While cigarettes sales continue to decline, the segment is still a top seller for convenience stores, according to the 2025 Pulse of Convenience Report from PDI Technologies. But rising excise taxes are threatening cigarette sales.
Excise taxes are among c-store operators' top concerns, said PDI, a convenience retail and fuel technology provider based in Alpharetta, Georgia. PDI reported that 25% of c-store operators are concerned about these tax increases, which affect cigarettes, among other products.
Some have already raised concerns about state cigarette tax hikes.
In Indiana, Cathy Melton, executive director of the Indiana Food and Fuel Association, told CSP that the $2 per pack cigarette tax increase will certainly have a significant impact on our members, particularly those located near Indiana’s borders. The increase will take effect July 1, bringing Indiana’s cigarette tax rate to just under $3 per pack.
“Customers who live near those states with lower cigarette taxes will have an incentive to cross state lines to purchase cigarettes at a cheaper price, which will result in a decrease in cigarette sales for Indiana c-stores,” Melton said.
Based on taxes alone, Melton said cigarettes will be $1 cheaper per pack in Michigan, $1.40 cheaper in Ohio, and $1.90 cheaper in Kentucky.
“That’s nearly $40 in savings for a carton of cigarettes in Kentucky,” she said. “This tax increase will most certainly drive business across state lines.”
Beyond the direct impact on cigarette sales, Melton said this tax increase will likely have a ripple effect on overall store sales.
“Cigarette purchases often serve as a gateway for customers to buy other items, such as snacks, beverages, and fuel,” she said. “As a result, we anticipate that the higher price for cigarettes may reduce foot traffic, which could negatively affect sales of other products that many Indiana convenience stores rely on for profitability.”
While 58% of convenience store operators feel optimistic about business in 2025, PDI also reported that 26% of c-store operators are concerned about consumers smoking less, and illegal vapor products remain a top concern for 19% of c-store operators.
In May, the Food and Drug Administration and U.S. Customs and Border Protection said it seized nearly $34 million worth of illegal e-cigarettes during a joint operation.
“The FDA, working with our federal partners, can and will do more to stop the illegal importation and distribution of e-cigarette products in the United States,” said FDA Commissioner Marty Makary.
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