vaping hotspots · 2019. 6. 14. · rates of vaping among the adult population, as is the case for...

Vaping Hotspots The spread of the vaping industry across the UK and its potential as a replacement for smoking July 2018

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© Centre for Economics and Business Research

Disclaimer

Whilst every effort has been made to ensure the accuracy of the material in this document, neither Centre for Economics and

Business Research Ltd nor the report’s authors will be liable for any loss or damages incurred through the use of the report.

Authorship and acknowledgements

This report has been produced by Cebr, an independent economics and business research consultancy established in 1992. The

views expressed herein are those of the authors only and are based upon independent research by them.

The report does not necessarily reflect the views of Philip Morris. London, July 2018

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Contents

Executive Summary 4

1 The shifting composition of the UK High Street 6

2 Growth of the vaping sector 10

2.1 Geographic distribution of vape shops 10

2.2 Rates of vaping across Great Britain 13

2.3 Rates of smoking across Great Britain Error! Bookmark not defined.

3 Consumer survey of vapers and smokers 15

3.1 Success of vaping as a means of reducing smoking 15

3.2 Time taken for vapers to reduce their smoking 16

3.3 Factors encouraging and inhibiting the switch from smoking to vaping 16

3.4 Switching intention of current smokers 17

4 Conclusions 19

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Executive Summary

The rapid proliferation of vape shops across the UK has been one of the most visible changes to the high street in recent years. Between 2013 and 2018, the number of vape shops in Great Britain has soared from less than 100 to close to 3,000. These vape shops directly employ an estimated 5,700 workers and generated £1 billion in revenues in 2017 according to Euromonitor International. A growing number of smokers have already taken up alternatives to cigarettes such as vaping or heated tobacco, and with around seven in ten regular smokers intending to

quit over the next ten years1 this trend looks set to continue in the coming years.

A survey commissioned for this research of 1,500 vapers and / or smokers in the UK finds that 68% of regular vapers have reduced their consumption of cigarettes since taking up vaping, while 16% have quit smoking altogether. According to the survey, pressure from loved ones and the NHS’ quit smoking services are the most important factors that aid this transition. The effectiveness of vaping as an alternative to smoking is highlighted by the fact that three-quarters of regular vapers in our survey believe that doctors should recommend e-cigarettes as a method of quitting smoking.

While the rise of vaping has very much been a UK-wide phenomenon, the prevalence of the sector does vary between regions. The North West of England stands out as the UK’s vaping hotspot, with roughly one vape shop for roughly every 2,000 adult smokers. Other areas in the North of England, as well as the Midlands regions, also have a higher than average density of vape shops. Meanwhile, the South East, the East of England, Wales and London have the lowest number of vape shops per adult smoker.

The regions with the highest concentration of vape shops also tend to have higher than average rates of vaping among the adult population, as is the case for the North West and Yorkshire. However, the small but not insignificant market share held by online retailers and supermarkets means that there are regions – such as the South West and Scotland - for which a high proportion of vapers is not accompanied by a high density of vape shops. Many individuals who take up vaping go on to substantially reduce their smoking, meaning that areas with a prominent vaping sector are likely to experience a fall in smoking rates. However, since smokers represent the primary source of demand for vaping, areas with a high prevalence of smoking tend to have a larger vaping sector.

The increased prominence of specialist vape shops has come alongside many other notable shifts that have taken place on the UK high street. Supermarkets have continued to increase in number since 2010, while more specialist food shops such as grocers and butchers have declined. The tough economic conditions in recent years appear to have left their mark on the high street, with sizeable growth in the number of used car dealerships, thrift shops and repair shops between 2010 and 2017. The rise of online retail has also contributed to a decline in

1 Based on the results of a survey of regular vapers and surveys commissioned for this report.

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electrical goods and clothing stores, which have struggled to compete with their online counterparts.

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1 The shifting composition of the UK High Street The structure of the UK’s high streets has changed significantly in recent years, driven by sizeable shifts in consumer preferences and technology. In the years since 2010, many shop types that have traditionally been a staple of the UK’s high street have dwindled in number. Over the same period however, a number of sectors have expanded, while high streets have also seen the emergence of new shop types altogether. One of the most noticeable changes since 2010 has been the rapid expansion of vape shops, which have become ubiquitous on the UK’s high streets. The remainder of this section will outline in more detail the sectors that have experienced the most notable expansions or declines in recent years, utilising data from the Office for National Statistics’ (ONS) Annual Business Survey.

