Electronic Cigarette Growth Re-Accelerates
Herzog weighs in on e-cig, cigarette and smokeless sales
NEW YORK -- Though much has been made of the recent deceleration of electronic cigarettes and vapor sales, the latest Nielsen data depicts optimistic numbers: over the four weeks ending March 21, 2015, convenience store dollar sales grew by 17.5% (compared to just 2.3% growth in February) driven by a 51.6% growth in unit sales. The one potential negative was the fact that average e-cig unit pricing continued to decline, down 22.5% (vs. a 20% decline last month).
“Though e-cig year-over-year pricing has been negative for 10 consecutive periods, we believe it’s at least partially due to difficulty in capturing SKUs given the rapidly evolving vapor category,” Wells Fargo senior analyst Bonnie Herzog wrote in a research note. “(Also), the proliferation of vapors/tanks/mods (VTM) and refills which tend to have a lower retail price/refill.”
Reynold’s Vuse continued to dominate c-store sales with a 34.6% dollar and 45.2% unit share. Lorillard’s blu was solidly in second with 19.2% of dollar shares and 15.2% of unit shares. Logic and Altria’s MarkTen split the No. 3 and No. 4 positions: Logic had a 16.2% dollar share and a 9% unit share, while MarkTen had a 11.6% dollar share and 13.5% unit share. Similarly, NJOY and CB Distributors were fighting for the fifth slot: NJOY had the edge in dollar sales (with a 5.3% share) while CB Distributors had a higher share of unit sales (4.5% vs. NJOY’s 4.1%).
“We are impressed with Vuse’s strength,” Herzog said. “Though we note Vuse’s pricing ($6.82) was 34% below category average of $9.12.”
Herzog was also impressed by the smokeless category, noting “smokeless tobacco dollar sales (are) strong despite ‘tough’ competition.”
During the same four-week period, c-store smokeless dollar sales grew 5.6% and unit sales were up 4.2%. Altria remained the top seller, with a 58.1% dollar share (up 6.5% from last month) and a 53.6% unit share (up 7.4%). Reynolds had a 34.8% dollar share (up 5.2%) and 34.2% unit share (up 2%), with Swedish Match rounding out the top three with a 6% dollar share (up 1.8%) and 9% unit share (down 9%).
Cigarettes had a strong March across all channels (including mass and c-stores): dollar sales grew by 2% (up from a 2.1% increase last month). The positive overall sales came from a 2.7% increase in pricing offset by a 0.7% decrease in unit sales.
“We continue to expect strong manufacturer pricing in 2015,” said Herzog, “which should help offset broad volume declines and generate robust profitability growth.”