CHICAGO -- Retailers may be riding a rising tide in tobacco sales, especially after a dramatic drop during the first two quarters of the year, according to numbers reported exclusively at this week's CSP Tobacco Category Review Meeting.
Though growth in retail dollars for cigarettes specifically is up 1.1% for the year covering last July through this past June, that movement reflects a growth rate of 3.6% through the latter half of 2007 and a dip of 4% in the first and second quarters of 2008, according to Mike McClurg, senior vice president of client solutions for Chicago-based Information [image-nocss] Resources Inc. (IRI).
He told the 16 retailers and 13 suppliers in attendance that these numbers could relate to the drop in units sold of consumer packaged goods (CPG) in general, a c-store trend that started in the winter months as street postings began to climb. IRI figures showed an almost 30% leap in gas prices through the fourth quarter of last year and the first quarter of 2008, while CPG volume went from an increase of 5.9% in the third quarter of 2007 to a 1.9% drop in the first quarter of 2008.
"We've been hearing that instead of filling up, people are coming in on multiple occasions for $30 to $40 [in gasoline]," McClurg said. "But it doesn't translate inside the store."
Many retailers in the room agreed that their tobacco sales mimicked IRI's findings, but Mike Zielinski, president and CEO for Royal Buying Group Inc., Lisle, Ill., said he's heard different stories, especially when considering chains vs. the independents in his membership.
"Upper-quartile stores didn't see that big dip," he said. "But the lower quartile saw an even bigger dip. So overall, you see a softening of the numbers when you take into account smaller stores."
McClurg also compared c-store tobacco breakdowns to other channels. Having developed a multi-channel category that includes grocery stores, drug chains and what is essentially Kmart as a representative of the mass merchants, he showed several interesting differences:
C-store tobacco sales far outpaced the food-drug-mass channels, with c-stores at $44.8 billion annually and the other channels at $7 billion. C-stores sold cartons at less of a discount than the food-drug-mass channels, opting for 10% vs. the other channels at 25%. Females are probably shopping for cigarettes in the food-drug-mass channels, with numbers showing the Virginia Slims brand ranking eighth among the Top 10 sellers for c-stores but up at No. 3 for other channels.IRI's numbers come from its AllScan Convenience Store Tracking service that is tied to point-of-sale devices at 11,000 c-stores. The company says AllScan covers 54 syndicated markets as well as combining census-based data for 7-Eleven and Circle K branded stores.
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