Despite ongoing concerns regarding the U.S. Food and Drug Administration, as well as local efforts to raise excise taxes and the legal age to purchase tobacco, c-store retailers are optimistic about the category overall. Here are areas of momentum, as well as uncertainty, for tobacco in 2018.
1. Rise of vaping and OTP.
Numbers trending from last year and into 2018 show vaping devices—especially closed systems that use flavored, prefilled pods—gaining traction in the industry, with new players jumping into the game. Meanwhile, the cigar and smokeless categories are growing for c-store operators, as demand for alternatives to combustible cigarettes drives subcategory sales.
2017 E-Cigarette Distributor Data
Source: McLane Co.
2. Regulation concerns.
A heightened legislative and regulatory landscape has put retailers on the defensive. Lawmakers are focused on excise-tax increases, changing the legal age of purchase from 18 or 19 to 21, flavor bans that include menthol, and new permit rules that negatively affect c-stores.
3. Cross-channel competition.
The movement of dollar stores into the tobacco category remains a concern. While c-stores are still the dominant channel for the category, dollar stores are refining their sets, expanding distribution and having an effect on share within their market zones.