Consumer Report: Millennials' Taste for Tobacco

New data brings some clarity—and surprising conclusions—to the category

With millennials outnumbering baby boomers, it’s no wonder that convenience retailers mulling the future of the tobacco category want to know if there’s fire where there’s smoke—and vapor, for that matter.

New, exclusive data on millennials and tobacco consumption, as well as a look at one brand resonating with this group, brings some clarity to the category, with surprising conclusions that may have retailers buzzing.

The recently released 2016 CSP Consumer Study powered by Technomic asked millennials about their tastes and habits regarding tobacco, finding the group second only to Generation X as likely to visit a c-store for tobacco products.

While those tobacco-shopping millennials primarily purchase cigarettes, they were most likely to buy electronic cigarettes (19% purchasing in the past month) compared to Gen X (40- to 50-year-old consumers) at 16% and Generation Z at 13%. Millennials were also more inclined to buy e-liquids at 11% compared to Gen X (5%) and Gen Z (2%).

(For tobacco-related questions, Gen Z respondents were restricted to those of legal smoking age by state, up to 23 years old. Millennials, defined in the study as being born between 1977 and 1992, are as young as 24 years old and about to turn 39 on the upper end.)

Still, cigarettes were clearly the main tobacco product purchased by the most number of consumers. Millennial tobacco consumers scored high on purchasing cigarettes at c-stores at least once in the past month at 86%, but they still ranked fourth out of five compared to other demographics.

The group dubbed the “matures” (born before 1946) reported in at 94%, Gen Xers at 90%, boomers at 88% and Gen Z far below millennials at 74%.

The black packaging, bolder flavor and lower price point of Philip Morris’ Marlboro Black seems to have connected with millennials, according to a report in The Wall Street Journal.

The product grabbed 1% of market share in 2011, the first year it was introduced, and has since helped Philip Morris USA, Richmond, Va., increase overall sales 3 percentage points to 46% in 2014 from 2011 in the 18- to 24-year-old age range, the Journal said, citing a report from the National Survey on Drug Use and Health.

While Altria, Philip Morris’ parent company, does not release information specific to Marlboro Black, the Journal reported that Marlboro recently hit an all-time high of 44.1% market share.

“It’s making Marlboro relevant again,” says Bonnie Herzog, managing director of beverage, tobacco and convenience-store research for Wells Fargo Securities, New York. Though it is unclear how much revenue the brand generates, Herzog estimates 1% market share is worth about $320 million in annual revenue for Altria.

Jerry Weger, director of sales for core products for Sheetz, Altoona, Pa., said Marlboro’s black packaging gave the brand an upscale image that has allowed it to accumulate an estimated 6% to 8% market share in Sheetz stores.

For its part, an Altria spokesperson says its success stems from its new branding “architecture,” which created color-coded brand identities of Marlboro Red, Gold, Green and Black. Since that time, Marlboro’s share among smokers ages 21 to 29 and 30 to 39 “both exceeded its overall share.” It reversed a declining trend among 21- to 29-year-olds and locked them in as a base “relatively more stable than key competitive brands.” The company specifically points to the Green and Black brands as triggers that “have helped strengthen [our] demographics.”

From the backbar to the cold vault, a strong brand is key in engaging millennial consumers. Millennials by far are the most brand loyal of all the age groups in the CSP-Technomic study, with 58% saying they go only to c-stores that carry their specific tobacco brand.

This finding aligns with a 2015 Elite Daily study showing slightly more than half of millennials surveyed were extremely brand loyal. Elite Daily officials said “millennials are … the most loyal generation to their favorite brands.”

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