Supermarkets

The UK’s supermarkets have continued to expand in number over the last seven years, from a

total of just over 44,055 in 2010 to 47,815 in 20172 – a 9% increase. According to data from Kantar World Panel, sales among UK’s chain supermarkets over the 12 weeks to the 25th of February 2018 were 3.5% higher than for the same period the previous year, with low cost supermarkets experiencing particularly rapid revenue growth. This trend suggests that the convenience, cost competitiveness and selection offered by supermarkets is continuing to appeal to consumers.

Figure 1 Number of supermarkets in the UK 2010 - 2017

Source: Annual Business Survey

2 Supermarkets have been defined here according to the ONS category: “Retail sale in non-specialised stores with food, beverages or tobacco

predominating”

41,000

42,000

43,000

44,000

45,000

46,000

47,000

48,000

49,000

2010 2011 2012 2013 2014 2015 2016 2017

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Grocers, butchers & bakeries

More specialised shop types have had mixed fortunes in recent years. The number of grocers has continued to decline, falling by over 500 between 2010 and 2017, leaving just 3,000 across the UK. Meanwhile, over 500 butchers were also lost from the high street between 2010 and 2017. This suggests that specialist food retailers have struggled to compete with larger supermarkets, as consumers are opting for the convenience of making the bulk of their food purchases from a single retailer. Moreover, some supermarkets have also incorporated a specialist butchers into their stores. However some types of specialist food retailer have fared better in recent years. For instance, the number of bakeries has actually risen from 6,810 in 2010 to 7,625 in 2017 – a 12% increase.

Figure 2 Number of specialist grocers, butchers and bakeries in the UK 2010 - 2017


Restaurants, cafes and pubs

The rapid expansion of restaurants and cafes has been one of the most prominent high street trends in recent years: the number of restaurants and cafes across the UK has increased from 43,250 in 2010 to 60,925 in 2017 - a 41% increase. This growth has led to an intense degree of competition and many large chains have announced closures in recent months, suggesting that this sector could be nearing its saturation point. Meanwhile, the pubs sector has had a contrasting fortune, with the number in the UK falling by 13% between 2010 and 2017.

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2010 2011 2012 2013 2014 2015 2016 2017

Grocers Butchers Bakeries

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Figure 3 Number of restaurants, cafes and pubs in the UK 2010 - 2017


Other store types

Between 2010 and 2017, the number of clothing stores and electrical goods stores fell by 3,250 and 3,495 respectively, in the face of intensifying competition from online retailers. On the other hand, there has been a sharp increase in the number of thrift stores and repair stores over the last seven years, perhaps a symptom of the pressure that household budgets have come under recently. Interestingly, the number of new car dealers fell by 24% between 2010 and 2017 while the number of used car dealers rose by 14% - another sign that households are managing their finances more carefully.

Table 1 Summary of changes to number of different shop types between 2010 and 2017

Shop type % change in numbers 2010 - 2017

Online sellers +159%

Hairdressers & beauty salons

+60%

Restaurants & cafes +41%

Markets / stalls +40%

Toy stores +39%

Repair shops +34%

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000

2010 2011 2012 2013 2014 2015 2016 2017

Restaurants & cafes Pubs

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Thrift stores +32%

Used car dealers +14%

Bakeries +12%

Supermarkets +9%

Butchers -8%

Clothing stores -12%

Pubs -13%

Grocers -15%

Newsagents -21%

New car dealers -24%

Electrical goods stores -26%

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2 Growth of the vaping sector Rates of smoking have been on the decline in the UK in recent years, and many have turned to vaping as a means of helping them to reduce their consumption of cigarettes. This has led to a rapid expansion of vape shops across the UK, which have now become a common sight on the high street. According to data gathered by the Local Data Company (LDC), in May 2018 there were around 2,850 vape shops across Great Britain. This compares to a figure of less than 100 five years previously, meaning that Great Britain has seen a dramatic increase in the number of vape shops since 2013. Around 40% of the 2,850 vape shops recorded by the LDC were on premises that were vacant during the previous survey six months earlier. This highlights that the spread of vape shops has played an important role in reviving the high street during a time when many retailers have faced difficulties.

