NEW YORK -- Moist smokeless tobacco (MST) has long been a steady performer for the convenience store channel and 2014 was no exception: Nielsen data showed large-chain convenience sales saw a 4% overall MST can volume growth.
Presenting at CSP's Tobacco Update webinar on Dec. 10, Swedish Match management director Joe Teller described this figure as in the typical growth rate of 4-6%.
“Everyone knows this category is really consistent; that’s not going to change next year,” he said. “I’m projecting the same growth rate of about 4%.”
However, Teller did predict that the MST subsegments driving the growth might change in 2015, at least based on 2014’s numbers. Though premium and low-priced loose MST make up 84% of c-store MST sales, the two subsegments only accounted for roughly 40% of category growth this year.
The Nielsen data showed both segments have experienced a slowdown in can volume: premium loose volume was down 1% in 2014 and low-priced loose grew by just 2%.
“Low-priced loose MST is the big one with 54% of all category can sales,” Teller said. “It’s not throwing up nearly the growth it used to. Since this is the biggest piece of the category and since its growth is slowing (which I expect to continue) how to we get to 4% MST category growth next year?”
The answer? Focus on the small, but growing pouch MST options. Although premium and low-priced pouches are just a small piece of c-store MST sales, both experienced robust growth in 2014, with premium pouches up 6% and low-priced portioned pouches up an impressive 20%.
“Low-priced pouches and premium pouches, although they’re only 15% of can sales, they’re driving 60% of category growth off of a very small base,” said Teller. “A huge percentage of the typical strong category can growth we get is coming from pouches.”
Based on 2014’s numbers and continuing trends within the category, Teller anticipates both premium and loose sales will throw up a combined growth of under 1%; premium pouch sales will continue to grow at a moderate rate (Teller has it at 5.7% growth in 2015); meaning low-priced pouches will need to grow by 27% in order to maintain that 4% MST growth rate.
“Next year, pouches are probably going to need to drive 90% of category growth given the big slowdown low-priced loose MST,” Teller said. “Retailers are going to need to actively push this pouch segment – or the risk is that the category growth could potentially stall out a little bit.”
Which isn’t to say Teller expects this category to stall out. Based on 2014’s trends, Teller said retailers have every reason to be optimistic about the potential of pouches.
“The good thing about pushing MST pouches is it’s the easiest way to drive additional growth because it’s from the part of the category that’s already showing excellent growth.”
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.