues to go from strength to strength, ranking as the fastest-growing category for the second year in a row (NielsenIQ).
Newer areas in alternative nicotine, such as pouches and heated tobacco, have now become must-have products for any retailer looking to cater for a broad range of nicotine consumers.
Enya McAteer, who runs Spar Jonesborough in Newry, Northern Ireland, says: “We don’t run promotions on next-gen products – we don’t need to – but we’ll do a two for £10 if we’re trying to shift a certain product.”
2. Cigars have grown by 5% in the past year, driven by cigarillos
Despite the dip in tobacco sales, there are still some areas in growth. Cigars have grown by 5% in the past year (IRI). Nataly Scarpetta, marketing manager at Scandinavian Tobacco Group (STG), says: “This positive performance is mainly down to cigarillo sales, which account for the largest of the four segments in the cigar category, and the only one currently in growth.
“Cigarillos are now worth more than £114m in annual sales and are responsible for just over half of total cigar volume sales [IRI].” Retailers can tap into this growth by stocking the top two or three brands in each of the four cigar segments, as the top 10 sellers overall account for more than 90% of sales (IRI).
Value is also continuing to drive sales in cigars. Moments Blue 10s is the biggest brand in the value segment and offers up to 18% margin when sold at its RRP, claims STG.
3. Value is the dominant force in all tobacco segments
The value of tobacco in the UK totalled £14.1bn in the past year, with the cigarette market accounting for £9.9bn (Circana).
Drawing on Imperial Tobacco’s 2022 Report On Trade, Yawer Rasool, consumer marketing director at Imperial says: “The sub-economy segment now makes up 63% of cigarette sales, while the economy segment accounts for just over a half (56%) of RYO. These segments are showing strong growth.”
Brands in the value tier include Embassy Signature and Richmond, as well as added-value formats like Players JPS Easy Rolling Tobacco, which offer filters and papers in one pack. Manufacturers are investing more in the value segment, with JTI launching Mayfair Gold in October last year, which has already gained 1% share of market (Circana).
Enya says: “In tobacco, shoppers always buy Benson & Hedges Blue. It’s our biggest seller and shoppers are very loyal to the brand. We had to increase pricing last month as the cost went up by 50p but it hasn’t stopped customers buying them.
“Premium tobacco brands are very slow now and there’s a small minority of customers who will buy them.”
Trudy Davies, owner of Woosnam & Davies News, Llanidloes, Wales, says: “Roll-your-own tobacco is our biggest area because shoppers can’t afford readymade cigarettes anymore. They went up by 50p last month because suppliers have increased their prices. We’re all impacted by the cost-of-living crisis. Customers still pay it, but this is why we encouraged them onto vaping products; to help their health, save them money and boost our margins.”
4. In independents and symbols the vape market is now worth £1.67bn
While the disposables category continues to grow in popularity, accounting for 88% of all vape sales (ITUK), a ban on these products means big changes for retailers.
However, manufacturers are reminding retailers to be cautious of making any knee-jerk decisions.
“Despite the announcement, it’s unlikely that the demand for disposable vapes will slow down any time soon,” says Imperial’s Yawer Rasool. “So, we recommend that retailers continue to stock a wide range of leading disposables in order to cater to this trend and in turn, maximise sales.”
Disposables are a big seller for Trudy and she is wondering what the future holds. “We were devastated to hear the news about legislation,” says Trudy. “They are a huge part of our business. It’s opened up more questions than solutions, like how will the ban be policed?
“We have nothing to replace the margins we’ll lose. Retailers have invested so much in disposables and we’re now at risk of losing thousands. What will I do with my gantry space? What will I focus on now?”
Ed Heaver, co-founder and CEO of Serve Legal, says that retailers will need to keep vigilant. “The incoming ban on disposable vape products in the UK is likely to prompt some current underage disposable vape users to seek out refillable vape products and refill liquids,” he explains.
“This potential shift poses a challenge for retailers who had already opted not to stock disposable vapes, as they may encounter an uptick in underage customers attempting to purchase refillable vaping products once disposables are off the market.”
