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[ COVER STORY]
RYO heats up
Retailers better be ready to roll with the changes
by Timothy Bryers
In the dynamic world of roll your own/make your own cigarette products, tobacco retailers had better have their eyes open for the next innovation because RYO/MYO is a lot like computer technology, the next must-have product is right around the corner. People may get into RYO as a less expensive alternative to those highly taxed packaged cigarettes, but with a little effort and education on the part of the retailer, RYO/MYO can become a highly profitable product of preference.
Once tobacconists settle on which products to stock, they have to be thoughtful about how they display the latest rolling papers, rolling machines, or tobacco blends because presentation is everything. The tools of the RYO/MYO trade are marketing, pricing, distributing and staying a step ahead of the competition. It’s a lot of smoke, literally, and mirrors to sell high-end specialty tobaccos, cigarette rollers, tubes and specialty papers, all aimed at a specific consumer audience: the discriminating smoker who has rejected the offerings of the packaged cigarette industry.
“Point-of-sale materials such as banners, posters, shelf -talkers or racks all are eye-catching and draw attention to RYO,” says Dean Rouse of M &R Holdings, Inc. in Pink Hill, N.C. Rouse says the manufacturers of RYO products are very willing to assist retailers and customers on the ins and outs of the RYO phenomenon. “For customers not aware of how to roll your own tobacco, Farmers Gold RYO has made the first ‘How To Roll Your Own’ video in the industry,” he says. “It clearly explains how simple it is to roll their own cigarettes and save a lot of money.”
Rouse says product variety is crucial for retailers. “The critical element of a RYO section is to provide a variety of blends of RYO along with point-of-sale materials,” he says. “Consumers are looking for quality RYO products at a fair price. Cheap RYO tobaccos are now available but  consumers always get what they pay for. Therefore, price is what attracts consumers, but quality is what generates repeat sales and happy consumers.”
Rouse also said private label RYO is a growing segment of the industry. “It allows retailers to have their own brand, generating repeat sales,” he says. “Additional items would be private label tubes. These products are available only from that retailer, which encourages customers to come back and buy their products.”
M & R, which manufactures Farmers Gold RYO, is the largest private labeler of RYO tobaccos in America. “We carry in stock more than 36 different blends of RYO,” Rouse says. “We also customize tobaccos to meet any requirements from our customers. In addition we offer leadership and support to our customers with a variety of free point-of-sale materials to promote our products.” All M&R products come with a complete satisfaction guarantee backed by Rouse, a seventh-generation tobacconist.
One of the exciting new products on the market—and a development that very well could send shock waves through the industry—is a cigarette-rolling machine that will make a pack of cigarettes in two minutes, according to the product’s manufacturer, Sally Baldwin of Fresh Choice of Benicia, Calif.
“If you sell RYO or MYO, you are going to want this machine,” says Baldwin. “This machine will revolutionize RYO.”
The first Fresh Choice Electric Cigarette Maker became available April 28 and the machine costs between $399 and $499. “Other companies have tried this and some of the units turned out to be unsafe or they just didn’t work,” says Baldwin. “When we produced this machine we decided it has to be fast, it has to be safe and it has to work.”
Baldwin says the industry response to the cigarette maker has been fantastic. “There’s a waiting list for the machines,” she says. “I’m not a smoker and I enjoy making cigarettes with this machine. It’s like making a good cup of coffee.”
Baldwin says the consumer cost savings is enormous for smokers who make their own cigarettes and Fresh Choice means smokers no longer have to fear the next tax or big tobacco price increase.
“You can now make your own cigarettes with the push of a button and enjoy better cigarettes with the Fresh Choice System,” according to Fresh Choice’s Web site promotional material for the new machine. “The Fresh Choice Electric Cigarette Maker allows you to enjoy the pleasure of smoking pure tobacco.”
The new machine also comes with a warranty.
One of the innovators in the RYO/MYO market is without a doubt HBI International, a multinational tobacco company and tobacco products distributor with offices in Arizona, Canada and Germany. This is a shrewd business that knows how to market new products to niche audiences. “HBI is the fastest growing market leader in RYO/MYO innovation,” says the company’s spokesperson Josh Black. “We are constantly introducing new products. In a field like ours that is based simply on paper and tobacco, it’s pretty hard to innovate.”
