As cigarette sales decline and people smoke less, the other tobacco products (OTP) segment is growing its space in convenience stores.
Nate Brazier, CEO and president of Stinker Stores, told CSP that when it comes to shifting the Boise, Idaho-based company’s strategy of the back bar, interpreting the data is key.
“We are utilizing our market data and making shifts based on what we are seeing in the data. Currently we are downsizing our combustible area to make more room for innovation, modern oral, etc.,” he said.
The back bar is really important to GetGo as a whole, Terri Micklin, president of GetGo Café + Markets convenience stores, Cranberry Township, Pennsylvania, told CSP.
GetGo is No. 29 on CSP’s 2024 Top 202 ranking of U.S. c-store chains by store count.
“We pride ourselves on what we believe is the best curb-to-counter marketing program for the back bar in industry, and it's something we invest a lot of time and resources against to make sure that we're bringing forward as much value as we can to that specific consumer,” she says.
Micklin said GetGo continues to invest in the back bar, “to make sure innovation has the right amount of space and to shift that in partnership with our vendors and the contracts we have to highlight those products that are really growing market share right now.”
Nicotine Pouch Applications
When it comes to the non-combustible category, particularly vapor products and nicotine pouches, National Association of Tobacco Outlets (NATO) Executive Director David Spross told CSP that those segments continue to grow.
“Last year, the Food and Drug Administration stepped up its enforcement efforts against illicit flavored disposables, which I expect to continue and, as a result, bring more regulatory order to the category,” he says.
Spross said he expects the FDA’s Center for Tobacco Products to continue to process vapor premarket tobacco product applications (PMTAs) and start to make progress on the nicotine pouch applications.
“It is my hope and expectation that this will result in more marketing granted orders to provide adult tobacco consumers more choices,” he said.
In a May of 2024 report from PDI Technologies and GasBuddy, cigarette sales declined 3.3% year-over-year in the convenience-store channel when comparing results from 2022 to 2023.
Cigarettes, considered one of the largest in-store sales categories, experienced some of the lowest growth rates and even some declines when comparing results from 2022 to 2023, according to the report.
Despite cigarettes experiencing a decrease in sales, OTP saw a 0.3% increase, the report said. OTP includes tobacco products that are not cigarettes, including cigars, smokeless tobacco, nicotine pouches and heated tobacco products.
As for which OTP has seen the most growth, Spross put nicotine pouches at the top because these products are still considered a new product format.
Greg Schmidt, vice president of business analytics, for Swisher, Jacksonville, Florida, offered an even wider view of the trends in OTP.
“Overall, OTP volumes are declining across most product categories, with a few notable exceptions,” Schmidt said. “For example, modern oral nicotine pouches are up 56.5% and the branded value segment within moist smokeless tobacco is up 6.2% with experienced growth in 2024.”
Cigar Category
Schmidt also revealed that the wraps category was also up last year 7%, with natural leaf wraps growing at over 42%, highlighting adult consumer interest in alternative tobacco options.
Taking a longer view of the large cigar category, he says the homogenized tobacco leaf (HTL) pipe tip segment has exhibited steady volume growth over the past several years, having only leveled slightly in 2024.
“This trend has been consistent both before and after the pandemic, signaling ongoing consumer demand in this niche market,” he says.
Zeroing in further on the modern oral nicotine (MON) segment, Schmidt credited its growth to the ability to meet evolving adult consumer preferences for noncombustible options that are both discreet and versatile. He said this segment also allows for product use in places where traditional smoking is restricted due to bans.
“MON pouches offer a wide variety of blends and strengths, appealing to a broad spectrum of adult consumers,” he said, adding that affordability is a factor as well.
He said MON’s momentum is driven by their affordability compared to cigarettes and premium-priced moist smokeless tobacco (MST) products.
“MON pouches still provide retailers with healthy dollar sales and penny profits,” he said. “MON pouches perform well across all price points within the category, with even the most expensive options still being cheaper than most cigarettes.
Schmidt does not see MON as an entry-level product, but instead said many consumers are coming into the category as “experience” tobacco users, whether from cigarettes or moist snuff.
In January, the FDA made a key move regarding OTP products when it issued marketing granted orders to 20 Zyn nicotine pouch products. Swedish Match North America, which was bought by tobacco company Philip Morris International (PMI), makes Zyn. The announcement marks the first nicotine pouch product to be authorized by the FDA.
The products, each with two nicotine strengths (3 milligram and 6 milligram), include Zyn Chill, Zyn Cinnamon, Zyn Citrus, Zyn Coffee, Zyn Cool Mint, Zyn Menthol, Zyn Peppermint, Zyn Smooth, Zyn Spearmint and Zyn Wintergreen.
“An estimated 45 million Americans regularly consume nicotine and about 30 million of them smoke, the most harmful form of nicotine consumption,” Tom Hayes, president of Swedish Match North America, said after the January announcement. “The FDA’s decision recognizes the role that Zyn can play in the protection of the public health by helping people switch from cigarettes and other traditional tobacco products.”