Cheaper cigarettes target consumers on budget

Smokers on a budget are the latest target for the UK’s largest cigarette companies.

As the slowdown in consumer spending deepens, Imperial Tobacco and Gallaher are chasing the low end of the market with price cuts and cheaper brands.

Imperial, which controls 46 per cent of the market with brands such as Lambert & Butler, is set to fire the first shot next month with the launch of JPS Silver, which will retail for £4.21 for a pack of 20.

In response, Gallaher is planning to slash prices on Sterling, its budget brand, by 7 per cent to £4.20 a pack.

“Gallaher recognises that the market may be set to down trade during the credit crunch with consumers looking to make savings on their purchases,” said the company, which commands about 39 per cent of the market through brands such as Benson & Hedges and Silk Cut.

Sales of cigarettes at the budget end of the market – defined as those priced at £4.60 and below for a pack of 20 – have seen strong growth in recent years.

The sector accounted for 10.5 per cent – or £1bn – of total sales last year, compared with 6 per cent in 2005. The figure is expected to increase to 12.5 per cent by the end of the year.

“This accelerated growth is a result of the recent economic downturn,” said Rachel Smith, for Imperial. “Rises in fuel and food costs have encouraged adult smokers to down trade.”

However the focus on low price cigarettes has angered health campaigners.

“We regard anything that makes cigarettes cheaper as a step back,” said Martin Dockrell of the health charity Action on Smoking and Health. “The problem with cheaper cigarettes is that it keeps the poorest smokers smoking.”

Source: The Financial Times, 10 October 2008
Link: http://tinyurl.com/3tmprr

Smuggled tobacco 'kills more than illicit drugs'

Four times as many people die from the effects of smuggled tobacco than from illicit drugs, a report has found.

A study published in the British Medical Journal , conducted by Cancer Research UK experts, claims that four thousand deaths could be prevented in the UK each year if tobacco smuggling was abolished.

The authors claim that low income smokers are more likely to smoke smuggled cigarettes and that people from lower income backgrounds are twice as likely to die from smoking related illnesses compared to people from high income backgrounds.

Robert West, from Cancer Research UK, said: "Smuggled tobacco is more dangerous than duty-paid tobacco because it brings tobacco onto the market cheaply, making cigarettes more affordable. Cost is a major deterrent to smoking and the availability of cheap cigarettes, often for sale at half to a third of their official price, removes or greatly weakens the price incentive to quit.

"If we are to lower smoking rates and reduce health inequalities in this country, the government needs to treat tobacco smuggling as a national emergency and act now to stop the trade."

Official figures from HM Customs and Revenue (HMRC) claim that 22 per cent of all the tobacco smoked in the UK is smuggled into the country, representing 18 billion cigarettes out of the total 82 billion.

The authors of today's report estimated that if authorities were able to eliminate the smuggling of tobacco the total number of cigarettes would fall by five per cent and 4,000 fewer people would die from the effects of smoking.

Deborah Arnott, Director of the charity Action on Smoking and Health (ASH), said: "A further crackdown on smuggling is necessary."

She called on the government to publish new targets and make them a joint responsibility for HMRC and the UK Border Agency, so they can be held accountable for their performance in reducing smuggling.

Jean King, director of tobacco control at Cancer Research UK, described the government's response to tobacco smuggling as "weak" and described smoking as the "single biggest preventable cause of cancer."

Link to the full research: 
http://www.bmj.com/cgi/content/extract/337/oct09_2/a1933?papetoc

Source: inthenews, 10 October 2008
Link: http://tinyurl.com/4kffsj

R.J. Reynolds Preps Dissolvable Tobacco

R.J. Reynolds Tobacco will dive deeper into the smokeless category next year by nationally distributing Camel Snus and introducing in test markets dissolvable alternatives to cigarettes called Camel Sticks, Camel Orbs and Camel Strips.

The new products, grouped under the Camel Dissolvables banner, are smokeless and spit-free; they are made from finely milled tobacco and held together with food grade binders. The products will launch in the first quarter in Columbus, Ohio, Portland, Ore., and Indianapolis. The Camel Dissolvables Sticks can be placed in the mouth like a toothpick or broken into a piece that is placed between the upper lip and gum, where it dissolves after 10 minutes.

The three forms of smokeless tobacco will be packed in plastic, child-resistant packaging. Strips will come in Fresh mint flavor and Sticks in Mellow; Orbs will be available in both flavors. Camel Dissolvables deliver between 0.6 to 3.1 milligrams of nicotine, while cigarette smokers typically inhale about 1 mg per cigarette.

Advertising is still being developed, but a company rep said print ads, direct marketing, sampling (at bars and nightclubs) and POP will support. The Reynolds American unit currently has a company policy that restricts advertising cigarettes in consumer publications. That self-imposed ban does not apply to other tobacco products and trade publications.

By introducing the products in select test markets, RJR hopes to find out which forms of Camel Dissolvables are the most popular, and how demographics or usage determines preferences. The product concept partly evolved from consumer feedback, following a test of Camel Snus in 2006. Camel Snus is also spitless, but some smokers said they didn’t care for loose tobacco or pouched smokeless products, particularly ones they had to remove from their mouth after use.

The smokeless category has been a magnet for cigarette makers with sales averaging 5% to 7% annually, per various estimates. Although there is a growing body of literature contending that smokeless tobacco is less harmful than smoking cigarettes, a 2007 study by the American Cancer Society found that male smokers who switched to smokeless had higher death rates than men who quit or never smoked. Camel Dissolvables will not be positioned as a smoking cessation or reduced risk product, per the company.

"The consumer should be aware of the information available about the potential risks of each tobacco product. There are none that are safe and there are none that are without risks," said RJR rep David Howard.

In addition to introducing the new dissolvable alternatives, RJR will expand distribution for Camel Snus (pronounced snooze) by offering retailers countertop and under the counter refrigerator units to keep the product cold.

In 2006, Reynolds American acquired Conwood, the second largest maker of smokeless products in the U.S. Philip Morris USA's smokeless products include Marlboro Snus and Marlboro Snuff. Altria, Philip Morris' parent company, expects to close by January on its purchase of UST, the holding company for U.S. Smokeless Tobacco, the largest smokeless product company and maker of Skoal and Copenhagen.

Source: Brandweek
Link: http://tinyurl.com/3ldmtd