It's been a tough year for smokers, and for the tobacco retailers that serve them.
Smoking was banned in enclosed public places across the UK from last July, and the weather hardly encouraged smokers to take to the fresh air. Then this month, EU legislation on child-proof lighters came into force just before Chancellor Alistair Darling slapped an 11p duty hike on cigarettes and rolling tobacco. And in the autumn we can look forward to the introduction of picture health warnings.
It's no wonder tobacco sales are floundering. In the six months to December 2007, cigarette sales dropped 5.4%, cigars 9.3% and pipe tobacco 10.6% by volume, according to Nielsen. Only rolling tobacco managed to grow sales, by 5.2%.
Nielsen says the cigarette market was worth £9.7 billion in January 2008, and according to leading manufacturers the overall UK tobacco market is worth £13 billion - of which some 80% goes straight into the Treasury's pockets.
The industry expects sales to decline by 3-4% a year in the wake of the ban.
The smoking ban
Retailers OLN contacted are not complaining of severe sales losses since the smoking ban - in fact, many have seen it as an opportunity not just to steal a march on pub vending machines, but to sell other products to smokers who prefer drinking at home to smoking outside pubs.
Costcutter trading manager Steve McCann says: "The general tobacco market is struggling post-smoking ban, but ours is showing some very strong growth, both volume and value-wise, that probably reflects the fact that our stores are in a fantastic position to pick up trade from what the on-trade is losing. Vending machines and cross-counter sales in pubs are in a terminal decline, and more people are now choosing not to drink in licensed premises. Our retailers are in a perfect position to pick up those sales that are lost from on-trade premises."
But some retailers report that sales have slowed. Dave Brown, of Rock Bottom in Cowbridge, says: "I can remember saying to my wife years ago, when cigarettes get to £1 a pack, I'm going to give up. They are now £5 a pack and I'm still smoking. But I think other people have got more common sense - people are smoking less, and I think that is partly down to the smoking ban. Philco [the retail group Rock Bottom is part of] introduced a ban on smoking in enclosed premises as a company rule a year before it became law . We tend to stand in the shop saying, 'I'm going to go out for a fag', but it's lashing down with rain so perhaps I don't. I do notice that I smoke less."
The ban seems to be pushing smokers towards less showy brands, with rolling tobacco and value cigarettes both on the up. In February Gallaher introduced limited -edition 50g price-marked packs of Amber Leaf, last year Imperial Tobacco launched Gold Leaf, and Henri Wintermans has launched a 25g pouch of Natural American Spirit tobacco to cash in on the growth.
Imperial also owns rolling paper market leader Rizla, and in September 2007 introduced Rizla Smooth, a paper designed to make smoking rolling tobacco less harsh.
Gallaher says premium brands such as Benson & Hedges Gold, Silk Cut and Camel still make up a third of all cigarettes sold in the UK. But among the top 10 cigarette brands, less premium brands such as Lambert & Butler, Mayfair, Richmond, Royals and B&H Silver are the ones showing growth, according to Nielsen.
Gallaher has launched Sterling Superkings Menthol 10s to tap into the value sector and growing demand for menthol cigarettes.
McCann says: "People are certainly trading into the low and ultra low -price cigarette sector. That is possibly driven by people not smoking while they are out as often, so there is not the same pressure on them to smoke the big or premium brands as there would be when they were out with friends and in company. They are more likely to smoke the lower- priced products if they are at home."
Brown says: "I think sales are holding up reasonably, but people are certainly trading down. The cheaper brands are selling better while the more expensive brands, such as Bensons & Hedges and Silk Cut, are quietening down. We are selling a lot more rolling tobacco, filter tips and papers."
But Denise Miles, of Clarkson's of Selsey in West Sussex, has had a different experience: "I have noticed that the smoking ban has pushed people back into the main brands. I thought it would go really cheap and cheerful, but we are selling so many Benson & Hedges and Marlboro s - expensive brands.
"We are selling more drink," she adds. "I think people don't want to stand outside and smoke. It is easier to go home with a few bottles of wine or beer and be able to smoke in your home, for the winter anyway. The summer will be different, I'm sure."
Close, but no cigar
The social element of smoking has undoubtedly had an impact on cigar sales, which slumped 9.3% in the six months to December.