According to the ONS’ Business Counts and Business Register and Employment Survey, the number of workers per tobacconist has averaged just over two since 2010. Given the often overlapping product offering and the small and specialised nature of tobacconists and vape shops, it is likely that the number of workers per shop is comparable between these two categories of retailers. Based on this assumption, vape shops in Great Britain currently employ over 5,700 people. To put this into perspective, 2,500 people are currently employed by specialist music shops, a further 2,500 are employed in specialist fishmongers, and 11,000 work in grocery stores. It is worth noting that while around 5,700 people are employed directly by vape shops, the rise of this sector will also have generated employment gains and positive spillover effects in the supply chains for these products.

Figures released by Euromonitor International show that UK sales of vape products reached £1 billion in 2017 and are on track to reach £2 billion annually by 2020. The significant revenues and employment gains generated by vape shops coupled with the finding that a substantial portion of shops occupy spaces that were recently vacant show that the vaping industry has fast become a key sector for the UK’s high street and the wider economy as a whole.

2.1 Geographic distribution of vape shops

In 2013, there was one vape shop for roughly every 112,000 adult smokers in Great Britain. The embryonic state of the vaping industry in 2013 makes it difficult to draw meaningful insights into where the sector was most prominent, although the density of vape shops was significantly higher in the North West than in any other region.

Today, there is one vape shop for roughly every 3,000 smokers in Great Britain. While the growth of vape shops has occurred throughout the UK, the density varies significantly across the country. The North West is the undoubted vaping hotspot of the UK, both in terms of the absolute number of vape shops and the density of vape shops i.e. the number adult smokers per vape shop: the region has 456 vape shops, which equates to one for roughly every 2,000 adult smokers.

There is very much a north-south divide when it comes to the density of vape shops in England’s regions. The North East and Yorkshire & the Humber have the highest number of vape shops per

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adult smoker behind the North West, while the Midlands regions also have a higher than average density of vape shops.

The South East and London have the second and third highest number of vape shops in Great Britain in absolute terms. However, this largely reflects the large populations of these regions. When adjusting for the number of adult smokers, London has the lowest concentration of vape shops in Great Britain, with one for roughly every 3,300 smokers.

Table 2 Great Britain’s vaping hotspots ranked by number of adult smokers per vape shop

Source: Local Data Company, ONS, Cebr analysis

Adult smokers per vape shop

Adult smoking

rate 2013

Adult smoking

rate 2017

Change in smoking

prevalence

North West 2019 20.0% 16.1% 4.0%

North East 2323 21.2% 16.2% 5.0%

Yorkshire and the Humber

2407 20.5% 17.0% 3.5%

West Midlands 2468 17.8% 14.2% 3.5%

East Midlands 2474 18.9% 15.7% 3.3%

Great Britain 2694 18.8% 15.1% 3.7%

South West 2741 17.9% 13.7% 4.2%

Scotland 2928 21.5% 16.3% 5.2%

South East 3080 17.2% 13.7% 3.5%

East of England 3253 17.5% 14.2% 3.2%

Wales 3259 20.2% 16.1% 4.1%

London 3276 17.1% 14.6% 2.5%

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Table 3 Great Britain's vaping hotspots ranked by total number of vape shops

Vape shops (2018)

Smoking prevalence

2013

Smoking prevalence

2017

Change in smoking

prevalence

North West 456 20.0% 16.1% 4.0%

South East 319 17.2% 13.7% 3.5%

London 309 17.1% 14.6% 2.5%

Yorkshire and the Humber

304 20.5% 17.0% 3.5%

West Midlands 265 17.8% 14.2% 3.5%

Scotland 246 21.5% 16.3% 5.2%

East Midlands 240 18.9% 15.7% 3.3%

South West 224 17.9% 13.7% 4.2%

East of England

214 17.5% 14.2% 3.2%

North East 148 21.2% 16.2% 5.0%

Wales 124 20.2% 16.1% 4.1%

Source: Local Data Company, ONS, Cebr analysis

2.2 Rates of smoking across Great Britain

According to the Annual Population Survey, 15.1% of adults in the UK are smokers. Rates of smoking vary significantly across the country. The highest prevalence of smoking is observed in the North of England, Scotland and Wales, while lower smoking rates are observed in the South West, the East of England and the South East.

