The future looks bright

At the last count the UK’s vaping market was worth an estimated £167m (Nielsen w/e 25 October 2017 MAT) and growing at a rate of about 12% year on year, with independent retailers accounting for 39% of the UK market.

It’s a sum that should certainly make even the most archaic of convenience store retailers sit up and take note of the category. And the truth is that those figures could sky-rocket should the UK government finally take heed of the growing swell of calls from health professionals and its own committees to release the legislative hand brake and allow the market to reach its full potential.

Hot on the heels of a report by Public Health England which estimated that e-cigs were 95% less harmful than normal cigarettes comes a report by the government’s Science and Technology Committee (STC) which concluded that e-cigs should not be treated in the same way as tobacco and that a raft of current laws relating to their licensing, prescribing, advertising and use in public places needed urgent reconsideration.

Topping the list of recommendations in last month’s report was a review of the current 20mg/ml limit on nicotine refill strength – introduced under the revised EU Tobacco Products Directive which came into force last May.

Limiting nicotine strength in this way could be hampering quit attempts using e-cigs, “as heavy smokers may be put off persisting with them,” the STC states.

The STC also called for an “urgent review” of the current 2ml restriction on tank size, which it says “does not appear to be founded on scientific evidence”.

The current restrictions on e-cig advertising also need another look, as part of a shift to a “more risk-proportionate regulatory environment, where regulations, advertising rules and tax duties reflected the evidence of the relative harms of the various e-cigarettes, heat-not-burn and tobacco products available,” it adds.

Commenting on the report, Norman Lamb MP, chair of the STC, says: “Smoking remains a national health crisis and the government should be considering innovative ways of reducing the smoking rate.

“E-cigs are less harmful than conventional cigarettes, but current policy and regulations do not sufficiently reflect this, and businesses, transport providers and public places should stop viewing conventional and e-cigs as one and the same. There is no public health rationale for doing so.”

He adds that concerns e-cigs could be a gateway to conventional smoking, including for young non-smokers, have not materialised. If used correctly, e-cigs could be a key weapon in the NHS’ stop smoking arsenal, he points outs.

“E-cigs are a proven stop-smoking tool and, while uncertainties undoubtedly remain about their long-term health impact, failing to explore the use of e-cigs could lead to the continued use of conventional cigarettes – which currently kill about 79,000 people in England every year,” Lamb adds.

Legislative review needed

Many in the vaping industry have welcomed the report and its calls for urgent legislative reviews and change.

Brett Horth, CEO of the Vapouriz brand, says: “One of the biggest challenges we face is the legislation that puts us, unfairly, in the same category as cigarettes when it comes to communicating with our consumers.

“The vaping industry is fast paced, with innovation and technology driving rapid change. It is often confusing for consumers and puts people off making the switch from the more harmful cigarettes that they might be currently smoking.

“While we absolutely agree there should be some regulation, it would be great to be able to talk to consumers directly. Anyone we can help switch to the 95% healthier alternative to cigarettes has got to be worth it.”

However, he does believe that there are areas of the vaping market that do need more regulation.

“One of the other challenges is labelling and clarity on ingredients. Many of the popular ‘short fills’ don’t contain nicotine so are less regulated, and there is little known about what is in them.

He highlights a recent report in the Observer about vapers unwittingly smoking liquids containing a strain of synthetic cannabis that was banned in 2016 under the Psychoactive Substances Act.

“We believe there should be more transparency in labelling of all liquid ingredients, not just those covered by the Tobacco Products Directive (TPD),” Horth adds.

Reports such as the one referred to above certainly go no way towards boosting the category’s standing in the minds of sceptical would-be vapers, meaning that expert research and trusted advice will also be more critical than ever in 2019.

Pooling research

Little surprise, then, that the STC report also called on the government to help facilitate further research and, crucially, to support the creation of an official online hub where evidence could be made available to the public, health professionals and the retailing industry.

