Exclusive, Part I: E-Cigs Gaining Retailer Acceptance

Nearly three-quarters of survey respondents call category viable

Mitch Morrison, Vice President of Retailer Relations

NEW YORK -- The electronic cigarette segment is rapidly moving with the zip of energy shots, transforming from fad to mainstay.

Nearly three-quarters of the retailers responding to the exclusive quarterly UBS-CSP/Tobacco E-News survey believe the category is viable.

"It is rapidly growing, less competitive, higher-margin alternative for retailers," one operator said. "We are expanding allocation for e-cigarettes."

Added another retailer: "State and local smoking regulations provide a window for category growth. Pricing without an excise tax provides a cost/equity advantage over traditional cigarettes."

More than 50 convenience store companies representing approximately 11,600 stores responded to a wide-ranging survey about tobacco brands, pricing, marketing practices and emerging trends.

Although e-cigarettes represent less than 1% of total tobacco sales, the attention it has captured over the past two years far exceeds the diminutive presence it currently occupies in most c-store sets. The excitement stems from growing consumer acceptance, increased sophistication and capital by some of the leading e-cig manufacturers and greater distribution across the supply chain.

That said, some retailers say there remains a glut of players that will necessitate winnowing akin to the bursting of the dot-com bubble more than a decade ago.

"We keep trying different kinds to see what our customers want," one merchant said. "We have four different brands at this time, some in test at some stores, some in test at other stores. Still a long way to go on customer education for this product."

Another operator said the category is "viable, but sorely misguided."

"You need a leader in the field to push the category forward," the retailer said. "As it is now, you have 10 dozen brands pushing proprietary products and refills. It is a miracle to find a second store that sells the same brand that you originally purchased."

Read Part II of the exclusive UBS-CSP Tobacco Survey in Thursday's edition of CSP Daily News.

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