Vape expectations

Worth an estimated £160m and growing at just shy of 10% in the last two years, and with further rapid growth anticipated for 2018, the UK’s vaping category is now well on its way from fragile infancy and barrelling steadily towards the heady vibrancy of youth.

In fact, looking to the future, JTI predicts that by 2020 global sales will reach €25.5bn (£22.75bn). “We are therefore investing significantly in research, production capacity and new product development to lead the global market with Logic,” says JTI’s head of reduced risk products (rrp) Nick Geens.

And it’s not just sales that are on the up. Despite the introduction of new rules and restrictions under the EUTPD2, the last year alone has seen continued growth in product ranges – particularly in the e-liquids sector which represents the driving force of value sales within the vaping category, at 39% (Nielsen w/e 25.10.17 MAT).

Sophie Hogg, head of next generation products at Blu, elaborates: “The sheer volume of different devices, liquids and components now available on the market is eye-watering.

“Long gone are the days of ‘cigalikes’ as consumer tastes have shifted to new devices, such as the ‘open’ systems we’re seeing become increasingly popular.”

Just last month e-vapour brand Blu expanded its portfolio with the launch of its latest next-generation ‘pod mod’ system, Myblu, along with its new ‘Intense’ Liquidpods.

The Myblu device combines a high-performance vaporiser which takes just 20 minutes to charge, while the device’s “hassle-free” Liquidpods allow consumers to switch between flavours in seconds via a simple one-step ‘click and go’ system.

The product is also the first widely-available pod mod device to feature nicotine salts which are absorbed into the body much faster than regular nicotine-containing e-liquids.

This rapid nicotine absorbtion by the lungs creates a sense of “instant satisfaction” when inhaling, which is much closer to the hit achieved when smoking a traditional tobacco cigarette.

The development means that the Myblu Intense product is likely to hold a strong appeal for 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,” explains Blu’s Hogg.

“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,” she adds.

Available online now, the Myblu Starter Kit has an rrp of £19.99 and includes a Myblu device, USB charger and one tobacco-flavoured Liquidpod.

The Myblu Intense Liquidpods retail at £5.99 for a pack of two 1.5ml Liquidpods and come in four flavours. A selection of 11 freebase Myblu Liquidpods are also on offer, including zero, 0.8% and 1.6% nicotine strengths, and are sold in packs of two pods with an rrp of £5.99.

Within the vaping category, capsule and refillable products are currently the fastest-growing devices, now used by 91% of UK vapers according to JTI, whose ‘reduced risk product’ portfolio includes Logic LQD, Logic PRO and the rechargeable lightweight Logic Curv.

However, as Hogg warns, “after a strong start, retailers are now losing out to both online stores and the many vape shops that have sprung up across the UK”.

With well over 2,000 vape shops now thought to be open for business in the UK and counting, competition within the sector is fierce and getting tougher by the day. And let’s not forget the many sales that are also being made via discount shops, market stalls and other outlets that might not traditionally have sold tobacco.

With competing on price not among the most sustainable options (especially when said discount retailers are increasingly selling e-liquids for less than £1), it is the retailers who set themselves apart from the competitive melee by positioning themselves as experts in the field who are in the best position to profit from the great vape opportunity.

Convenience retailers such as Sid Sidhu, of Kenilworth Budgens in Warwickshire, are learning from the cream of the vape store crop, investing in educating their staff and diversifying their product ranges, offering a full shop-within-a-shop solution to cater for all vaping needs.

“From Sainsbury’s Local to B&M everyone is trying to get in on vaping but it’s not necessarily proving to be a success for all of those outlets because real vapers want more than they’re offering,” he says.

“Unlike so many stores out there, vaping is not something we dabble in; we are true specialists and people come to us from miles around.

“We have two fully-trained members of staff who have excellent product knowledge, plus we offer a full repair service. We are basically a vape shop within a c-store that offers a complete solution which is what people who are serious about vaping want.”

Sid sells a really broad range of devices and e-liquids, including an increasing number of zero-nicotine products.

