With the spectre of plain packaging looming ever-larger and the final piece of the display ban puzzle set to click into place in April, these are worrying times for the tobacco industry. And it’s not just the government making life tricky for the big manufacturers; the downtrading among their core customer base is also becoming more acute. Just see the rise of budget brand Sterling to the top spot for proof.

Given the hefty tax hikes imposed every year by the Chancellor in the Budget, the machine-rolled cigarette category remains in value growth, up 4% on last year to £12.7bn. However, volumes are down 2.2% and, most pertinently, volumes have fallen for all of the top 10 cigarette brands this year as shoppers continue to drift towards the cheapest end of the market and roll-your-own (RYO) tobacco.

tobacco tpt

“Tobacco shoppers are continuing to demand a lower out-of-pocket spend and better value for money when purchasing their tobacco products,” says Rachael Geake, communications director at Imperial Tobacco UK. “Currently the economy and sub-economy-priced cigarette brands account for over 50% of all cigarettes sold in the UK, and growth in this sector looks set to continue.”

JTI UK head of communications Jeremy Blackburn agrees value has become an even bigger driver in both the cigarette and RYO category, which has proved a catalyst for the sensational growth of JTI’s economy brand Sovereign Blue. The brand, which only launched in 2013, is now the 12th biggest seller. Sovereign Blue sales increased by more than £200m (415.3%), the greatest absolute growth in this year’s Top Products survey.

Imperial Tobacco this year followed suit with the launch of Lambert & Butler Blue in March at £6.40 for a 19-pack. It too has experienced rapid growth, reaching sales of £81m to make it the 23rd biggest-selling brand.

The RYO sector remained buoyant with sales up 10.8% by value and 4.4% in volume terms. Laraine Jones, buying director at CTN chain Rippleglen, says JTI’s Amber Leaf now accounts for 40% of RYO sales, with strong growth also from Imperial’s Gold Leaf. However, she warns the illicit market is still a threat. “It’s a huge problem that is not being tackled and will get worse if plain packaging eventually gets the go-ahead.”

Marlboro gold

Top launch: Marlboro Gold Original by Philip Morris

Despite the difficult trading conditions affecting premium cigarette brands, the iconic Marlboro Gold has held up pretty well, with sales up 5.8% year 0n year by value and down just 2% in volume.

Nonetheless, the time seems right to expand the brand into the key growth area in tobacco: roll-your-own. And so, after a soft launch at various music festivals in the summer, Philip Morris launched Marlboro Gold Original rolling tobacco in August - its first UK move into rolling tobacco.