Wholesalers – here is why you have not missed the boat on vaping

Helena Drakakis finds out what you can do in order to not ‘miss the boat’ on e-cigarettes

There are an estimated 3m vapers in the UK, yet many wholesalers have not fully embraced the e-cigarette category.

At this year’s Federation of Wholesale Distributors Conference, Bestway Wholesale managing director Martin Race picked up on the opportunity, urging wholesalers to “get on top of trends and get closer to the consumer”.

“Wholesale has got to take risks with new products. We have virtually lost out on vaping, and look at the size of it,” he added.

The e-cigarette category has mushroomed, with e-liquids the driving force, responsible for a 45% share of the market, according to analyst Nielsen.

However, Sophie Hogg, head of next-generation products (NGP) at Imperial Tobacco, which is behind the Blu brand, says the majority of e-vapour sales – around 75% – still stem from either online stores or specialist vape shops. “They tend to be seen as the current category experts,” she says.

Those wholesalers who have embraced vaping are seeing impressive results.

Grimsby-based wholesaler Dee Bee Wholesale invested in its range and sought specialist advice around eight months ago. Since then, it has experienced 265% growth in the category.

Likewise, fellow wholesaler United Wholesale Scotland predicts £1m sales in e-cigarettes and e-liquids next year having ploughed £250,000 into vape rooms and a business development programme for its retailers.

“Wholesalers who want to succeed must start with their customers and create solutions that work for them,” says managing director Asim Sarwar.

How can you take advantage of all that this new category has to offer? Read on to find out.

Be compliant

The reticence of retailers and therefore wholesalers to commit to the category may be historical, says Kevin Kirkbride, retail sales director at Dee Bee.

“The category was unregulated and brands were slow to react to it. The products on the market were not always the best, so there was negativity,” he says.

Things have changed, however. Larger players, such as JTI and Imperial, have entered the market and standards have been elevated. The consumer is also becoming more aware, especially since EUTPD II legislation restricting sales of tobacco came into force last year. While United’s and Dee Bee’s sales have been driven in part by the success of the Aramax! brand, niche brands such as Doozy Vape Co and Chuckleberry, with higher retail prices, are also proving popular.

Whatever your customers’ needs, Imran Ismail, chief executive officer of Doozy, suggests working with reputable brands to ensure compliance and safety testing is carried out.

“It is vital to ensure wholesalers work with a company that has a Material Safety Data Sheet (MSDS) on all their liquids.

“You should have in writing that the company you choose to work with can provide toxicology reports for all your liquids,” he says.

Educate yourself

With smaller packs of tobacco gone, it is essential that you adapt your tobacco room to use the additional space now available, says Stephane Berset, head of marketing at JTI, which is behind the Logic brand.

Whatever your level of commitment, you need to use space in depot so your retailer customers can understand products better and feel confident enough to invest.

“It takes around £300 to get a credible range in a convenience store,” explains Dee Bee’s Kirkbride, who believes indies have been slow to the category precisely because there is a “lack of education from wholesalers”.

With margins of between 40% and 60% to be had, however, retailers are realising the opportunity, but do need expert help on ranging and merchandising. To that end, Dee Bee has been working with vape expert SMKD. “Our business development managers are out and about educating the retailer, and SMKD sits in on our sales meetings and educates the business development managers,” says Kirkbride.

United’s aforementioned £250,000 investment behind the category included the creation of two vape rooms at its Glasgow depots, complete with kits and around 400 different types of liquids.

“We also created a ‘vaping for dummies’ guide that explained the basics, like batteries, coils, e-liquids and so on,” says Sarwar.

Not only did United appoint staff internally to develop the category, but it also hired an external vape expert who set up around six shops a day.

“Vapers have to feel comfortable leaving their vape shop and have the confidence to come into a convenience store,” says Sarwar, who advocates that your first port of call should be to seek input and advice from as many experts as possible.

Understand the range

“There are a lot of retailers who understand the margins are great, but who think e-cigarettes are not working, but it is because they do not have the right products for their store,” says Dee Bee’s Kirkbride.

In the north-east, where Dee Bee operates, Aramax! has 45% of total category sales, and behind that, Edge e-liquids accounts for 25%.

