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Cigarette Sales Volume Drops 3.5% in C-Stores in Q2 2014

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A midyear survey of tobacco retailers and wholesales, including contacts representing more than 30,000 convenience stores, shows industry cigarette volume declines held steady during the second quarter of 2014 as the competitive environment eased. Wells Fargo Securities' Tobacco Talk survey shows "the competitive environment moderated slightly in Q2 with 53% of respondents indicating a slightly more competitive environment (down from 63% in Q1), despite dollar stores starting to become a greater threat to c-stores." Overall cigarette sales volume was reported down about 3.5% for the quarter, however. Below are the survey's volume results for each of eight major cigarette brands in convenience stores.

Altria's Marlboro lost some momentum in Q2, according to the survey, possibly driven by lower promoions and incremental impact from Newport Gold.

Altria's L&M remains steady--up 2% in volume--despite lower promos, likely gaining slight market share.

R.J. Reynolds' Camel cigarette volume was "flattish" during the quarter, despite increased promotions. Camel Menthol Crush, meanwhile, continues to be strong, according to survey respondents.

RJR's Natural American Spirit continues to be on a roll, projected to be up 15% in Q2. "Retailers feel ultimate share potential in midsingle digits," the survey reported.

Newport Menthol brand momentum remains strong as additional 50-cent-off product is hitting stores, the survey reported. Retailers are not enthused, however, by Newport Smooth Select.

Newport Red volume remains steady, while Newport Gold is a “disappointment.” But 0.5% share is expected for fiscal year 2014, aided by changes in the second half of the year. "We see the most upside potential for Lorillard in Q2 given Newport Menthol's continued strength, plus incrementality from Newport Gold," the survey report states.

Lorillard's Maverick cigarette volume growth picked up a bit in Q2, but is still estimated at -5.0% (compared to -6.0% the previous quarter).

Source: 
Wells Fargo Securities
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