5. Pod systems and hybrids will grow in the wake of the disposables ban
Enya is already stocking new vape lines that won’t fall under the scope of the disposables ban. “We had a feeling the disposables ban was coming in last year following a rep visit from Lost Mary. They had gotten ahead of the curve by launching a refill device/pod and they’re selling really well. Customers are saying it lasts longer,” she says.
“We understand why the ban has come in, but it’s a shame for those who are responsible retailers. We’ll sell them until we can’t, but sales have been gradually dropping – we’re £1,000 down compared to last year. Shoppers are moving to reusable devices because disposables can be expensive if you’re consuming enough of them – they’re more cost effective. “
Ebrahim Kathrada, managing director of Aquavape, says: “Our data shows that year on year, disposables have continued to lead the market, however, now pod systems are making an emergence.
“The emergence of more pod systems like SKE 4-in-1, and hybrid vapes like Insta Flow or Elf Bar AF5000 has become more prominent over the past year. As the disposable ban looms, we will start to see the market changing, favouring pod systems and hybrids over disposables as we step into the new era of vaping.”
The trend for value products is also changing what vaping consumers are buying. “Vape products with a high puff count that are better value for money will be making more appearances in shoppers’ baskets – especially products like pod systems (SKE Crystal 4in1) and rechargeable hybrid vapes (Insta Flow, Elf Bar AF5000),” says Kathrada.
6. The new vape tax is set to drive up prices
A vape tax is expected to be implemented by October 2026, according to Chancellor Jeremy Hunt’s Spring Budget speech.
The government’s thinking is that the levy will reduce the amount of young people and non-smokers vaping by making it less affordable.
The proposed vaping duty structure would see a duty of £1 per 10ml on nicotine-free liquids; £2 per 10ml on liquids that contain approximately the same or less nictotine (per ml) than in an average cigeratte (0.1-10.9mg) and £3 per 10ml on liquids that contain roughly more nicotine per ml than in an average cigarette (11mg or more).
The government estimated that the impact on the cost of a 10ml liquid, with a £2.50 pre-duty price, could rise up to £6.10, depending on the nicotine content.
A tax on tobacco will also be implemented in order to maintain the financial incentive to choose vaping over smoking.
Even before the new taxes come into play, Enya says rising costs are causing her shoppers to question whether vaping or tobacco is right for them, but most are sticking with next gen. “Tobacco itself is quite expensive now and while we’ll always have smokers buying tobacco, it’s more the older generation doing so. The younger generation aren’t buying tobacco, especially since the news of the generation ban.”
7. Flavours are driving growth in nicotine pouches, with mint making up 80%
The nicotine pouch category is growing in convenience and is now worth £1.9m a month (Circana). Forty per cent of all nicotine pouch sales come from c-stores, so there is a key huge opportunity to drive sales and profits.
Enya says: “Nicotine pouches are performing well and selling quickly – they’re really popular with sports players and active shoppers.”
Bruce Terry, portfolio brand manager at JTI UK, says: “Mint-flavoured products have soared to new heights within the category, with the market currently split 80% mint and 19% fruit [Circana]. Within these, more specifically, shoppers are looking for these flavours in higher nicotine strengths. A total of 73% of nicotine pouch sales in traditional retail in the UK are from the Extra-Strong or Strong strengths (ibid).”
8. Heated tobacco is now worth £105m, with a growth of 26%
Heated tobacco is another area where the rising cost of living is leading to increased sales. Seventy per cent of heated tobacco consumers are switching from value tobacco lines (Circana), with devices offering smokers savings of thousands of pounds per year.
“Sales of tobacco flavoured variants account for 50% of all refill sales in traditional retail [Circana], with menthol flavours accounting for 38% [Circana],” says Mark McGuinness, marketing director at JTI UK. “We reimagined our EVO tobacco sticks at the end of 2021, featuring a longer filter to achieve a fuller and more authentic tobacco taste experience.”
While the disposables ban is presenting some uncertainty for the next-gen category, there are plenty of areas of opportunity, such as heated tobacco for retailers to keep sales strong. Retailers who invest in a broad range of nicotine alternatives will continue to be destinations for these consumers.
No comments yet