The back bar in convenience stores is no longer a combination of products that have stayed mostly unchanged over time.
Instead, it is becoming one of the most dynamic and contested spaces in convenience retail as nicotine pouches accelerate and vape-product authorizations are increasing.
At the same time, emerging categories such as cannabis are beginning to redefine what growth looks like beyond traditional tobacco.
For retailers, the challenge is no longer simply managing tobacco, it is actively rebalancing shelves behind the counter that are shifting in real time with an array of products and knowing what to cut, what to grow and what categories to prepare for next.
Here’s a closer look at the trends and challenges shaping the tobacco category.
Making room: The rise of modern oral nicotine
Behind the counter of most convenience stores, nicotine pouches have moved from a niche product to a central growth driver. Modern oral nicotine is reshaping both assortment strategy and space allocation as consumers shift toward discreet, smoke-free alternatives.
“Modern oral nicotine will take an increasing share of back bar space,” said Richard Bode, managing partner and CEO at Cadent Consulting, Evanston, Illinois, a sales and marketing consultant for manufacturers and retailers that focuses on consumer-packaged goods companies.
John Rhine, CFO of Savannah, Georgia-based Parker’s Kitchen, said that he is most excited about the continued growth of new modern oral (NMO) products, which include nicotine pouches. “I really believe this category represents the future of nicotine consumption,” Rhine said. “Nicotine pouches are viewed as a much more socially acceptable delivery system—there’s no smoke, no smell and no spitting, which removes many of the barriers traditionally associated with tobacco use.”
Rhine said with the trend of working from home declining and more employees returning to office environments, NMO products have become an attractive alternative for poly-tobacco users, or those who use multiple types of tobacco products.
“They’re discreet, they align with changing social norms, and they offer a cleaner, more convenient way for consumers to meet their nicotine needs,” he said. From a retail standpoint, it’s one of the most promising growth categories in the store.”
Goldman Sachs Managing Director Bonnie Herzog projects that smoke-free products will continue to expand and play a central role in volume growth and profitability. She expects the total U.S. nicotine market to reach roughly $67 billion in revenues by 2035, adding that she expects cigarettes to make up a smaller portion of revenues (47%) while smoke-free revenues expand.
“Given attractive unit economics, we expect smoke-free products to become the key driver of industry profit growth,” Herzog said in February at a virtual session at CSP’s Convenience Retailing University in Austin, Texas. “While cigarettes comprise 70% of the operating profit pool today, we expect its share to fall to roughly 50% of profits by 2035.”
With smoke-free products expected to be the dominant driver of volumes, Herzog said downtrading and cross-category movement will likely drive this growth.
“Smoke-free products make up roughly 48% of U.S. nicotine volumes today,” she said.
Herzog said she expects that number to jump to roughly 75% by 2035.
Bode says retailers are already responding by reallocating how shelf space is divided among products.
“Modern oral nicotine growth is exceeding that of its adjacent offerings and warrants deliberate investments in both product offerings and allocated space,” he said.
When it comes to what’s changing in the planogram behind the counter, Bode said that nicotine pouches are gaining facings at the expense of legacy tobacco products.
“The retailers who will be best positioned over the next several years are those who treat the backbar as a living asset rather than a fixed one,” he said. “The category will continue to evolve through regulation, innovation, and shifting consumer economics.”
Bode said that the planogram needs to reflect where demand is headed, not where it has been.
Philip Morris International said in its first-quarter 2026 earnings report on April 22 that consumer sales of Zyn nicotine pouches increased by more than 10% during the quarter, according to estimates from Nielsen cited by the company.
British American Tobacco CEO Tadeu Marroco said on Feb. 12 that the company’s Velo Plus nicotine pouches saw strong growth, becoming the No. 2 brand in both in volume and value share.
Richmond, Virginia-based Altria said nicotine pouch volumes grew during first-quarter 2026. Shipment volume for Altria’s On Plus nicotine pouch portfolio grew nearly 18% to more than 46 million cans in the first quarter.
Cigarettes remain a key player
Despite rapid growth in smoke-free alternatives, cigarettes remain the backbone of the back bar revenue and traffic generation, Bode said. But their role is becoming more concentrated as volumes decline and consumer behavior shifts.
“Full removal is out of question given their volume contribution, but the set will begin to narrow as competitive alternatives arrive,” Bode said.
Despite ongoing category decline, premium combustibles continue to show resilience at the top end of the segment. Altria reported strong first-quarter 2026 results, with smokeable product driving overall growth. Net revenues rose 3.2% to $5.4 billion, supported primarily by combustibles’ performance. The company also said Marlboro continued to strengthen its leadership in the premium segment.
“In the first quarter, Marlboro expanded its share of the premium segment to 59.5%, up 0.1 share point versus the prior year and 0.2 share points sequentially, expanding its long-standing leadership position,” CFO Salvatore “Sal” Mancuso said during the company’s earnings call on April 30, according to a transcript from financial services site AlphaSense.
