NEW YORK-- With much of the channel seeing the continued and often talked about decline of the tobacco category, analyst Bonnie Herzog described the recent quarter’s cigarette sales as “soft,” pointing to decelerating volume as the main culprit.
In a recent newsletter, Herzog, marketing director of beverage, tobacco and convenience-store research for Wells Fargo Securities LLC, New York, said cigarette dollar sales decreased by 1.9% in the four-week period ending Dec. 31, 2016. The drop came amid a “solid” pricing increase of 3.5% and decelerating volume of 5.3%. She described cigarette sales figures from Winston-Salem, N.C.-based Reynolds American Inc. and Richmond, Va.-based Altria Group as “flat” over a recent 12-week period.
Here’s how four c-store chains described recent activity in the tobacco category …
Alimentation Couche-Tard, Circle K
When asked about the tobacco category and its integration of the Pantry chain, Brian Hannasch, president and CEO for Laval, Quebec-based Alimentation Couche-Tard and the Circle K chain, said synergies fell into place quickly and have not had any impact on merchandise-margin percentage. He said they’ve been having a good year working with suppliers and have not felt a pressing need to “be as deep in terms of discounting promotional activity.”
On the topic of London-based British American Tobacco (BAT) trying to purchase Reynolds, Hannasch said he looks at it in positive terms, since both Couche-Tard and BAT operate globally. He called it “an opportunity to bring global experience and also different products to help us better service our tobacco and moist-smokeless customers in our network here in North America but also in the rest of the world.”
Casey’s General Stores
In its latest investor call, Ankeny, Iowa-based Casey’s General Stores called cigarettes a “declining category” although margins have been “relatively stable,” said Bill Walljasper, senior vice president and CFO. They observed that customers appear to be buying fewer cartons and more single packs, which come in at a lower ring but “don’t affect … same-store sales.”
In time, he said, the rise in pack sales will help margins if volumes remain steady.
Sheetz and Wawa
Two other prominent c-store chains made news with regard to the tobacco category in recent months. Wawa, Pa.-based Wawa resolved a skirmish over tobacco-retail zoning regulations in Philadelphia, and Altoona, Pa.-based Sheetz noted a strong showing with Marlboro Black among its millennial customers.