The Electronic Revolution
Are e-cigarettes the spoils of another gold rush or a harbinger of transformation for the tobacco category?
To stay on the safe side, many retailers have opted to dip their toes in the metaphorical waters by bringing in an established leader such as NJOY or blu. Nielsen shows blu as a dominant force in the c-store channel, earning 45.3% dollar share and 37.2% unit share as of Sept. 28, 2013, followed by NJOY at 22.5% dollar share and 20.1% unit share. These companies, along with others such as Logic and Fin, were among the first to grab the retail stage. They continue to use their national presence as a competitive advantage.
“Choosing which brands wasn’t that difficult because NJOY and blu were the only ones who called on us,” says John Strickland Jr., president of Goldsboro, N.C.-based Wayne Oil Co. “They both seem to be very interested in marketing the product, they talk to us frequently and they’re interested in reviewing our scan data.”
Strickland is far from alone: NJOY’s products are sold in 70,000 retail locations nationwide, including Sheetz and 7-Eleven stores, while blu is merchandised in chains such as 7-Eleven, Circle K, Speedway and Chevron.
Lou Maiellano, president of TAZ Marketing & Consulting Group, Sevierville, Tenn., champions a strategy that features more national brands coupled with local and/or regional players.
“Just because a manufacturer has broader distribution, that doesn’t mean they’ll be a top seller in your stores,” he cautions.
Indeed, it’s becoming rare to see retailers carrying only one or two brands.
“Major retailers are carrying the key brands, and many c-store operators are taking on new brands and SKUs because the category is giving them growth and margin opportunities,” says Bonnie Herzog, managing director of beverage, tobacco and convenience store research for Wells Fargo Securities LLC, New York.
John Geoghegan, director of strategic planning and brand development for Moorpark, Calif.-based Cig2o manufacturer Kretek International Inc., agrees that carrying a variety of brands is a smart move. “When consumers enter a retail store, they expect three to five different brands, as well as disposable and rechargeable SKUs,” he says.
Kyle Sloan, tobacco category manager for Oklahoma City-based Love’s Travel Stops & Country Stores, is following this strategy, carrying NJOY, blu, Fin and Nicotek products—and constantly watching the market for additional opportunities.
“There is a possibility for brand expansion,” he says. New product innovations, he says, would drive his decision to bring in a new brand or product.
Fielding a similar mix, Alon’s Slattery turned to an unlikely source—the Internet—when looking for a fifth brand. There, he discovered Green Smoke, which traditionally sells its products online.
“When you look at who’s buying and where they live, we have a lot of their customers in our area,” Slattery says. “It made sense to chase after them. Those consumers are already there.”
And as the segment continues to evolve, more retailers are carrying a mix of brands and of products. Disposables took an early hold in the value-conscious c-store channel, but as consumer awareness has grown, so have sales of more profitable starter kits and cartomizers.