3 Highlights From the 3rd-Quarter 2023 Nicotine Nuggets Survey

Pressures are high on adult tobacco consumers. Elevated fuel prices, concerns about flavor bans and the impact of continued list price increases are pushing them to downtrade to cheaper cigarettes or to move away from cigarettes altogether.

About 55% of retailer respondents to Goldman Sachs third-quarter 2023 Nicotine Nuggets survey were more negative in their outlook for the total tobacco/nicotine category in the past few months compared to the first two quarters of the year, Bonnie Herzog, managing director at the New York-based company, said.

• Read more here to find out what retailers thought about e-cigarette performance. 

Herzog shared the findings of the retailer and wholesaler survey, which represents about 60,000 retail locations across the United States, including convenience stores.

About 58% of survey respondents said c-store trips for tobacco/nicotine products were lower in third-quarter versus second-quarter 2023.

Retailers attributed this to various reasons, from one manufacturer ending couponing on cigarette cartons to disposable e-cigarette customers shifting away from c-stores to online or smoke shops. Customers also have pressure on their disposable incomes with higher fuel prices, one respondent noted.

How much people spent on tobacco when they did come in the store was also less than the previous quarter, according to the survey.  

Retailers and wholesalers remain positive about the smokeless/oral nicotine category and said category volumes were up 12% year-over-year in third-quarter 2023, reflecting continued robust growth in modern oral nicotine (MON) brands like Zyn, On and Rogue, Herzog said.

Respondents expect the category to grow 11% overall in 2023 as it continues to take share, especially from traditional moist snuff, she said. Here’s how four brands performed:

• Zyn from Swedish Match, which Philip Morris International now owns, grew 25% in the third quarter and is expected to grow 29% for the full year. Most are expecting Zyn to benefit longer term with PMI’s backing and strong brand loyalty, Herzog said.
• Altria’s On also grew, up 20% in the third quarter, respondents said. Respondents still expect it to show 24% growth overall in 2023 and 17% growth in 2o24 as Altria pulls back on aggressive promotional investments, she said.
• Velo, from R.J. Reynolds Vapor Co., declined 1% in third quarter, survey respondents said. It was projected to decline about 2% in 2023 and be flat in 2024.
• Rogue, owned by Swisher International, was noted as one of the few oral nicotine pouch brands with significant momentum, the survey found, up 16% in the third quarter. Respondents expect volume to grow 19% in 2023 and 13% in 2024.

Retailers and wholesalers said cigarette volumes continued to decline in the third quarter of the year, down 6.1% year-over-year, and slightly worse than second-quarter 2023, when they said volumes were down 5.1%.

Respondents expect volumes to decline 5.5% in total this year.

“Respondents generally expect cigarette volumes to further deteriorate from the combined impact of continued retail list price increases, increased excise taxes and high retail gas prices and overall inflation pressuring wallets,” Herzog said. “Retailers are relying on the strength of brand loyalty programs (e.g., Marlboro loyalty and [R.J. Reynolds] loyalty/scan) to drive sales and provide a competitive advantage relative to smaller/independent retail operators.”