“Demand for these types of zero nicotine products seems to be coming from new adult vapers who have never smoked tobacco before but who are choosing to vape as a lifestyle choice,” he explains.

“There are also many former tobacco smokers who have moved to vaping and used nicotine products to start with, and gradually moved down the strengths until they hit zero. It’s a bit like the idea of drinking decaf coffee - plenty of people do so because they like the taste but don’t want the caffeine hit. As a result we now sell around 20 different types of zero nicotine e-liquids.”

On the flip side, Sid adds that so-called ‘nicotine shots’ are also becoming increasingly popular. The shots, which contain 10mg of pure nicotine, are used by adult vapers to strengthen the nicotine content of their e-liquids, which was restricted to 20mg/ml following the implementation of the EUTPD2 last year.

“Since the introduction of the EUTPD2 manufacturers were banned from producing products with a nicotine strength of more than 20mg/ml. However the law doesn’t prevent the manufacture or sale of pure nicotine shots in sealed bottles which vapers can later use to top up their e-liquids with if they wish,” Sid adds.

And the vaping products industry appears to have found another loophole around the EUTPD2 restrictions on tank sizes which outlawed the sale of tanks any larger than 2ml, as Michiel Carmel, manager of Vape and Volt in Camden, London explains. “While the new law was well intentioned, much of the regulations were written by people who didn’t fully understand the vaping category or how it was developing,” he says. As a result, manufacturers have since produced larger 5ml “accessory” tanks not covered by the legislations, which vapers can use to augment their devices.”

 

Another emerging area worth keeping tabs on is ultrasound vaping products. Unlike battery-powered e-cigs, which use an atomizer or coil to vaporize e-liquids, ultrasound products use the high frequency vibration of ultrasound to create vapour - removing the need for coils. And according to Michiel, sales of Usonicig’s ultrasound products are starting to gain ground in his store.

Also gaining ground is the number of positive endorsements that the vaping category as a whole is now generating. Earlier this year, Public Health England (PHE) acknowledged: “Vaping poses only a small fraction of the risks of smoking, and switching completely from smoking to vaping conveys substantial health benefits.”

However, as a result of the swathes of negative press that first circulated around the category in its early days, many consumers are still displaying trepidation, the report adds.

Professor John Newton, director for health improvement at PHE, said: “Our new review reinforces the finding that vaping is a fraction of the risk of smoking, at least 95% less harmful, and of negligible risk to bystanders.

“Yet over half of smokers either falsely believe that vaping is as harmful as smoking or just don’t know. It would be tragic if thousands of smokers who could quit with the help of an e-cig are being put off due to false fears about their safety,” he added.

It’s a concern which also presents retailers with a “clear opportunity” to engage with consumers in terms of category education and advice, “potentially resulting in these consumers choosing to shop in independent stores, rather than online or in specialist vape shops,” Blu’s Hogg adds.

 

Tobacco category update

It may well be down, but the UK’s tobacco category most certainly isn’t out - especially not in convenience where it remains a major footfall driver. In fact, while the latest total UK tobacco market statistics suggest that sales are down 6.5% on last year, with sales of just over 41 billion sticks per year (Imperial Tobacco Estimates April 2018), many convenience store retailers claim that their sales are static, or indeed have risen in the year since EUTPD2 and plain packaging was enforced, with large numbers of adult smokers buying the new larger packs with the same frequency that they did smaller ones, whilst at the same time increasingly turning to the convenience sector for more expert advice and service in the new tobacco retailing environment.

In terms of the category breakdown, factory-made cigarettes (FMC) appear to be taking the biggest hit, down 8.7% in volume terms and 7% down in value, while conversely, sales of roll your own (RYO) tobacco are continuing to enjoy a surge in popularity, helped by the ever-present trend towards value for money.

Charles Brading, owner of Vic’s stores on the Isle of Wight, says his tobacco sales are up year on year, helped by a rise in RYO volume and value sales.

“I think that to some extent the new laws that banned the sale of small packs and pouches of tobacco have failed as adult smokers are just smoking all of what they have and then buying more.

