4 Highlights From Tobacco Retailer Survey

NEW YORK — Cigarette volume sales in the United States are expected to be less negative than previously expected—and retailers are more positive in their outlook for the broader tobacco industry, a survey from Goldman Sachs’ has found.

The Nicotine Nuggets survey relates to the second quarter of the year and represents about 105,000 convenience-store locations across the country, according to Bonnie Herzog, managing director of Goldman Sachs, New York.

Click through to see the survey’s highlights …

Retailers expect continued strong pantry loading of cartons and multi-packs of cigarettes, versus the typical single-pack purchase, Herzog said. 

Consumers are likely going for bigger packs as they try to keep trips to a minimum during the pandemic. Nearly 75% of respondents continue to see consumers making fewer trips to the store, purchasing larger pack sizes and using digital coupons when available.

There are, however, some signs of normalcy returning. One retailer noted people are getting tired of being cooped up, especially as the weather improves.

Underlying U.S. cigarette industry volumes are still expected to be negative but have improved. Volumes should be down 4%, versus a previously expected 5% decrease, Herzog said.

With more people working from home because of the COVID-19 pandemic, more people are smoking tobacco and nicotine products, Herzog said.

Retailers also expect continued economic pressures will cause more e-cigarette users to revert back to combustible cigarettes—especially deep discount or fourth tier cigarettes because they are cheaper, the survey found.

Some retailers said the category will keep declining though, once the coronavirus slows and the government stimulus payments expire.

Despite the maker of Marlboro cigarettes, Richmond, Va.-based Altria, raising its prices slightly on cigarettes, there was little to no consumer pushback, Herzog said.

Most survey respondents said cigarette manufacturers’ pricing power has not changed much compared to last year. About 46% said pricing power was the same, 22% said a little less, 16% said a little more, 8% said significantly less and 8% said significantly more.

More than half of retailers said they are now more positive in their outlook for the tobacco industry, compared to about 30% in April, Herzog said. Consumers are finding ways to support their tobacco habits despite logistical or income challenges and more are discovering oral nicotine as an option, she said.

Retailers believe the pandemic encourages more tobacco use given higher stress levels and social distancing orders, which makes it easier for people to use tobacco more freely, according to the survey. 

There still are some concerns among retailers, however.

Retailers cited concerns about lost opportunities in cigars as demand has remained strong through the pandemic, but supplies are very limited, to the point of out-of-stocks for some retailers. Other problems retailers noted in the survey were further potential excise tax increases, potential for more states to enact flavor bans, poor merchandising support by the major cigarette and e-cigarette manufacturers and re-acceleration of the pandemic leading to fewer store trips.