With blockades at the federal level, a regulatory fervor in hot-spot states and cities, and—despite it all—strong supplier innovation, the tobacco category faces a mixed bag of unit expansion and constriction.
“Smokeless and cigars continue to perform well,” says John Mayer, product manager of cigarettes and other tobacco products (OTP) for McLane Co. Inc., Temple, Texas. C-store cigar unit sales jumped more than 13% in the 24 weeks ending June 11, 2017, according to IRI. Spitless tobacco—also known as snus—grew more than 7%.
“Cigarillos and flavored cigars continue to perform well within the category,” Mayer says. Limited-time-offer products in particular are sparking interest among consumers. Overall, smokeless tobacco has also performed well, “especially in light of some of the challenges the industry has faced,” Mayer says. IRI shows unit sales of smokeless tobacco off 0.2% in the first six months of 2017, with dollars up 3.7%.
Electronic smoking devices, which include vaping products and e-cigarettes, saw a double-digit jump in dollar and unit sales, according to IRI.
In a research note, Bonnie Herzog, managing director of consumer equity research for Wells Fargo Securities LLC, New York, said she expects e-cigarette sales to grow 5% nominally to $4.4 billion across all retail channels. While the category is seeing limited innovation because of regulatory constraints, she believes up-and-coming reduced-risk products offer significant potential.
Headwinds for the remainder of 2017 are largely regulatory, with menthol bans, age restrictions, smoking zones and similar eff orts popping up below the federal level, such as in San Francisco and Minneapolis.
“The watch is always on for changes, which may occur at state levels,” Mayer says, “and we can’t forget about the FDA, as well as the concern of city or county ordinances.”
* Percent change from a year ago
** Products were isolated by McLane as top consumer velocity items in the six months ending June 30, 2017
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