Cigarettes and Smoking Cessation Aids - UK - May 2008

Table of Contents

• Issues in the Market
• Key themes
• Definitions
• Abbreviations
• Market in Brief
• Cigarettes still a huge industry
• The big hitters
• Legislation creates hamstrung industry
• Impact of smoking ban
• Plenty of reasons to give up
• Smoking cessation aids still ripe for growth
• The future
• Internal Market Environment
• Key points
• Smoking in long-term decline
  • Figure 1: Trends in cigarette smoking, 2003-07
• Potential quitters double
  • Figure 2: Cigarette smokers who are trying to give up, 2003-07
• Less smoking of cigars and hand rolling tobacco
  • Figure 3: Smoking of hand-rolling tobacco, cigars and pipe tobacco, 2003-07
• Smuggled cigarettes steal money
  • Figure 4: Smuggling and cross-border shopping, 2002/03-2005/06
• Anti counterfeit scheme
• Budget 2008 -- tax increase
• The right to smoke
• Restrictions on cigarette advertising
• Pictorial Health Warnings
• Must be 18
• Hidden display in the offing?
• VAT reduction on nicotine replacement products
• Broader Market Environment
• Key points
• Anti-smoking views intensify
  • Figure 5: Changes in socio-economic status, 2003-2013
• More potential smokers
  • Figure 6: Changes in the UK demographic profile, by age, 2003-2013
• Ban on smoking in public places
• Young DE women least favour the ban
• Health v pleasure
• Competitive Context
• Key points
• Cigarettes
• Addiction to the nicotine rush
• Recreational drugs
• Swedish Snus
• Smoking cessation aids
• Willpower competes
• Strengths and Weaknesses in the Market
• Strengths
• Weaknesses
• Market Value and Forecast
• Key points
• Cigarettes
• Volume drives down value in real terms
  • Figure 7: UK retail sales of duty-paid cigarettes, by volume and value, 2003-13
• Smoking ban accelerates volume decline
• Smokers adapt to ban
• Must be 18
• Gradually contracting to the core
• Trading down as key consumers' incomes are squeezed
• Lower socio-economic form core smokers
• Government loses billions
  • Figure 8: UK duty-paid and non-duty-paid sales of cigarettes, by volume, 2003-08
• Effect of EU expansion
• Smoking cessation aids
• Pressure to quit
  • Figure 9: UK retail sales of nicotine replacement products, by value, 2003-13
• Growth more than halves as ardent smokers remain
• The young should form target
• The future
• Segment Performance
• Key points
• Cigarettes
• Price sensitivity slows creeping average price
• Pack price of 20 increases
  • Figure 10: Typical UK retail prices of cigarettes per pack of 20, by price category, 2003-08
• Price increases due to increases in tax and duty
• Convenience and price dictate purchase
  • Figure 11: UK retail volume sales of duty-paid cigarettes, by price category, 2003-07
• Smoking cessation aids
• Patches and gums continue to dominate
  • Figure 12: UK retail sales of nicotine replacement products, by type and value, 2003-07
• Market Share
• Key points
• Cigarettes
• Imperial occupies imperial position
  • Figure 13: Cigarette manufacturers' UK market shares of duty-paid sector, by volume, 2005 and 2007
• Gallaher' s success with Sterling
• Internet
• Smoking cessation aids
• Shares stable but sales grow
  • Figure 14: Manufacturers' shares of smoking cessation aids market, by value, 2005 and 2007
• Companies and Products
• Key points
• Cigarettes
• Imperial Tobacco
• Gallaher
• Philip Morris International
• British American Tobacco (BAT)
• Smoking cessation aids
• Nicorette
• NiQuitin
• Nicotinell
• Boots (NicAssist)
• Nicobrevin
• Nicopatch/Nicopass
• Brand Communication and Promotion
• Key points
• Cigarettes
• Restrictions on cigarette advertising
• Point of sale availability crucial
• Cigarette display ban
• Smoking cessation products
• Advertising spend surges ahead
  • Figure 28: Main media advertising expenditure on smoking deterrents, 2003-07
• NiQuitin retains No.1 slot
  • Figure 29: Main media advertising expenditure on smoking deterrants, by brand, 2005-07
• Channels to Market
• Key points
• Cigarettes
• Forecourts lose least
  • Figure 30: UK retail distribution of duty-paid cigarettes, by value, 2005 and 2007
• Forecourts and grocery multiples gain
• Forecourts need smokers
• Forecourts and brands
• Multiples
• CTNs
• Internet
• Smoking cessation aids
• Pharmacies enjoy greatest gains
  • Figure 31: UK retail sales of smoking cessation aids, by outlet type and value, 2005 and 2007
• Multiples lose share but gain sales
• Internet
• Smoking Habits and Effect of Ban in Public Places
• Key points
• Volumes head south
  • Figure 32: Trends in cigarette smoking, 2003-07
• Fewer people smoking
• Less heavy smokers
• Cigarette of choice
  • Figure 33: Type of cigarettes smoked, 2003-07
• The challenge to patches
  • Figure 34: Methods used to try and give up smoking, 2003-07
• Smokers divided on wanting to give up
  • Figure 35: Smoking habits, March 2008
• Typical never smoker
• Affordability not an issue for the smoker
• Smoking higher in Scotland
• Effect of smoking ban in public places
  • Figure 36: Impact of the smoking ban in public places, March 2008
• Mixed response to the ban
  • Figure 37: Smoke fewer cigarettes of smoke more at home since ban, by age and socio-economic group, March 2008
• One in ten quit after the ban, but will it be for good?
• Impact greatest in Scotland, Ulster and North West
• Appendix -- Broader Market Environment
  • Figure 47: Agreement that: ' The ban on smoking in public places is a good idea, by demographic sub-group, 2007
• Appendix -- Smoking Habits and Effect of Ban in Public Places
  • Figure 48: Cigarette smoking, by demographic sub-group, 2007
  • Figure 49: Smoking patterns, by demographic sub-group, 2007
  • Figure 50: Smoking habits, by demographic sub-group, March 2008
  • Figure 51: Impact of the smoking ban in public places, by demographic sub-group, March 2008