Tobacco is holding its own. Despite ever-more stringent legislation, the category has barely dropped in value since this time last year. The fall of just 0.1%, represents a slowdown in its long-term decline after last year's slightly steeper slip.

Budget lines continue to grow the category, with Richmond up by 8.1%, not including Superkings, and Mayfair up by 2.9%. And although the total market dropped in value slightly, it is still worth £9.3bn, with leading-brand Lambert & Butler alone accounting for £1.3bn.

Tobacco producers are carefully watching the markets in the Republic of Ireland and Scotland to assess the impact of the ban on smoking in enclosed public places that is due to be extended to England in 2007.

Reports suggest that though the market in Ireland dipped initially, sales there are back to the same level as before, although smokers have changed where they smoke and where they buy from.

Even with the prospect of a total ban across the UK, coupled with a ban on advertising, the category has not lacked innovation this year.

The majority of activity has centred on the budget sector, as smokers have traded down to cheaper brands. Gallaher launched its budget brand, Sterling, nationwide this year after selling solely in multiples, while Imperial Tobacco expanded Windsor Blue with five variants, ranging from King Size to Superkings Menthol.

Meanwhile, Gallaher's Benson & Hedges Silver grew in value by a whopping 46.5% over the year. The company attributes this to its limited edition Silver Slide pack and continuous growth.

Companies also turned their attention to cigars. Gallaher entered the miniature market - currently led by Imperial Tobacco's Henri Wintermans' Café Crème - with Cappuccino. Producers believe the miniature market can attract more female and younger cigar smokers in a category heavily dominated by men aged over 50.

Meanwhile, roll-your-own has acquired a more positive image, with Gallaher stretching its Amber Leaf range and Imperial continuing to focus on Golden Virginia and Drum.n