2012 Category Breakdown, Part 1: Tobacco

Gross-profit margins remain strong on cigarettes; OTP spreads its wings

Angel Abcede, Senior Editor/Tobacco, CSP

[Editor's Note: In its second-annual category review, CSP takes a look at first-half 2012 sales data to determine how the industry is performing so far this year. In this five-part CSP Daily News series, we look at four major categories. For the complete report, see the September issue of CSPmagazine.]

OAK BROOK, Ill. -- John Strickland Jr. is not upset about holding steady to his cigarette volumes and margins, especially having seen a couple of price increases in recent months.

"Sales dollars have been flat year over year," Strickland, a 14-store retailer based in Goldsboro, N.C., told CSP Daily News. "But we've not suffered a loss of gross-profit margin."

The malaise with cigarettes appears indicative of his marketing area. "Gas [prices have] come down, but we have not seen a positive impact," Strickland said. "In our neck of the woods, customers are out of money."

Yet even the cash-strapped hold to the staples, which according to Strickland are cigarettes and alcohol. Data from SymphonyIRI shows a 1% increase in cigarette dollar sales year to date ending June 10, 2012. That's an increase on $24.4 billion in U.S. convenience store sales. Unit sales saw less of a lift of 0.25% on more than four billion units.

The hero in terms of percentage growth continues to be OTP (other tobacco products). Smokeless tobacco surged 8% on $2.2 billion in dollar sales. For Strickland, moist tobacco continues to grow in sales at his locations. He said he sees potential in multi-can promotions and specials.

Other new products in the category "have yet to turn a whole lot of dirt for us," he said. "Do they have a place for us in our market? No question. We may ratchet down a few SKUs, but we're going to keep [these new categories]."

Angel Abcede, CSP/Winsight By Angel Abcede, Senior Editor/Tobacco, CSP
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