MINNEAPOLIS — While convenience stores are down in sales in many categories amid the COVID-19 pandemic, tobacco is a bright spot.
The nicotine category is expected to grow by 1 to 1.5% in 2020 across all U.S. markets—and cigarettes are down less than expected.
“It’s an opportunity for [convenience-store retailers] to maintain the sales and revenue for [their] outlet with this category,” Don Burke, senior vice president of Management Science Associates Inc., said during a Sept. 15 webinar for the National Association of Tobacco Outlets, Minneapolis.
Burke used wholesale shipment to retail data through June 27 to identify trends in the category amid the pandemic and beyond.
Cigarettes are expected to be down 2 to 3% in units in the United States through the end of 2020, Burke said. This could improve depending on COVID-19, he said. If people continue to work from home more and commute less, that decline could be even smaller.
In c-stores, cigarette volumes were down 2.4% for the 52 weeks ending in the second quarter of 2020 versus the same quarter prior year. That decrease was 3.5% for all outlets, showing c-stores have a leg up when it comes to cigarette sales.
C-stores account for 72% of all nicotine volume in the United States, as of the 52 weeks ending in second-quarter 2020. That is followed by other trades (9%) and tobacco outlets (8%).
While dollar stores are increasing their nicotine volumes, they are still not having a big effect, Burke said, only taking up about 2% of the volume share as of the end of the second quarter.
An emerging category is modern oral nicotine (MON), Burke said, which includes pouches, like Swedish Match’s Zyn, and nicotine toothpicks. Although cigarettes are nicotine users’ product of choice—nearly 80% of the time a consumer chooses to use nicotine, they choose cigarettes—MON products are showing strong growth, Burke said.
The MON category share grew from 0.1% in second-quarter 2019 to 0.6% in second-quarter 2020, a 0.5% increase.
Looking at MONs growth by channel, c-stores had an 11% increase in the amount of MON they ordered for second-quarter 2020 compared to the first quarter this year. All trades saw only a 6% increase, shipment data from the Pittsburgh-based company showed.
Not only have stores been adding it, but the consumer acceptance of the product is growing and people who have tried it are becoming repeat customers, he said.
“We’re really expecting this category to take off,” Burke said.