The creation of such a hub would certainly help in demystifying the category for all, dispelling the many misconceptions that still deter conventional cigarette smokers from trialling e-cigs and hold many retailers back from investing more confidently in the category.

In September a YouGov survey of more than 12,000 adults for ASH revealed that almost a quarter of smokers still wrongly believe that vaping is as harmful, or more harmful, than smoking – a falsehood that could be holding thousands of traditional tobacco smokers back from successful quit attempts, ASH points out.

Sophie Hogg, head of next generation products at Blu UK, says: “The more widespread, positive word of mouth around vaping, the better.

“After all, 40% of UK smokers still haven’t even tried vaping (Public Health England), suggesting that huge potential opportunities exist for retailers to engage with consumers in terms of category education and advice to help them switch.”

 

Tax relief

The news that prices aren’t about to take a significant jump is also positive news for the category and future opportunities. HM Treasury recently confirmed that it had “no current plans” to implement a new tax on vaping products.

In a letter to the UK Vaping Industry Association, Exchequer Secretary Robert Jenkins says that vaping products had “a role to play in reducing smoking, as set out in the Department of Health and Social Care Tobacco Control Plan Towards a Smokefree Generation”.

He adds: “I recognise the contribution the vaping industry makes to the economy in terms of jobs and revenue to the Exchequer and welcome the fact the UK has a world-leading vaping industry.”

Unsurprisingly, this reassurance has been well received by the vaping industry and retailers alike.

Ketul Desai, owner of The General Store in Tufnell Park, London, says e-cigs are becoming an increasingly big part of his business. “I definitely see that continuing, but only if the government invests time and money to better understand how the category works and keeps its current word on not saddling it with new taxes.

“I recently added a Vape Station offer to my store as part of a major refit and it’s made us a real destination.

“The appetite for quality vaping goods is certainly out there, and even bigger opportunities lie ahead for retailers who believe in the category and take the lead.”

But with competition in the vaping industry fierce, taking the lead doesn’t necessarily come easy. To stand out in this increasingly competitive market place, retailers and their staff need to become true experts in the field.

“Retailers are increasingly losing out to both online stores and the many vape shops that have sprung up across the UK,” Blu’s Hogg admits.

“By building and expanding their knowledge on the category so they can effectively advise their customers, retailers have an excellent opportunity to cater for consumers who are new to vaping and may be otherwise intimidated by the many devices and liquids on offer.

“We are committed to helping retailers tap into this opportunity and have a whole host of free tools available to help them upskill their category knowledge, including our Retailer Guide to Vaping and eye-catching pos to boost visibility in stores.”

Ketul is also a staunch advocate of working with his suppliers for mutual benefit. “The category can feel like a bit of a minefield at times, so working with good suppliers is really important. They are incredibly helpful if you take the time to foster relationships with them,” he adds.

“It goes without saying that staff training and knowledge are key when dealing with such a fast-paced category that is evolving all the time. Having a wide range with lots of variety is really important so that you can cater for all tastes and needs.”

Ketul certainly had it right when he described the category as fast paced. Recent months have seen a further flurry of high-profile new launches onto the market, in line with emerging trends.

Closed systems, or pod mod devices as they are also known, have featured highly in the innovation stakes this year and look set to play a larger role in 2019.

In a similarity with the coffee capsule market, these closed systems function with mess-free, easy-to-use pre-filled e-liquid pods, and are proving popular with new vapers.

Vype’s new ePen 3 uses pods and a simple ‘click fit’ design which the company says makes it smoother and simpler to swap between one of its seven flavours. These include: blended tobacco; crisp mint; wild berries; golden tobacco; dark cherry; fresh apple; and infused vanilla.

Blu’s latest myblu device also features “hassle-free Liquidpods” and a simple one-step ‘click and go’ system. It says this not only makes it “convenient and easy to use”, but also makes it simple for retailers to understand and therefore sell.

“With 57% of new vapers opting for closed systems, we’re incredibly excited about the possibilities myblu and our unique Intense Liquidpods offer as we seek to widen the scope of our product offering in this dynamic new category,” Blu’s Hogg adds.

