Cigars: Up in smoke

By Éilis Cronin in Category Management 5th November 2021

The rise of the cigarillo has made a big impact on the market for cigars. “It used to be the case that only around a third of all sales went through the independent trade, but now that figure is just below 50% and that is largely due to so many cigarillos being sold in this channel,” says Alastair Williams, country director at Scandinavian Tobacco Group UK (STG UK).

Rival manufacturer JTI says cigarillos now account for 45% of the market, while Williams believes the figure is about 39%. “However, in the run-up to Christmas, we know it’s usually sales of larger-format cigars that go up, so it’s really important for retailers to get their range right so they can enjoy those extra sales and rewarding profit margins, which are typically three times those of cigarettes.”

Seasonal driver
Clearly, then, the cigars category continues to be a key seasonal driver. “Every year, cigar sales follow a very similar pattern, with a spike in volume in December as Christmas approaches,” says Ross Hennessy, sales vice president at JTI UK.

“In December 2020, for example, cigar sales volume increased by 6% versus the prior month. Therefore, now is a good time to stock up on cigars to take full advantage of this seasonal profit opportunity.”

As at other times of the year, Williams says it is important for retailers to offer a range of different price-points. “Typically at Christmas time, adult smokers will treat themselves and trade up, but of course this doesn’t mean retailers need to start stocking expensive Cuban cigars.

“It may be as simple as a miniature cigar smoker opting to jump to a panatella, for example.” He says STG’s Henri Wintermans Half Corona is the best-performing medium to large cigar in the run-up to the festive period, so urges retailers to make sure they have them in stock.

Ranging decisions
He adds: “When it comes to ranging decisions at other times of the year, it is worth noting that nearly 90% of total cigar sales in the UK come from the top 10 brands, so there’s little point in offering a wide variety. The most important thing to consider is to make sure you are catering to your local customer base and tailoring your range to their needs.” Signature Blue is the best-selling traditional cigar in the UK, he says.

One change to the market arrived with the ban on menthol-flavour cigarettes, which came into force in May 2020. Hennessy at JTI says the ban has boosted the cigars sector, paving the way for new, innovative variants. “With menthol and capsule smokers now unable to purchase their preferred traditional tobacco product in the wake of the ban, many are seeking alternatives.”

JTI’s Sterling Dual Capsule Leaf Wrapped cigars are made with mentholated Virginia-blend tobacco and a capsule filter that releases a peppermint flavour when crushed and have been a crucial footfall-driver for retailers in recent months, says Hennessy. “Retailers should monitor this category trend to make sure they are able to capitalise on any developments and potential profit opportunities.”

By David Shrimpton, Editor