As Section 3 discusses in greater detail, vaping is a widely used and potentially successful method used by smokers to reduce their cigarette consumption. Given that some individuals who take up vaping go on to quit smoking, areas where the vaping industry has most taken off are likely to have seen a fall in the rates of smoking. On the other hand, since smokers are the primary source of demand for vaping products, areas with a prominent vaping sector could be expected to have higher rates of smoking. On the whole, the latter effect seems to dominate, since Yorkshire, the North East, the North West and the East Midlands all have higher than average rates of smoking as well as a higher than average density of vape shops. Meanwhile, London, the South East, the South West and the East of England have below average rates of smoking along with a lower than average density of vape shops.

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2.3 Rates of vaping across Great Britain

According to the 2017 Opinions and Lifestyle Survey, 5.5% of people aged 16 and over currently use e-cigarettes, equating to 2.8 million people across Great Britain. A regional level breakdown of vaping rates is currently only available for 2015. However, the rate of e-cigarette usage among individuals aged 16 or over has risen from 4.5% in 2015 to 5.5% in 2017. The rates outlined in Table 4 below assume that this increase occurred proportionately across the country. The highest rates of e-cigarette use are found in the South West (7.7%), the North West (7.4%) and Scotland (6.7%), while the lowest rates are in London (3.9%) and Wales (4.5%).

Table 4 Adult vaping rates in Great Britain's regions

Adult vaping rate

South West 7.7%

North West 7.4%

Scotland 6.7%

Yorkshire and The Humber 6.2%

South East 5.7%

East Midlands 5.4%

West Midlands 5.4%

East of England 5.4%

North East 5.3%

Wales 4.5%

London 3.9%

Source: Opinions and Lifestyle Survey

It would be expected that the regions with the highest concentration of vape shops would be those with the highest proportion of vapers. This is the case for the North West and Yorkshire, which have among the highest number of vape shops per adult smoker together with high rates of e-cigarette usage. Similarly, London and the East of England – which have among the lowest numbers of vape shops per adult – also have a lower than average prevalence of vaping.

According to a 2016 study by Ernst and Young, only 35% of e-cigarette devices and 40% of refills are purchased in specialist vape shops, with online retailers and supermarkets also significant suppliers of vaping products. Therefore, while areas with more vape shops would in general be expected to have a higher number of vapers, this does not always have to be the case. For instance, the South West and Scotland have a lower density of vape shops than the UK average despite having among the highest percentage of e-cigarette users. One potential explanation for

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this could be that these regions are more sparsely populated than other parts of the UK, with a significant share of the population living in rural areas. As a result of this, many vapers in these regions could be purchasing e-cigarettes via the internet or larger supermarkets, as specialist vape shops are unlikely to have a sufficiently large customer base to sustain themselves in these less populous areas.

The rapid expansion of the vaping sector in recent years has coincided with a significant fall in the adult smoking rate in Great Britain: between 2013 and 2017, the percentage of adults who smoke has fallen from 18.8% to 15.1% (see Table 2). The two regions with the highest concentration of vape shops – the North West and the North East – have seen a greater than average decline in the adult smoking rate during this period. Meanwhile, Scotland and the South West – which have among the highest adult vaping rates in Great Britain – have also seen greater than average falls in smoking prevalence. It should be noted however that establishing a direct relationship between the prominence of the vaping sector and the prevalence of smoking is beyond the scope of this study.