But innovate they do. HBI has elevated rolling paper marketing to an art form. “We have a new rolling paper called RAW. It’s a brown paper, it has a brownish hue, but you can see through it—it’s almost translucent,” says Black. “These kinds of products are for people who want the purest smoking experience, the most natural smoking experience.”
HBI, Black says, is always angling to stay a step ahead in a fast moving market. “When hemp paper was in favor with the alternative market we developed a rice paper called Elements.”
HBI’s mission is to help retailers stay on the cutting edge of the RYO/MYO phenomenon. And retailers with an eye on the younger demographic, consumers with money and designer tastes, would be well advised to keep track of the HBI product line.
“People who are really into the RYO think they are individuals on the cutting edge—they like having their own papers, their own tobacco,” says Black. “It’s like people who make their own beer.”
“The advice we give to retailers is, ‘You’ve got to set yourself apart from other retailers,’” says Black. “Retailers can accomplish this by sprucing up displays. Make your RYO visible from the cash register, so that when a consumer views side-to-side the products are within viewing distance.”
HBI sells to more than 4,000 retailers in the U.S. and 3,000 of those are full-line tobacconists, Black estimates.
Sometimes HBI innovates by going retro. The company’s latest product release is a tobacco called Three Castles Tobacco. “It’s a kind of tobacco that is golden and dates back to the 1500s,” says Black. “We’ve revived a dormant tobacco line and given it new life.”
Black stresses the importance of retailers offering consumers products they can’t get at a convenience store.
“On the west coast of America, Zig-Zag papers are sold at almost every convenience store, cigarette stand and tobacconist,” Black says. “If you sell Zig-Zag papers, there is no reason for the consumer to choose your store. The consumer can much more easily purchase them at the local gas station while he is filling up, or at any convenience store that is closest. You are forced to price-compete with tens of thousands of other stores and to accept a small profit margin.
“In interviews with some of the most successful specialty tobacco retailers across the USA, they all cite verbatim that one of the biggest keys to their success is differentiating themselves from their competitors,” Black continues. “The undeniable fact of today’s super-competitive marketplace is that the consumers have an abundance of choice. There are many ways to differentiate your store from your competitors but the winning method is to have a better selection and to promote that better selection. Although this carries through to all products, we are concentrating on RYO products. There are two types of RYO products in the marketplace; commercial brands (big brands) and specialty.”
Black encourages retailers to carry specialty brands and actively promote specialty brands. “Elements is one of the most popular and profitable specialty papers. If you sell Elements, you draw in consumers that are forced to come back to you. If you get the consumer to choose Elements as their preferred brand then they will come back to your store to purchase them,” he says. “There are much fewer stores that carry Elements so you have less price-pressure to compete. You can charge a premium price and increase your sales. In short, you win in two important ways.”
“Remember that when you win someone over to a specialty brand, you have just increased your profits and odds that the customer will return to your store astronomically,” says Black. “Why would a consumer return to your store to purchase a commercial brand when they can get that commercial brand at a store that is more ‘convenient’ to them? Sell them a specialty brand and you’ve perhaps got a customer for life.”
L. Arnold Hamm, of the Flue Cured Tobacco Coop Stabilization Corp., in Raleigh, N. C., says they are preparing the introduction of a new tobacco blend called 1839 for the RYO/MYO market. “We expect to introduce 1839 in June,” Hamm says. “It’s a very exciting product. 1839 is unique to the RYO or MYO market as it will be a 90 percent flue and burley tobacco blend.”
“It will contain no reconstituted material and it will have an expanded stem,” he says. “We made a conscious decision to make a product that will have the highest tobacco content. This is a much higher quality than the purchased packaged product.”
Hamm says 1839 is to be marketed in mild, regular and exotic blends. “The flavor of the regular 1839 is not unlike what you saw in the 1940s, ‘50s and ‘60s. The traditional recipe has a similar aroma. In the exotic blend, the aroma is not unlike a fine pipe tobacco,” says Hamm.
Hamm says the corporation will market the product in a traditional way but adds that this RYO product is targeted to the more discriminating consumer. “Our objective is to give the consumer the best value for the money spent,” he says. He would not offer details on the pricing.
He says the RYO market keeps growing steadily and that tobacco manufacturers are now up to nearly 18 million pounds a year. “We are making a product that is targeted to an audience that is tobacco distributors and retailers and the unique thing about our product is that it contains no foreign-grown tobacco,” Hamm says. “This is a deal that is way better than what the packaged tobacco companies can offer and it is a much higher quality tobacco.” TR
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