Bode noted that while declines have accelerated, the shift is increasingly structural rather than uniform. He cautions that cigarette decline should not be conflated with broader category decline, noting that value is not exiting the back bar but shifting within it.
“The margin gap between other tobacco products (OTP) and cigarettes has closed and continues to narrow,” he said. “The revenue is not leaving the back bar but rather is repositioning within it.”
Price remains the dominant driver shaping behavior across the back bar.
“It is well understood that the consumer is facing financial pressure due to inflation, not just in tobacco, but across all categories,” he said. “Price gaps between premium and deep discount cigarettes have reached 49%, well above the historical 30% average, driving measurable downtrading.”
Bode said the practical implication is that pricing strategy should not be uniform across the backbar.
“Value-tier availability is essential in cigarettes, while assortment depth is what retains the pouch consumer,” he said.
When it comes to how much retailers should allocate space for combustible, Bode said cigarettes should retain allocation proportional to their volume contribution. But, he said that the set “should be limited to top-performing SKUs across premium and value tiers given that price gaps have reached historically wide levels and downtrading is accelerating.”
Underlying these shifts is the rise of the poly-user, who are consumers who move between nicotine formats based on occasion, price and context rather than loyalty to a single product type.
“When consumers purchase other tobacco products, cigarettes rank among the top three most co-purchased categories in the same trip, sitting alongside candy and packaged beverages,” he said. “A consumer’s preference on a product type can shift situationally.”
He said a consumer may prefer a vape in their home, a nicotine pouch in the office, and a cigarette on a weekend.
“This range of behavior is not an anomaly, but rather increasingly normal,” he said. “Retailers must recognize this shift and stock the backbar properly to capture the larger basket consumer.”
Illicit vape pressure
While smoke-free products continue to grow, the vape category is increasingly shaped by illicit market pressure.
The National Association of Convenience Stores (NACS) says illicit e-cigarettes imported from China are harming U.S. retailers, with some estimates suggesting they account for more than 80% of sales, NACS said in a letter sent in April to the Office of the U.S. Trade Representative (USTR).
“This illicit supply imposes direct and ongoing harm [to] every business in the supply chain—including law-abiding retailers,” NACS said. “Stores that attempt to comply with the law lose sales to competitors, such as vape shops, willing to sell unauthorized products.”
Enforcement pressure is also building at the state level.
Iowa Attorney General Brenna Bird joined a coalition of 13 state attorneys general in a letter urging major credit card companies to stop processing transactions tied to illegal vape sales, her office said on April 15.
The attorney general said illegal vaping products, largely manufactured in China, account for most of the U.S. vape market and generate more than $11 billion in annual sales.
“Illicit e-cigarettes are sold in more than 100,000 retail locations nationwide, including gas stations, independent convenience stores and vape shops,” the letter said.
Retailers are also weighing in on the illicit market.
When it comes to disposable vapes, Jack Costello, business analyst at Cadent Consulting Group, said they have become a wildcard. “Disposable vapes should be allocated cautiously,” he said. “Regulations make the management of space a headache. Illicit product saturation is suppressing formal channel growth, and until enforcement improves, this segment carries meaningful uncertainty.”
On the state level, policy responses are beginning to take shape, including Pennsylvania. The state’s vape law requires retailers to source from certified manufacturers.
The Pennsylvania law mandates that thousands of vape retailers across the state purchase products exclusively from state-certified manufacturers, according to a statement April 9 from Pennsylvania Attorney General Dave Sunday.
“The law will ensure that only e-cigarettes that contain nicotine, have FDA approval or are pending review as preexisting products (on market by Aug. 8, 2016, and premarket tobacco product application submitted by Sept. 9, 2020), or meet specific requirements, are listed on the directory,” the attorney general’s office said in an April statement.
At the same time, regulators are beginning to cautiously expand the legal market. In May, the FDA for the first time authorized the marketing of four e-cigarette products made by Glas Inc., an independent vaping technology company based in Inglewood, California. The authorized pods include Classic Menthol; Fresh Menthol; Gold, a mango flavor; and Sapphire, a blueberry flavor, marking the FDA’s first authorization of non-tobacco and non-menthol e-cigarette products.
The Glas system requires users to verify their age and identity with a government-issued ID and to pair the device with a smartphone via Bluetooth. The device will not operate if separated from the phone and the app conducts random biometric check-ins to confirm the registered user is the one using the device.
Glas CEO Sean Greenbaum called the authorization a significant milestone.
“With this latest decision, the agency has now extended authorization to our flavored products, confirming that they meet the statutory standard of being appropriate for the protection of public health (APPH),” Greenbaum said in a May 6 statement to CSP regarding the FDA’s authorization. “Today’s decision is an important step forward—not only for Glas, but for a clear, science-based path for responsible innovation in the United States.”