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3 Consumer survey of vapers and smokers To supplement the above research on the spread of the vaping industry and its potential as an

aid for stopping smoking, Cebr commissioned a survey of 1,500 adult vapers and / or smokers.3

3.1 Success of vaping as a means of reducing smoking

Among the 750 respondents in the survey who vape at least once a week, nearly a quarter (24%) smoke slightly less than they did before starting vaping, 27% smoke far less than they used to, and 16% have stopped smoking altogether. Collectively, this means that over two thirds

(68%) of regular vapers in our survey now smoke less than they did before they started vaping.4 At the last count (2017), there were an estimated 2.8 million vapers in the UK. Based on this and the results of the consumer survey, up to 448,000 people across the country will have quit smoking after having taken up vaping, while a further 756,000 will have significantly reduced their cigarette consumption. While vaping does carry some health risks, it is 95% less harmful than smoking according to Public Health England. Therefore the use of e-cigarettes as a means of reducing smoking has the potential to deliver significant health benefits.

Another potential alternative to cigarettes are heated tobacco products, which heat tobacco at a lower temperature than traditional cigarettes are burned. 29% of respondents in our survey have tried heated tobacco, while 16% use it frequently. Meanwhile, 42% stated that they had not heard of this category of product, highlighting that heated tobacco has yet to penetrate the market to the same extent that vaping has.

Figure 4 Distribution of responses to: how has the amount you smoke changed since you took up vaping?

Source: 3Gem, Cebr analysis

3 Survey was conducted by 3Gem Research. The survey was carried out online between 7th June 2018 and 13th June 2018. In order to ensure a

sufficiently large sample size for vapers, the survey was designed to ensure that it included 750 adults who vape at least once a week.

4 The quoted percentages for individual responses do not add up precisely to 68% due to rounding.

0%

5%

10%

15%

20%

25%

30%

I smoke farmore than I

used to

I smokeslightly morethan I used

to

The amount Ismoke has

not changed

I smokeslightly lessthan I used

to

I smoke farless than I

used to

I no longersmoke

I did notsmoke when

I startedvaping

Don’t know

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3.2 Time taken for vapers to reduce their smoking

The 43% of regular vapers who either smoke far less than they used to or have stopped smoking altogether were then asked how long it had taken them to make this transition. An impressive 43% responded that they had substantially reduced or completely ceased their cigarette consumption within a week of starting to vape, while a further 25% achieved this within one to four weeks, and 16% within one to three months. These results suggest that the uptake of vaping can yield relatively fast results, with over four fifths (84%) of those who substantially reduce their cigarette consumption achieving this within three months of starting to vape. The apparent success of vaping as a method for reducing smoking is reflected in the fact that three-quarters (75%) of regular vapers in our survey stated that based on their own experience, doctors should recommend e-cigarettes as a means of quitting smoking.

Figure 5 Share of regular vapers who feel that doctors should recommend e-cigarettes as a method of quitting smoking


3.3 Factors encouraging and inhibiting the switch from smoking to vaping

Vapers who have managed to reduce their consumption of cigarettes were then asked about the factors that helped them to accomplish this. Pressure from loved ones stood out as the leading factor, with more than seven in ten (71%) stating that this was either very important (32%) or somewhat important (39%) in influencing their decision to substantially cut down on smoking. The NHS’ quit smoking services were listed as an important contributor by 63%, while a visit to a health professional was listed by 59%. A smaller share of vapers who have successfully reduced their smoking cited media stories (46%) and advertising (41%) as important contributing factors.

The survey went on to examine the factors that have inhibited some vapers from reducing their smoking. 55% of those who have not substantially reduced their cigarette consumption since

Yes No Don’t know

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taking up vaping cite their enjoyment of the taste of smoking as a reason for this. Meanwhile 43% list the ease of use of cigarettes as a contributing factor, while more than one in five (22%) state that they cannot afford to switch fully from smoking to e-cigarettes. The latter finding is somewhat surprising given that besides the initial upfront cost of purchasing the necessary equipment, vaping is typically a significantly cheaper option than smoking. This suggests that smokers could benefit from being made more aware of the potential cost savings associated with switching from smoking to alternatives.

