TOB: Can you tell us a little about Imperial Tobacco’s history in the U.S. market?
Tim Jones: Prior to April 2007 Imperial Tobacco’s foothold in the U.S. came through ownership of Robert Burton Associates, Ltd., whose business consisted of mainly tobacco accessories sold under the brand names Premier, E-Z Wider, Joker, Rizla, El Rey, and Club. It was not until the acquisition of Commonwealth Brands, Inc., that FMSC [factory-made-cigarettes] and loose tobacco became part of Imperial Tobacco’s portfolio in the U.S. Imperial’s most recent acquisition of Altadis has now given us significant presence in the world’s largest cigar market.
TOB: Imperial Tobacco acquired Commonwealth Brands in April of 2007. Can you tell us a little about the reasons behind the acquisition and the company’s plans for growth in the U.S. market?
Jones: Imperial Tobacco had been looking at the U.S. market for some time, given its position as one of the top volume markets worldwide. Whenever Imperial Tobacco enters a new market, there is always the choice to enter via acquisition or through organic growth. When the opportunity arose to enter the U.S. FMC market through Commonwealth Brands, it was clear that this at the time was the optimal choice, one that the company therefore decided to pursue.
TOB: The RYO/MYO market has been on an upsurge in the U.S. due to rising tobacco taxes and cigarette price hikes. Do you expect that rise to continue?
Jones: Yes, we believe the U.S. loose tobacco market is growing by 10 percent to 15 percent a year and—given the reasons you outlined in your question—this RYO/MYO growth is predicted to continue.
TOB: The tobacco outlet channel is well-suited to the RYO/MYO category. Which of your products performs best in the outlet channel?
Jones: It is too early too tell as we only introduced Premier Loose Tobacco and re-launched McClintock Tobacco in bag format early this year. We now have three loose tobacco brands in distribution, all designed to appeal to different sectors and as time goes on we expect there will be a clearer picture as to which performs best.
TOB: You recently introduced Premier Tobacco. What is your sense of the growth potential of the loose tobacco market in general and what are your goals for Premier tobacco?
Jones: As mentioned, it is still early in the launch to truly assess the performance of Premier Tobacco. If our success with Premier Tubes and Injector machines is any indicator, there is a positive outlook for the performance of Premier Tobacco. Premier Tubes and Injectors are arguably the leaders in both segments, which indicates that Premier Tobacco should capture a significant consumer base within the mainstream segment of the loose tobacco category.
TOB: With cigarette margins continually being squeezed, many outlets are looking to expand RYO/MYO departments. What, in your view, can outlet merchants do to build their RYO/MYO business?
Jones: Proper store plan-o-grams would be a start. Often when you enter an outlet, you will find loose tobacco merchandised in one part of the store, while the cigarette tubes, rolling papers, and injector machines are in a completely different section. The onus is on the manufacturers to effectively communicate with, educate, and improve both retailers’ and consumers’ understanding of the RYO/ MYO category.
TOB: Do you plan to introduce any new products or promotions that it would be appropriate to mention?
Jones: Yes, we are planning a number of consumer-focused activities that we anticipate will increase existing consumer’s awareness and interest of our products.
TOB: How important is firsthand knowledge of the various RYO/MYO processes boosting sales in the category? How can retailers get their employees up to speed?
Jones: It is safe to say knowledge is essential to the growth of sales within the loose tobacco category. I mentioned earlier that the responsibility of education sits with the manufacturers. As Commonwealth Brands has historically been a cigarette company, our focus internally needs to continually change. All field sales personnel have been fully trained to improve their understanding of the RYO/MYO category so that they can transfer this knowledge to the retailers. In turn, the retailers will be better placed to transfer the knowledge onto their consumers to increase their understanding.
TOB: What else can outlet merchants do to maximize the potential of RYO/MYO?
Jones: Price increases in the U.S. are forcing many consumers to seek less expensive forms of tobacco. It is important for retailers to make sure they have the right mix of products if consumers decide to make a change. Proper merchandising of the category is essential and it could start with grouping the products within each category together in their store’s plan-o-gram. The consumer should be able to enter a store and find loose tobacco, rolling papers, cigarette tubes, and machines in the same section to assist them in their purchase decision. •
