Back-bar: Tobacco

Licensees should be looking at cashing in on smoking trends.Whatever the government does to try to stop people smoking, it's going to be hard to...

Licensees should be looking at cashing in on smoking trends.

Whatever the government does to try to stop people smoking, it's going to be hard to break the habit. Tobacco continues to be a huge market in the UK - and one that pubs take a slice of. It may be a small and, currently, diminishing slice but those extra sales can make a significant addition to a pub's take.

Looming over all this, of course, is the threat of a smoking ban. At the moment it looks as though the likeliest result will be to continue to allow pubs without food to permit smoking.

Such a move will inadvertently focus the attention of a large minority of pubs on maximising the opportunities around tobacco. At least that's the best hope of the tobacco manufacturers.

Paul Matthews, who manages the sales channel covering pubs for Imperial Tobacco, believes a ban will have a negative impact on vending machines, partly because of the high cost to consumers. Pubs' share of the tobacco market is already in decline thanks to growing competition from other outlets.

"I don't think vending will disappear but I can see some enterprising pubs might choose to take back tobacco for themselves and sell it across the bar to make it more accessible. Many publicans won't want to lose their smoking customers and they will find all kinds of ways to keep them."

So the steady trend towards vending machines that has seen tobacco disappear from the back-bar could be reversed.

Licensees will be forced to rethink the category. For some that may mean focusing on keeping their smokers happy and doing what they can to maximise sales across the bar.

With greater control over the product, they will be able to benefit from employing the usual rules of category development - understanding their customers and giving them what they want.

And perhaps the dominant shift in the UK tobacco market is price driven. This has not only seen a growth in value-for-money cigarettes at the expense of premium brands but in roll-your-own - and there is a clear opportunity here for licensees to use their back-bar to take advantage, especially those in community pubs.

Roll-your-own

The value of rolling papers in the UK now tops £1m and Imperial recently bought brand leader Rizla, anticipating where the market is going.

"There is an enormous opportunity for pubs to sell not only roll-your-own tobaccos but the cigarette papers that go with them," says Paul Matthews. "They offer high margins and don't need to take up much space on the back-bar.

"Pubs are highly underdeveloped when it comes to rolling papers - the market ought to be two or three times the size it is," he says. In fact, sales of papers shot up 14 per cent in pubs between 2003 and 2004, he reports.

Another trend is strengthening brand loyalty. Tobacco manufacturers are now working in a "dark market" - in effect unable to do anything to promote their brands. This means that new launches are all-but ruled out - unless they are, perhaps, a spin-off of a well-known name. Smokers will stick with the brands they know, and your stocking policy should reflect that.

Which type of smoker?

Gallaher has identified six main types of smoker, two of which predominate in pubs.

Friday nighters: lead an active social life and usually smoke when in the pub with friends. They are not cost-conscious and tend to buy the same top-quality brand, usually from a vending machine.
Budgeteers: buy cigarettes where convenient, often from a vending machine. They are brand conscious but do not want to pay a premium and will switch brands if it's a better price.

Smoke signals