SOI Category Focus: Cigarettes Continue to Decline
Challenges & opportunities to selling the No. 1 in-store product
ROSEMONT, Ill. -- Concern about sagging cigarette sales continue to dog the convenience store industry. Dollar sales dipped 3.5% in 2013, and unit sales dropped 2.1%, according to preliminary NACS State of the Industry (SOI) survey figures.
Still, predictions that the sales of other tobacco products, led by electronic cigarettes, will overtake cigarettes in coming years have a long way to go. The average convenience store sold $44,751 in cigarettes per month, according to the preliminary NACS State of the Industry (SOI) data, while OTP sales averaged $6,479 per month, $457 of that coming from e-cigs.
However, the sale of premium cigarettes, which account for more than 80% of all cigarettes sold in c-stores continued to lag in 2013, according to Nielsen data cited during the SOI Summit.
- Dollar sales of premium cigarettes dipped 1.0%, while unit sales dropped 1.5%.
- Branded-discount cigarettes (14.5% share) saw dollar sales up 1.4% and unit sales up 1.7%.
- Sub-generic/private-label cigarettes (4.8% share) grew 4.7% in dollar sales and 1.1% in unit sales.
- Fourth-tier cigarettes, meanwhile, dropped 2.4% in dollar sales and 0.8% in unit sales.
While taxation remains the biggest challenge to selling cigarettes, growing as high as $6.16 per pack in Chicago, Kevin Smartt, CEO of Kwik Chek Food Stores, who presented the category numbers during the summit, noted two other challenges:
- Dollar General “betting on tobacco to generate traffic and sales.”
- The number of cigarette/tobacco outlets grew by nearly 11,000 units in 2013, up 5.6% year over year.
There are a couple of opportunities, as well:
- CVS drug stores will give up $2 billion in tobacco sales as it gives up the category.
- Military exchanges are considering a ban on tobacco sales, possibly as soon as Oct. 1, 2014.