The authorization has also come under scrutiny. Yolanda Richardson, president and CEO of Campaign for Tobacco-Free Kids, called the authorization a “big step” backward for preventing youth e-cigarette use.
“Today’s decision puts at risk the progress our nation has made in reducing youth e-cigarette use. It conflicts with overwhelming scientific evidence and the FDA’s own repeated conclusions that flavors pose a substantial risk to young people,” Richardson said in a May 5 statement.
On May 12, Politico reported that FDA Commissioner Marty Makary had resigned. The decision to step away from the position comes following reports that Trump was going to dismiss Makary from the position. The two had clashed, in part, over the authorization of flavored vape products.
Emerging growth: Cannabis
Beyond traditional tobacco, convenience retailers are increasingly evaluating adjacent categories that could shape future back bar growth. Cannabis is emerging as a potential extension of age-gated retail.
Melissa Vonder Haar, managing director of TradeWorks for iSee Store Innovations and chair of CSP’s C-Store Cannabis Board, said at CSP’s first Cannabis Forum in March in Lombard, Illinois, that there is clear market momentum behind the category. Cannabis is a proven market with adult-use recreational sales reaching $31.6 billion in 2025, she said, adding that it is projected to climb to $40 billion by 2029, citing market and research and analytics firm BDSA, Boulder, Colorado.
She said convenience retail is well positioned to participate as cannabis evolves into more mainstream retail channels.
“When you are trying to launch a new category, convenience is where you do it,” she said. “We’ve done it before with energy drinks, craft beer, vape and modern oral products—and now we can unlock the true potential of cannabis. It’s all very exciting.”
Early retailer adoption is also emerging. Dan Razowsky, director of marketing, category manager and pricebook coordinator, Northbrook, Illinois-based Rmarts convenience stores, said THC products are showing incremental growth rather than cannibalization.
“This is new business,” he said at the Cannabis Forum. “It’s not taking away overall category beer sales.”
Data from NielsenIQ reinforces that trajectory. Convenience stores are now selling more THC beverages than any retail channel except liquor stores, reflecting rising consumer demand for low-dose cannabis drinks, according to NielsenIQ.
Jason Zelinski, vice president of North American Retail at Chicago-based NielsenIQ, shared the data at CSP’s Cannabis Forum, adding that 10-milligram doses are growing the fastest in the category.
“Distribution is driving THC beverage sales,” Zelinski said. “Currently, these products have a 52% distribution potential across legal states.”
However, regulatory uncertainty continues to define the category.
An impending Nov. 12 deadline that would ban most hemp-derived THC is being described by industry participants as an “existential threat. Diana Eberlein, chair of the Coalition for Adult Beverage Alternatives and chief communications officer for emulsion supplier Vertosa, said at the forum that “if you want to sell it, you have to advocate for it.”
Eberlein said the November deadline would ban all hemp products with more than 0.4 milligrams of psychoactive tetrahydrocannabinol, or THC, per container. Hemp-THC suppliers and distributors have until then before the full ban is enforced, unless the ruling is changed, she said.
Products exceeding the 0.4 milligrams would fall under the Controlled Substances Act, with no exceptions, Eberlein said.
And with the market moving faster than the rules that are supposed to govern hemp-THC beverages, Wine & Spirits Wholesalers of America (WSWA), a national trade association representing wine and spirits distributors in March launched an educational microsite focused on the regulation of hemp beverages.
The microsite outlines why intoxicating hemp beverages should be regulated in a manner consistent with alcohol, leveraging a proven system that prioritizes age verification, product standards, taxation, and state-level control over retail sales, WSWA said in a statement.
“If Congress fails to act, these products face a real risk of being removed from the shelves of licensed, responsible retail stores in November, but would still be available to consumers through multiple other unregulated channels,” said WSWA President and CEO Francis Creighton. “Intoxicating products, including hemp beverages, need a clear, workable framework that protects public health and public safety while allowing responsible businesses to operate.”
On May 4, following the House passing its draft of the Farm Bill, Dawon Hobbs, executive vice president of government affairs for WSWA, said the 2026 Farm Bill's failure to address the November ban on intoxicating hemp products is a “missed” opportunity.
“A ban will not remove these products from the market—it will push consumers toward unregulated, online channels with no age verification, no product standards and no accountability,” he said.
Hobbs added that WSWA has long believed that intoxicating beverages should be subject to baseline federal regulations that allow for additional state-specific regulatory solutions.
“The alcohol industry has 90 years of experience proving that responsible regulation works,” he said. “We urge the Senate to act before November 2026 to replace this ban with a durable federal framework that actually protects consumers.”
In December, President Donald Trump signed an executive order to fast track the reclassification of cannabis to a less-restrictive category of drugs because of its medicinal benefits.
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