The myblu system also includes a high-performance vaporiser, which takes just 20 minutes to charge.

The device features nicotine salts, touted to be the next big thing in vaping as a result of their ability to speed up the rate at which nicotine is absorbed into the body, when compared with conventional e-liquids.

“By delivering a sensation of satisfaction closer to smoking a traditional cigarette, myblu Intense will appeal to adult smokers who are either looking to switch to vaping for the first time, or have perhaps tried vaping in the past and not been fully convinced,” Hogg adds.

Also getting in on the salts craze is Vapouriz. CEO Brett Horth explains: “Nicotine salts are set to be the next big introduction in the highly innovative vaping sector.

“Nic salts are naturally found in the tobacco plant. They provide a smooth draw along with a fast nicotine hit that tobacco smokers often crave.

“At Vapouriz, we are introducing nic salts to our most popular flavours in two key brands: Vapouriz; and Double Drip.”

Vape Dinner Lady, the vaping company which claims to serve “nostalgia in a bottle” via its broad range of flavours such as lemon tart and blackberry crumble, is also big on nic salts.

“Nicotine salts are already proving popular with Vape Dinner Lady customers, a trend we have been at the forefront of in the UK market. This type of liquid is set to be a prominent seller in the convenience sector,” business development manager Brian Watts says.

 

Fashion sense

That’s certainly not been it for innovation. September also saw a collaboration between Vype and the British fashion brand House of Holland on the runway at London Fashion Week, to create a limited-edition Vype ePen3 collection.

The collection claims to fuse the “sleek design and sophisticated technology of the all-new ePen 3 with Henry Holland’s signature style of bold, disruptive design with a playful colour palette to match”.

The Vype x House of Holland capsule collection boasts five ePen 3 limited-edition designs plus three bespoke vaping accessories – a neck wallet, body harness and a clutch bag – all of which have been designed to “hold and show off the ePen 3 in all its glory”.

Gemma Webb, general manager at British American Tobacco UK, says: “This British partnership from two trusted UK brands has resulted in an exciting range of products to suit modern, fashionable, adult vapers.”

Another trend that is becoming increasingly big news in vaping is CBD. Visitors to this year’s National Convenience Show can’t fail to have noticed the plethora of exhibitor stands featuring CBD e-liquids for vaping, and the market looks set to grow in 2019 as vapers and retailers alike learn to separate the fact from the fiction.

In a nutshell CBD, or cannabidiol as it is also known, is one of the many naturally occurring constituents of cannabis. Because CBD is isolated from the rest of the cannabis plant, it does not lead to any of the side-effects or highs associated with smoking cannabis.

CBD is not a controlled drug under the Misuse of Drugs Act 1971, neither is it covered by the Psychoactive Substances Act 2016. As long as it is marketed as a food supplement without any medicinal claims, it is perfectly legal to sell and to buy.

And while CBD products including e-liquids for vaping cannot make claims about its therapeutic properties, the so-called benefits are widely extolled by users. Many are reporting its help with anxiety, aches and pains, digestive troubles and sleep.

Vapouriz’s Horth says: “CBD products are a great opportunity for the convenience sector. There is already a growing consumer demand.

“Like all liquids, it is important that consumers look for high-quality, clearly labelled products so they know exactly what they are vaping.

“We are currently researching the possibility of producing some ourselves in our ISO Class 6 state-of-the-art clean room at our HQ in Surrey, where we have full control over the entire production process, including the component ingredients which if we don’t manufacture are sourced from a highly vetted list of suppliers.”

Sid Sidhu, owner of Budgens Kenilworth in Warwickshire, also thinks that CBD for vaping could provide a key opportunity.

“I think the CBD market could hold quite a bit of potential as it matures and consumers and retailers alike learn more about it. At the moment it still feels more like the preserve of specialist vape shops, but it doesn’t have to be that way.

