CHICAGO -- Convenience retailers may feel a little down about their first-quarter tobacco numbers, but cigars were a strong performer and limited-time-offer (LTO) opportunities and innovative technologies are reasons for optimism, according to speakers participating in a recent CSP-Swedish Match webinar.
A half-dozen reasons ranging from rainy weather to disheartened Clinton voters contributed to a slower start to sales in 2017, said Nik Modi, managing director of tobacco, household products and beverages for RBC Capital Markets LLC, New York. Despite that slow start, Modi said numbers for March and April are already ticking up.
Here’s a look at four highlights of the May 11 webinar …
Cigars drove 83% of OTP (other tobacco products) growth over a six-month period ending the beginning of April, said Joe Teller, director of category management for Swedish Match, Stockholm, Sweden. Unit growth was 9.6% and dollar growth was 9.5%, he said, citing c-store figures from New York-based Nielsen.
Natural-leaf and rolled-leaf cigars showed the largest percentages of growth in terms of specific categories, and increasing competition from new and existing players fueled growth vs. cannibalizing the category, Teller said.
Much of the driver for cigar’s formidable showing were limited-time offers (LTOs), Teller said. With manufacturers able to develop new LTO products even under heavy regulation from the U.S. Food and Drug Administration (FDA), retailers need to be ready to accommodate the fast in-and-out stock cycles, he said.
As new retail contracts settle in the coming weeks, retailers can expect more promotional dollars from manufacturers as they try to shore up or gain market share, Modi said.
While retailers in a CSP-RBC survey expressed doubt about the emerging nicotine-delivery method known as “heat not burn,” Modi still expects it to be a significant opportunity, especially as global tobacco players find success with the technology outside the United States.
Modi also said the technology will have an even stronger chance at success if the FDA deems it less harmful than combustible cigarettes. Consumers have responded to that product claim with other nicotine products in the past, he said.
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