Still aflame
How can well-established tobacco manufacturers seek to grow their businesses at a time when there has never been more social and regulatory pressure about the very act of smoking? It is a thorny question, and frankly not one to which there are any easy answers.
As you might expect, a certain degree of pragmatism is a prerequisite for success (and even survival) these days, and many of the world leaders and rising suppliers that spoke to Frontier this month alluded to duty free/travel retail strategies founded on long-term brand enhancement and sensitive exploration of potential new markets when and as they arise.
House of Prince
Scandinavian-based operation House of Prince is among them. According to Henrik Frøkjær – the company’s marketing manager, export markets – the supplier continues to emphasise its core, close to home territories while exploring opportunities elsewhere.
“Being a Scandinavian-based company with a strong position in the Scandinavian markets, the main airports in Norway, Sweden and Denmark are of great importance to our duty free business,” he confirms. “However, the ferries offering duty free sales are also successful.”
Straightforward, price-off promotions are helping to support House of Prince brands across this retail channel. “In the past year we have executed a number of price-off promotions since this has proven to be the most effective mechanism in supporting the duty free sale.”
Elaborating on House of Prince’s current plans, Frøkjær continues: “At present we are working with brand building as well as geographical expansion. Our duty free portfolio has been widened from mostly Prince to Slim Agenda (super slim) and Rockets (semi slim).”
The slim-stick, stylishly-packaged Slim Agenda brand has met with a particularly encouraging reaction since its recent design revamp. “Slim Agenda has been tested across markets and the brand has received very positive feedback from both trade and consumers,” he concludes.
Imperial
As the countless positive trade media headlines during 2006 suggested, Imperial Tobacco’s duty free operation has been enjoying a particularly successful phase of late. Placing a renewed emphasis on its premium brand, Davidoff, has proven to be a winning strategy as customers become increasingly inclined to ‘trade-up’.
Buoyed by the recent acquisition of discount cigarette manufacturer CBHC Inc (which trades as Commonwealth Brands), Imperial looks set for further growth in 2007. It is a year in which, as far as the duty free/travel retail business goes, Davidoff will continue to be top priority.
“Davidoff cigarettes are Imperial Tobacco’s focus in duty free and this will continue in 2007,” says Mark Robinson, Imperial’s trade marketing manager global duty free. “With the acquisition of the trademark in the second half of last year, Imperial Tobacco will continue to invest in Davidoff cigarettes to accelerate its global growth, whilst carefully guarding its position as a high quality premium offering.” The link with Design Hotels, announced last year in Cannes and covered subsequently in Frontier, provides Davidoff cigarettes “with a global platform to work with”; details of how the link will tie-in to the duty free operation are set to be revealed soon.
There will also be further support of two other key Imperial brands: “West will launch some new special edition packaging for Central and Eastern Europe in the coming months, and there will be a continuation of the policy of ensuring the UK’s number one cigarette brand, Lambert & Butler, is available where British travellers are present.”
Von Eicken
At a time of increased sector diversity, Von Eicken’s regional director Asia, Israel & France, Mary Lam, attributes the company’s strong form to an extensive product selection and an internal structure that allows for changes in the market to be responded to rapidly.
“Since our company offers a wide spectrum of products which includes quality pipe tobaccos, hand-rolling tobaccos, filter cigarettes, cigarette specialties, hand-made and machine made cigars, nasal snuff tobaccos and even water-pipe tobaccos, we always have something to meet individual market demands,” she tells Frontier. “Moreover the hierarchy within our company is relatively flat; we can
react to market changes quickly. I believe these are some major strengths of Von Eicken.”
Accordingly, Lam notes the way in which the ten-flavour Harvest hand-rolling tobacco brand has resonated with public demand for “novelties”.
A number of new projects are currently in development, and Lam says that “some of these will be ready by May for worldwide introduction during the TFWE AP in Singapore”.
Protégé International
For fast-rising distributor Protégé International, the focus in this category continues to be on Fender Tobacco Inc’s increasingly extensive range. After Hours, Silhouettes and High Roller among the offers in a portfolio that, says Protégé International CEO Andre Levy, is proving evermore attractive to Travel Retail customers.
The response to the low-tar Silhouettes, in particular, has been “exceptional,” says Levy. “It’s rapidly established itself as a product of its time, and one that will stand the test of time.” Among the retailers to have taken on the brand is Taiwan Duty Free, which Levy reports recently made a substantial order for both Silhouettes and After Hours.
In the case of the latter brand, he believes that Fender Tobacco has developed a product which plugs an important gap in the contemporary marketplace: “After Hours has come in and, to a very great extent,
created its own niche of people who are smart, well-travelled, have a sophisticated point of view and want to make an informed choice.
“It’s quite an extensive and diverse group of people who are open to new influences. There’s been a huge expansion of the middle class, particularly in the Far East and Eastern Europe, resulting in more people with disposable income and who want something different that reflects their era. After Hours seems to be filling this particular niche extremely well.”
Further developments from Protégé during 2007 are set to include a line extension of After Hours entitled After Dark.
New Century
Ensuring continued growth is no mean feat these days for the mainstay manufacturers, so how does a fledgling supplier go about establishing a foothold in this problematic business? That is the challenge currently being undertaken by US-based New Century Tobacco Group. Founded less than two years ago, the company already possesses an extensive portfolio of brands – including Fact, Stampede, Traffic and Passport – and is making duty free/travel retail a key part of its growth strategy.
As New Century president/CEO Alex De La Cruz admits, it is still early days, but he has high expectations for a distribution agreement that is set to take the flagship Fact brand – which features the innovative (and much-discussed in trade circles) Filligent filter – to a number of new markets this year in both domestic and travel retail.
“We’re going to be getting into Germany, Hungary, Luxembourg and Italy by the end of 2007,” he says.
While De La Cruz concedes that sales to this point have “not gone ballistic crazy”, he is hopeful that, with a growing public profile, the Fact brand could win some invaluable advocates in high places. “Something or someone has got to come out and say that people smoke – which you should not, you should quit – but if you are one of those unable or unwilling to quit that this is the brand you should smoke,” he says. “Once someone prominent says that they recognise what the brand does, I think that will really open the doors for us.”
While FACT is the operation’s top priority, New Century is not neglecting its other brands. Stampede is said to be performing well in Canada despite “little or no marketing”, while Passport has picked up listings in the Middle East and several South American countries.
De La Cruz and team are aware that much hard work awaits them if their brands are to join the likes of Prince and Davidoff as international tobacco mainstays. But whatever the future holds, TR is going to be a central tenet of New Century’s strategy.
“When people see products in stores at the airports, they see them as prestigious. Unfortunately, some of the stores at the airports only want to carry the top ten world brands, which makes it a little difficult for us. But you know, we’ve really been doing pretty good so far.”
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