Convenience-store retailers remain optimistic on the outlook for the tobacco category, according to Goldman Sachs’ fourth-quarter 2025 Nicotine Nuggets survey. This was mainly due to moderating cigarette volume declines and continued growth of the nicotine pouch category.
The survey, analyzed by New York-based Goldman Sachs Managing Director Bonnie Herzog, represents about 76,000 c-store locations across the United States.
Momentum in smokeless
When it comes to smokeless and oral nicotine products, Herzog said retailers expect category momentum to continue to be strong and are planning to add incremental shelf space to nicotine pouches. The survey revealed that several retailers said that space will be taken from cigarettes, moist smokeless tobacco and cigars to make more room for nicotine pouches.
“Innovation in nicotine pouches is sought after and expected to drive growth, with retailers expressing excitement behind the broad launch of Altria’s On Plus (moist pouch) this year and Zyn Ultra (pending FDA approval), as consumers seek options and newness,” she said.
Herzog said “86% of respondents continue to see increased promotional activity in oral nicotine pouches, up from 73% from our second-quarter survey, with 58% seeing a substantial increase in activity as manufacturers continue to invest to drive conversion and volume.”
Challenges persist
Manufacturer pricing power is weakening relative to a year ago, Herzog said.
“Trade down continues to be a common theme, fueled in part by continued price increases against a weak consumer backdrop, and a stubbornly persistent inflationary environment that is pushing consumers to the fourth tier or lower cost alternatives including nicotine pouches, and e-cigarettes,” Herzog said.
According to 49% of retailers surveyed, manufacturer pricing power is weakening relative to a year ago—although lower than 61% in second quarter, Herzog said, adding that several respondents indicated that pricing actions are feeding ongoing volume declines.
Cigarette volume declines moderated “sequentially” in fourth quarter and roughly 80% of those surveyed revealed that deep discount cigarettes gained share, Herzog said.
Cigarettes are not the only segment facing challenges. The illicit disposable e-cigarette market remains a topic of concern for many retailers with many expecting these headwinds to persist, she said. While difficult to quantify the direct sales or volume impact, 50% of respondents indicated that illicit activity has gotten worse, Herzog said.
Tobacco and nicotine customer traffic trends have also weakened sequentially, retailers noted in the survey. Most respondents (73%) reported c-store trips for tobacco/nicotine products were lower in fourth quarter versus third quarter, Herzog said.
“This marks a relatively significant deterioration in trends vs our prior survey—where a more modest 57% of respondents indicated that traffic levels were sequentially lower in second quarter vs first quarter,” she said.
Herzog also noted that retailers said Supplemental Nutrition Assistance Program (SNAP) benefit delays have created short-term pressure on traffic and in-store sales—particularly in lower-income and rural areas. During the government shutdown last November, several states were forced to delay distribution of SNAP benefits.
Herzog said one retailer noted that consumers only have so much expendable income—and consumers need to use more of it for necessary living expenses like food, medicine and rent, leaving less left for optional items like tobacco and alcohol.
“The same respondent noted that while there will always be demand for nicotine products—the types of products containing tobacco and/or nicotine will change,” she said.
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