Mike Rogers, of Philglas & Swiggott in Battersea, London, stopped selling cigars a couple of years ago because he thought the space his humidor took up would make more sense and money as a wine fixture.
"Smoking cigars is an aesthetic pleasure, and I think that aesthetic pleasure comes into its own when you can show off in public being seen smoking a cigar," he says.
"It is a social pursuit, and the moment society prohibits you from smoking in society I think you are more inclined to say: I'm not going to light up a six-inch cigar at home and smoke it, and I'm certainly not going to stand out in the garden because it will take me an hour and a half."
The space where Rogers' humidor used to live is now home to a section of Californian wines. "We have not lost any customers because we are not selling cigars," he says. "The people who would come in and buy them would only buy one or two - they wouldn't buy wine and spirits as well."
Alex Roberts, manager of Wines of the World in Clapham, says: "Because we only sell cigars the smoking ban hasn't affected us at all. A lot of people who give up smoking smoke cigars, or move to having a cigar a week or whatever it may be - personally I'm in that situation. Mini cigars are selling more because they do fill the gap for people who are going to the pub and want to have a quick smoke."
Miniature cigars now hold 48% of the cigar market and that will grow to 51% by 2010, according to Imperial Tobacco, which distributes Henri Winterman's market-leading Café Crème range.
The brand was given a new look in 2007, and commercial marketing head James Higgs says: "Miniature cigars continue to drive growth in the total UK cigar market. We are confident the new logo and exciting pack redesign has increased awareness and interest among smokers."
For Ian Loftus in York, whose Evil Eye Lounge is a shop attached to a bar, the smoking ban has had little effect and he expects to see sales pick up in summer.
"I think our smoking area is quite good so they don't mind. It is better to smoke outside if you are a cigar smoker because it absolutely stinks," he says.
"In our other shop, The Bottle, cigars are more of a tourist trade. Once the Americans start arriving from Easter onwards, they come in and buy them by the box load."
Like him, many retailers will be holding out to see what this summer brings - if it is good weather, it could at least slow the sales decline for a few months.
March 26 2006: smoking is banned in enclosed public places in Scotland
April 30 2007: smoking is banned in enclosed public places in Northern Ireland
July 1 2007: smoking is banned in enclosed public places in England and Wales
Oct 1 2007: selling tobacco to
under-18s becomes illegal
March 11 2008: selling cigarette lighters that do not conform to EU
child-safety standards becomes illegal
March 12 2008: Chancellor Alistair Darling announces 11p duty hike on
20-packs of cigarettes and 25g rolling tobacco packs, 4p on five-packs of cigars and 6p on 25g packs of pipe tobacco
Oct 1 2008: all tobacco products manufactured in the UK must display a pictorial health warning on the back of the pack
Sept 30 2009: all cigarettes without PHWs must be sold - after this date it will be illegal to sell them
Sept 30 2010: all other tobacco products without PHWs must be sold.
Will graphic warnings help smokers kick the habit?
Picture health warnings are to be introduced on cigarette packs this autumn, and by October 2010 it will be illegal to sell any tobacco product without an image warning on its back.
The pictures - which will rotate in the same way written warnings currently do - are to cover 40% of the back of cigarette packs, while the front of the pack will still carry a written warning.
EU health commissioner Markos Kyprianou says: "A picture paints a thousand words. Images help smokers to visualise the nature of tobacco-related diseases and convey health messages in a clearer way."
But UK retailers don't think the warnings will encourage smokers to kick the habit.
"I don't think it will make any difference at all," says Denise Miles, of West Sussex off-licence Clarkson's of Selsey. "Writing on it made no difference at all. People used to go: 'I want the one that says it hurts the mother and child'. It hasn't made a scrap of difference to most of the smokers - obviously people are trying to give up, but I think they are trying to give up mainly for the price rather than it doing them any good."
Dave Brown, of Rock Bottom in Cowbridge, adds: "It won't work, because the written warnings haven't and I have been smoking for 46 years now."
Do you need help or advice on the new regulations, counterfeit, under-age sales or how to boost your revenues? Try these websites and helplines:
Gallaher Customer Careline: 0800 163503
Imperial Tobacco UK Trade Support: imperial-trade.com or email@example.com
Henri Wintermans' free quarterly Cigar Focus: 020 8731 3400
The Tobacco Manufacturers' Association: the-tma.org.uk