Cigarettes Back on Top

Resurgence after three years as second-most profitable, according to NACS preliminary data.

Linda Abu-Shalback Zid, Senior Editor

CHICAGO -- Thanks to sub-generic and private-label brands, cigarettes are the number one category in convenience stores once again, according to preliminary results of the NACS State of the Industry Report of 2010 Data.

At the NACS State of the Industry Summit in Chicago last week, John Zikias, vice president of marketing at Louisville, Ky.-based Thorntons Inc. shared that the category continues to grow in sales and gross profit dollars, following the 2009 SCHIP tobacco tax increase.

Cigarettes accounted for 35.82 percent of in-store sales, up .3 points from 2009. Packaged beverages [image-nocss] were the next biggest contributor, growing .1 points to 14.2 percent. Other tobacco products (OTP) also increased, up .2 points to account for 4.03 percent of in-store sales. Zikias attributed OTP growth to new products, promotions and retail price increases.

For in-store gross profit dollar contribution, cigarettes grew .4 points to 18.35 percent and OTP grew .3 points to 3.95 percent. Combined, the two surpassed foodservice, which grew .1 points to 21.87 percent.

While premium cigarettes increased .3 points to account for 78.2 percent of cigarettes, sub-generic/private label cigarettes had the most significant growth of .5 points to 13.7 percent. Fourth tier increased .1 points to .4 percent and branded discount cigarettes dropped significantly, seeing a decrease of .9 points to 7.6 percent.

In OTP, there were "only minor changes to contribution of sub-categories," according to Zikias. Smokeless increased .3 points to 57.7 percent of the category's sales, according to Nielsen syndicated data. Cigars declined .1 points to 36.1 percent and pipe/cigarette tobacco declined .2 points to 2.4 percent. Papers and other tobacco remained flat at 3.7 percent and .1 percent respectively.