3.4 Switching intention of current smokers

The focus of the survey then switched to regular smokers i.e. adults who smoke at least once a week. Nearly seven out of ten smokers in our survey (69%) said that they intend to quit smoking within the next ten years, while just 10% responded that they did not intend to do so. This result again highlights the appetite there is among smokers today to find alternatives to cigarettes. The main alternatives currently available to smokers are e-cigarettes and heated tobacco. Nearly half (46%) of regular smokers are currently using e-cigarettes as a means of reducing their cigarette consumption, while 19% are using heated tobacco. While 36% of regular smokers are not currently using an alternative, 16% of these are considering using e-cigarettes as an

alternative, while 6% are considering using heated tobacco.5 When asked when they are likely to start using e-cigarettes or heated tobacco, nearly four in five (78%) answered within the next six months. This suggests that there are a significant number of smokers in the UK who are set to commence the process of switching in the coming months.

A majority of those considering switching (58%) said that more information on available alternatives would assist this transition. This suggests that while a lot of information undoubtedly exists to help smokers quit, this has not been delivered as effectively as it perhaps could have been. Another means by which smokers could learn more about available alternatives would be to provide information inside cigarette packs. Three fifths of regular smokers in our survey feel that cigarette companies should include information on switching to alternatives inside cigarette packs, reinforcing the finding that many smokers do desire more information on this topic. Moreover, a majority of regular smokers (55%) said that the provision of information on alternatives such as e-cigarettes or heated tobacco inside cigarette packs would increase the likelihood of them switching.

A reduction in the price of e-cigarettes or heated tobacco would aid the transition away from smoking for half of those currently considering alternatives. Given that on the whole, e-cigarettes are a significantly cheaper option than cigarettes, this result points towards a lack of awareness of the potential savings that could be generated by switching to alternatives. Other important factors relate to the attractiveness of the products themselves. Lowering the health impacts of e-cigarettes or heated tobacco would aid the transition for 36% of those considering

5 The quoted percentages for the share of regular smokers currently using e-cigarettes, heated tobacco or neither do not sum precisely to 100%

due to rounding.

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switching to alternatives, while improved taste and a greater range of products would be helpful for 33% and 19% respectively.

Figure 6 Factors that would help smokers switch to e-cigarettes or heated tobacco


0%

10%

20%

30%

40%

50%

60%

70%

More informationon e-cigarettes orheated tobacco

A reduction in theprice of e-

cigarettes orheated tobacco

Less harmassociated with e-

cigarettes orheated tobacco

Improved taste ofe-cigarettes orheated tobacco

A greater range ofproducts to choose

from

Increased ease ofuse of e-cigarettesor heated tobacco

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4 Conclusions In the space of just five years, the number of vape shops in Great Britain has soared from less than 100 in 2013 to nearly 3,000 in 2018, as increasing numbers of smokers have embraced alternatives to cigarettes such as e-cigarettes and heated tobacco. This has been one of the most notable changes to the UK’s high streets in recent years, with others being the continued expansion of large supermarkets, dwindling numbers of specialist food retailers, the growth of thrift and repair shops, and a decline in some shop types that are particularly exposed to competition from online retailers, such as electrical goods stores.

The North West of England is the undoubted vaping hotspot of the UK, with the highest number of specialist vape shops per adult smoker in the UK. The vaping sector in this region is supported by high rates of e-cigarette usage among the local population together with a higher than average adult smoking rate, which generates substantial demand for substitute products. In general, areas with the highest concentration of vape shops tend to be those with a high rate of e-cigarette usage among the adult population. However, some regions with high rates of e-cigarette usage – such as the South West – do not have a high density of specialist vape shops, suggesting that online retailers and supermarkets hold a significant market share in some areas. At a local authority level, areas with higher rates of smoking generally tend to have a more established vaping industry. This is likely due to the fact that smokers represent the primary source of demand for vaping products.

The results of our consumer survey suggest that vaping is an effective means of reducing cigarette consumption: 68% of regular vapers stated that they had reduced their smoking since taking up vaping, while 16% had quit altogether. Moreover, three-quarters of vapers in our survey feel that doctors should recommend e-cigarettes as an aid for stopping smoking. This echoes the call made recently by Public Health England for e-cigarettes to be made available on prescription.

Although the number of smokers in the UK has been on the decline, the adult smoking rate still stands at 15.1%. Seven in ten regular smokers in our survey indicated that they intend to quit smoking within the next ten years, which suggests that there remains considerable scope for the vaping sector to continue to expand in the coming years.

vaping hotspots · 2019. 6. 14. · rates of vaping among the adult population, as is the case for...

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