The theme for cigarettes in 2014 was “flat is the new up”—referring to the flatlining of c-store sales that year after several years in the red. The story for 2015 was drug-store chain CVS’ abandonment of tobacco sales, which became a $2 billion gift to the c-store industry. “Everybody in here just needs to thank CVS,” said Andy Jones, president and CEO of Sprint Food Stores, Augusta, Ga.
According to NACS SOI data, monthly cigarette sales rose 3.4% in 2015 (after barely budging in 2014). Low gas prices had a big effect on that category as well, encouraging consumers to trade up to premium brands—sales in this segment grew 4% in 2015, according to Nielsen—and to move up from packs to cartons. Fourth-tier cigarettes, while very small in terms of its contribution to total c-store cigarette sales, did see double-digit growth in dollar and unit sales in 2015, “something definitely to watch,” Jones said.
The main headwind for cigarettes this year: state excise-tax increases. Nine states raised their cigarette excise taxes in 2015, reportedly the largest number since the passage of SCHIP. Meanwhile, more than a dozen other states have not raised their taxes in the past decade, meaning there is a high probability they will soon.