Miniature migration

Cigar consumers are continuing to migrate towards miniatures as the knock-on effects of a sluggish economy and smoking ban continue to bite.

The cigar market is dominated by three main players: Scandinavian Tobacco Group UK, JTI and Imperial Tobacco. According to Nielsen, STG’s Henri Wintermans Café Crème Blue commands the biggest market share, followed closely by JTI’s Hamlet (Nielsen Market Track, year to August 2010).

Similarly, the cigar market is still clearly segmented into three sectors according to size – miniature, small and large, says Iain Watkins, Imperial Tobacco’s communications manager.

“The miniature sector grew its share of total cigar sales throughout 2010 and now accounts for more than 55% of the market,” he says. “Small cigars make up just 42% of the sector while large cigars hold a share of around 3%.”?Alastair Williams, trade marketing and communication manager for STG UK, believes the downsizing trend can be attributed to people being “time poor and venue restricted”.

“Undoubtedly the recession has affected sales across the board,” he says. “There isn’t quite as much money slushing around and people aren’t going out as much as they did before. But they can still enjoy a cigar at home. It gives people the opportunity to experiment and reward themselves with some luxuries.”?Mitchell Orchant, managing director of specialist retailer C Gars, agrees people are willing to venture outside their comfort zones. “The new trend is that many seasoned premium cigar smokers who are used to smoking Havanas are happy to experiment and try out New World cigars. Perhaps that is due to quality improving in terms of blending on Dominican, Honduran and particularly Nicaraguan cigars.

“In terms of Havana cigars, exclusive regional editions that we receive annually in limited quantities are extremely popular. The most recent example would be the Por Larrañaga Regalìas de Londres, where 1,200 boxes were made and we sold 100 boxes of 25 cigars on the first day of launch.”?Effects of the smoking ban Watkins says: “The public smoking restrictions introduced throughout the UK over the past few years have definitely had an impact on the cigar segment – especially in pubs, restaurants and in the workplace.

“A nice meal out can no longer be concluded with a brandy and a cigar. Small and large cigar brands are not deemed an everyday smoke because smokers prefer to enjoy them in a relaxed environment where they do not have to rush. However, this change of mindset has seen the miniature cigar brands grow their share of sales as they can be smoked in the same time as a cigarette outside a pub or workplace.”?The recession has also meant an increase in the number of value-for- money products being launched into the market – resulting in lower margins for retailers, says Williams.

“The threat of counterfeit tobacco is greater than ever before,” he adds.

But Watkins says: “Cigars remain a vital category element for off-licence retailers across the UK – last year 400,000 adults who chose to smoke cigars spent around £333 million on their preferred brands.”?Orchant says he has seen positive effects from both the smoking ban and the economic downturn.

“Humidor sales are at an all-time high as more and more cigar smokers prefer to enjoy them at home since the ban and recession generally. I think this is down to comfort purchasing perhaps – spending to enjoy at home and not out in restaurants.

“Our sales of premium cigars have grown at 20% per annum compound since the smoking ban, so the ban has had a positive effect on sales. This year we expect sales to increase by over 25% as cigar smokers enjoy more at home and perhaps dine out less. In times of recession cigar smoking and sales increase.”?Jostling for prime positionWilliams points to another challenge facing retailers. “New product launches have become sporadic, as manufacturers do not seem to want to jeopardise their position on retailers’ gantries.

“There are a lot of brands competing for a finite amount of space on the gantry, so tobacco manufacturers are sometimes reluctant to risk sacrificing the space taken up by an established brand for a new product.

“This cautious attitude has resulted in a lack of innovation and stimulus into the category.”?In 2009 STG launched Café Crème Express – a smaller cigar that takes a similar amount of time to smoke to a cigarette. In August this year Café Crème Silver Filter was launched.

“There’s been a trend over the years for people to migrate across to a smoother smoking experience,” explains Williams.

“There are cigarette smokers who enjoy a cigar as well, so we have tried to make that transition easier for the consumer.”?Williams said there were more innovations on the cards. “There are a few things bubbling away which should be ready to be revealed in the first quarter of next year,” he said.

“We’re looking to invigorate the category – there has been very little NPD from our competitors over the past few years. We owe it to cigar smokers to offer different propositions in the category.”?JTI’s Hamlet had a redesign across its large, small and miniature ranges last month to make it more contemporary.

Head of communications Jeremy Blackburn says: “Hamlet delivers the premium quality, heritage and value for money adult smokers have come to expect from the brand. The contemporary new look will take Hamlet forward and ensure the brand remains relevant to today’s adult cigar smokers.”?Blackburn says cigars experience a marked uplift in both volume and value sales over the festive season.

“The week leading up to Christmas has the highest volume sales for cigars and is the best cigar-selling week of the year.

“Last year, cigar volume sales in December increased by almost 10% compared with the preceding month – an increase equivalent to 4.5 million cigars. Cigar gross retail value increased by £2.2 million in December compared with the previous month.”?In addition, the Christmas holidays provide a number of different celebratory and cigar-smoking occasions, he says.

“Adult smokers will be looking for the right cigar to suit the occasion, whether it’s a single large cigar or a miniature.

“For retailers, ensuring they are offering the right range of cigars is vital to capitalise on this profit opportunity – adult cigar smokers are very brand loyal, so choice and availability is key to driving cigar sales over the festive season.”