E-Cigs Gaining Ground

Exclusive survey shows segment's growth, retailer optimism

Mitch Morrison, Vice President of Retailer Relations

NEW YORK -- Despite uneven performance in the convenience sector, electronic cigarettes are increasingly winning space and promotion in the channel. An exclusive UBS-CSP Daily News poll shows that more than three-fourths of operators believe e-cigarettes will continue to grow as a category.

"Customers are getting more familiar with them and are more willing to try them," said one retailer.

"With cigarette smoke becoming socially and lawfully unacceptable in public facilities, e-cigs offer an alternative," another operator said. "Our society in general may not be so offended by nicotine as much as the smoke tobacco cigarettes create. Consumers like energy drinks and what they contain, as well as 5 Hour Energy, anything caffeinated, so why not nicotine? I do think the category will grow considerably."

E-cigarettes have generated enormous attention over the past two years, garnering curiosity, uncertainty and hope as a robust alternative to cigarettes. The segment to date is showing some wins:

  • The fact is e-cigarettes are penetrating most of the channel, albeit with mixed results.
  • More merchants are featuring multiple brands versus just one.
  • And, among the sea of products, some e-cigarette brands are emerging as frontrunners.

Of survey respondents, more than 80% said they were carrying e-cigarettes, with the majority of those marketing a minimum of two or three brands.

Among the brands leading the charge, NJOY took top spot, with 32% of operators carrying it, followed by Krave (Vapor), Cig2o and Logic. That said, more than 10 brands were mentioned as capturing at least some market share.

"Retailers are still in sampling mode," said UBS tobacco analyst Nik Modi. "What will define the winners is capital, because it's going to take a lot of capital to get brand equity, have a product that can withstand FDA scrutiny."

Growth Segment

The UBS-CSP Daily News survey further asked if sales of e-cigarettes had grown over the past 12 months. The answer was an emphatic yes. Four of five retailers had experienced growth, and only 3% reported a decline, with the rest remaining flat.

"I've merchandised them for the last nine months and have [had] great success in sales," a retailer said. Others reported doubling sales. And yet some merchants offered a more nuanced view.

"Our overall sales have decreased as we were first to market, and other retailers are catching up," an operator said. "But our per-store/per-day average sales for stores having the product a year or more are still growing."

Not surprisingly, more than three-quarters of respondents said they expect the category to continue to grow.

"More people are trying them," a retailer said. "We are getting refill orders and the disposables are picking up a little bit."   

Mitch Morrison Winsight CSP By Mitch Morrison, Vice President of Retailer Relations
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