However, ranges vary from area to area, and Doozy’s Ismail warns that your range should not be wholly price-led, as price often relates to quality.

“More expensive liquids cost more because of the quality of the concentrates, the grade of nicotine. Using less concentrates makes the liquid cheaper but it does not have the same taste and is therefore not as appealing to the user,” he says.

Meanwhile, Imperial’s Hogg says the secret to successful ranging is “about striking the perfect chord between maintaining focus and ensuring consistent availability of bestselling lines, while also offering products that tap into any potential growth opportunities”.

Dee Bee advises retailers to start small and grow the range. Kirkbride recommends a starter pack, such as Blu’s kit, which retails at around £20, as well as core flavours, such as tobacco, menthol and cherry, before expanding.

Get the range right

Blu itself, meanwhile, recommends a range that includes mint flavours, fruity flavours and savoury flavours such as vanilla. “A strong range of flavours, complemented by the right range of nicotine strengths, will help wholesalers and retailers retain existing customers, attract new ones and foster e-liquid sales,” says Hogg.

Meanwhile, as part of its e-cigarettes investment, United developed four solutions, from counter display units with a basic range of 35 vapes, right up to an in-store vape shop. “A lot of manufacturers go in and create a display with their product,” explains Sarwar, “but the reason vape shops do so well is because they have the brands and range people want.

“Our solutions are based on best practice and are not biased towards a brand, but allow the retailer a range.”

United has also split that range into four more categories – entry level, mid-range, premium and super-premium.

In areas with a low socio-economic profile, entry-level brands such as Aramax! tend to work well, says Sarwar, whereas upmarket brands such as Dinner Lady work well in more affluent areas.

Alongside the right range, retailers require education about maintaining a continuity of range, highlights Dee Bee’s Kirkbride.

“Previously, retailers would have a tank for one product, a battery for another and a liquid for something else, and it would not always match up,” he says.

“They need the right starter kits, the right flavours and the right batteries. We tell retailers to keep things simple for consumers.”

According to Doozy’s Ismail, retailers must also understand what equipment works best with what liquids. “Some types of liquids will work best at a certain wattage and therefore will require the correct devices,” he says.

“If the consumer already has a device, the retailer needs to be able to advise on the liquid they can buy to use with it.”

Promote strong displays

With traditional tobacco going ‘dark’, there is a chance for retailers to use free space for eye-catching e-cigarette displays, which are not currently legislated.

“It is about putting strong, impactful display stands in the store, so the consumer can browse that category rather than having things dumped on counters,” says Dee Bee’s Kirkbride. “There is so much more space available and there are some great, positive stands out there.”

Stores selling more expensive kits and liquids should be advised to position their range behind the counter, at a distance at which customers can see the product, but not so close that it can be stolen.

Effective displays should also be part of an in-depot strategy and you should also consider events, says Hogg.

“We recommend competitions, lunch ’n’ learn sessions, taster events and other eye-catching in-depot activations and promotions in order to generate positive word of mouth among local retailers, foster loyalty among existing customers and entice potential new customers,” she says.

Keep up with trends

The vape market has come a long way since the first e-cigarette was introduced in 2007, and it is important wholesalers keep on top of customer habits, which are constantly evolving.

As well as traditional tanks and atomisers, pod systems are becoming popular. “It is a discreet device that is very stealthy and lightweight,” explains Ismail.

“You put a tiny 2ml cartridge prefilled into the device and for the user it is very easy to use and lasts longer than any other vaping device.”

Ismail also suggests vapers are moving away from “big clouds”.

“Vapers are realising they are spending the same money as cigarettes, if not more, and they want to make it more cost-effective,” he says.

“Liquids and devices that give vapers their nicotine fix are becoming popular over reduced nicotine liquids that deliver great taste.”

Blu recently added a next-generation ‘pod mod’ system, MyBlu, to its existing range, along with the new ‘Intense’ Liquidpods, both of which are due to be rolled out in the convenience channel this month.

“MyBlu is also the first widely available pod mod device to feature Nicotine Salts, created by introducing a special compound to the ‘freebase’ nicotine found within tobacco leaves,” says Hogg.

Read more: Boost your e-cigarette sales