“Education is crucial, and retailers who invest in truly understanding the category could do well out of repeat sales to adult customers who genuinely feel that it is of benefit to them.

Sid says he started stocking a CBD brand about five months ago. “There was definitely interest from adult vapers who wanted it for the right reasons and not just to try out as a result of some of the sensationalist coverage that’s appeared in the national press. There’s definitely a huge amount of false information out there that needs correcting with education.

“This month I’m off to NACS in Las Vegas where I am expecting to learn a lot more about the category and see how to potentially develop it in my store.”

He points out, though, that it’s definitely not the kind of product that retailers should just stick on the shelf without a thought

“The pricetag that CBD commands would probably prevent you from doing that in any case as CBD is not cheap! High-quality products retail in the region of £35, it’s quite a premium product, and that alone will deter a lot of shoppers. It can, of course, be bought for cheaper, in lower strengths, but I doubt that users would say these products would have much, if any, beneficial impacts.”

 

RYO on a roll

Away from vaping, and back in the traditional tobacco category, UK sales of roll your own (RYO) are continuing to grow, fuelled by challenging economic conditions and the relative value for money that this sector still offers hard-up smokers, especially when compared with cigarettes which can now of course only be bought in packs of 20 or more.

According to JTI data, the RYO category is now worth almost £2.6bn and growing 7% year on year. Little surprise, then, that both JTI and Imperial have worked on new product development of late: Imperial with Riverstone (see box, p54) and JTI with Kensitas Club Rolling Tobacco.

In August JTI added the RYO offering to its Kensitas Club cigarette brand, which it claims is Scotland’s fastest-growing cigarette brand.

The Kensitas Club Rolling Tobacco launched with an rrp of £10.90 for a 30g pouch and £17.80 for a 50g pouch – JTI’s lowest price for rolling tobacco which it claims will help retailers to capitalise on the growing value-priced RYO segment.

Cigars in growth

As we barrel steadily towards Christmas, a look back at the previous months reveals that 2018 has borne some interesting fruit for the UK cigar market.

Jens Christiansen, head of marketing & public affairs at Scandinavian Tobacco Group UK (STG UK), explains: “The cigar market in the UK, currently worth £199.4m, is reporting a minor increase of 0.4% overall, with the miniatures and medium/large cigar segments reporting an increase of 4% and 5.2% respectively.”

Overall, the top 10 cigar brands account for 89% of the total cigar sales and 85% (£168m) of value sales, highlighting just how important it is for retailers to ensure they’re stocking the leading brands, Christiansen adds.

Thanks to their value for money credentials, miniature cigars continue to dominate the market, accounting for an impressive 72.5% of the total cigar volume and £103.3m in value sales and growing, according to IRI MarketPlace data for w/e 13 August 2018.

Christiansen says that given the “major drive towards value and the uncertainty of what lies ahead for the UK’s economy, it’s unlikely we will see a shift in this trend anytime soon”.

STG research also shows that price in terms of out-of-pocket spend has the greatest influence on consumer tobacco purchasing decisions, coming out top of the poll (61%), with perceived value for money a close second (47%).

However, Christiansen says it’s important for retailers to recognise and understand that value for money means different things for different people and urges them to be able to advise customers on which cigar products would be best suited to their needs.

“For those looking for the cheapest out-of-pocket spend, cigars offer many benefits given the changes in pack sizes within the wider tobacco category has come with a higher price for many shoppers, making some cigars the cheapest option,” he says.

The 5.2% growth coming from within the medium/large segment could be down to a parallel trend towards premiumisation, says STG, “as certain consumers seek out products such as Henri Wintermans Half Corona that given the perception of a luxurious lifestyle”.

The fantastic summer experienced by most parts of the UK this year also contributed, by providing even more opportunities to smoke outdoors.

The sunny picture may continue given the sales opportunity offered up by the festive season. Last December sales of cigars increased by 7% in comparison with the previous month, with larger cigars from the medium/large cigars segment, such as Henri Wintermans Half Corona, reporting a 14% increase, according to STG.