3 Technology Insights Coming to Tobacco

LAS VEGAS -- From Google science to “magic” pills, a NATO Industry Outlook workshop provided attendees with an unexpected snapshot of the tobacco category in 2018.

Most of these insights involved technology. For instance, Nik Modi, tobacco analyst for RBC Capital Markets, New York, said much of his enthusiasm for the category’s future lies with companies such as Richmond, Va.-based Altria Group Distribution Co. and its efforts to innovate with alternatives to combustible cigarettes.

“You don’t see that in other industries that I cover, like lipstick, detergents, bleaches,” Modi said to about 200 workshop attendees. “They’re really trying to innovate in the category.”

Here are three unique trends and insights that experts addressed during the Jan. 30 workshop in Las Vegas ...

Saying that technology can disrupt the tobacco category just as it has other industries, Modi said a pill is coming to market that can transmit information to people’s doctors from within their bodies. With these minicomputers in the bloodstream, doctors can monitor patients’ cholesterol levels, sugar levels or warnings of a heart attack.

“It’ll influence the choices we make based on data,” Modi said. “A microcomputer in your body is telling you how many years you’re adding to or taking off of your life” because of habits such as smoking.

In studying correlations between Google search activity and movement in tobacco products, Don Burke, senior vice president of Management Science Associates (MSA), Pittsburgh, reported a behavioral trend with new products such as vaping devices that could present an advantage to web-savvy retailers.

“Customers first see an item in a store, then go to Google” to research it, Burke said. “Any opportunity you have to display a product and show you have it, you’ll drive interest” before an actual purchase.

While convenience stores still command a lion’s share of the tobacco category compared to other retail channels, dollar stores are presenting a growing threat, said Burke. Through shipment data from distributors, MSA calculated that dollar stores grew 14% in cigarette volume and c-stores fell 4% year over year for the 13 weeks ending Sept. 30, 2017.

C-stores still represent 56% of cigarette volume across all channels, compared with dollar stores at 5%, but even those numbers are shifting. In that same 13-week period, those same distribution numbers showed dollar-store share up 10% and c-stores falling by 1%, Burke said.