“We’ve definitely seen a rise in sales of RYO over the past few months. It offers smokers much better value for their money. Our customer service has also improved thanks to the installation of a new automatic tobacco vending machine, so maybe that’s helping too,” he adds.

Andrew Miller, head of field sales at Imperial Tobacco UK, says RYO has been increasing its share of the overall tobacco category in the UK.

“Between 2014 and 2016 RYO saw an average monthly gain in White Stick Equivalent (WSE) share of just 0.07%. However, through 2017 – as EUTPD II regulations came into effect – RYO’s share of WSE grew more sharply. It increased by an average of 0.18% per month in 2017, almost triple the rate of overall category growth.”

The continued success of RYO presents retailers with a “significant opportunity” to maximise sales by stocking up on value priced products, JTI’s head of marketing Stephane Berset adds.

“Independent retailers should also be aware of two recent RYO trends that have developed during the transition to EUTPD2 packs - the pouch format has increased in share, and there was also an increase in share for the 50g pouch format within the independent and symbol channel,” he says.

And while innovation has undoubtedly been knocked by the arrival of EUTPD2, and the UK laws on plain packaging, it’s certainly not been beaten into the ground, with a smaller, yet steady, stream of new product developments having taken place this summer alone.

“By investing in innovative new products that meet consumer demand, and providing staff training through JTI Advance and sales reps, JTI has successfully launched new product development to the current market this year,” JTI’s Berset continues. “We re-launched Kensitas Club in January 2018 - which is now the fastest growing tobacco brand in Scotland.”

Keen to exploit the growing success of the capsule cigarette segment, which now accounts for almost 15% of total cigarette sales in the UK, JTI also extended its capsule range with the addition of three new value products: Sterling Dual Superkings 20; Sterling Dual Double Capsule King Size 20; and B&H Blue Dual Superkings 20.

Imperial’s Miller says it, too, “remains committed to innovating within the category”.

Recent examples of Imperial’s innovation include a string of JPS portfolio enhancements: firmer filters for JPS Real Blue; filter flow channels for JPS Silver Stream; and menthol pack liners for JPS Green Edge. ‘Easy Pull’ foil tabs on Lambert & Butler Original packs were also introduced earlier this year, adding to the recent arrival of Gold Leaf Ice Pack which features mentholated tips – a first for the RYO category. The Rizla range of rolling papers were also re-launched in “stylish” new product and outer packaging. As well as a more modern aesthetic, each pack now features a ‘tuck in’ closing mechanism designed to reduce wastage, plus a ‘soft touch’ finish designed to make the packaging feel more tactile.

 

Cigars

Worth £198m in the UK, the cigars category still presents a significant sales opportunity for retailers, especially at this time of year, thanks to the hot weather and increase in outdoor smoking opportunities.

The recent EUTPD2 restrictions on pack sizes, from which cigars are exempt, are also providing some benefit to the cigar category. STG’s head of marketing and public affairs Jens Christiansen explains: “Demand for value is nothing new, having been a major consumer trend for many years now, but as our research shows, it can mean different things to different people.

“The restrictions on pack sizes within the tobacco category have come with a higher price for many shoppers. However, given their exemption from these restrictions, cigars are often the cheapest option for shoppers.

“Cigars still benefit from being exempt from the restrictions around minimum pack sizes and standardised packaging so they can still be branded beyond the product name and can be wrapped and sold individually, or in 10 packs.

“This means some cigars are now the cheapest option available on shelf, which may attract existing smokers from other categories,” he adds.

And STG anticipates that the value for money trend will gain even more momentum as the year progresses.

“With the small cigar segment worth £74m, we believe with the right product there is a huge opportunity to capitalise on this demand for value and drive growth back into the category,” Christiansen adds.

To tap into this demand for value, STG launched Moments Panatella last year which is available to buy in packs of five with an rrp of £4.20, making it the cheapest product on shelf within the segment. “Thanks to its exemption from the plain packaging restrictions, the range also benefits from an eye-catching yellow design to help stand out on-shelf,” he concludes.