OAKBROOK TERRACE, Ill. -- The high cost of cigarettes has lured many smokers to little cigars as a cost-effective alternative. This trend has spurred a steady stream of lower-end options that can leave convenience store operators dazed when it comes to stocking the OTP set. The key factors to consider? Working with known brands, understanding your audience and keeping quality top of mind.
With value-priced items capturing 76% of c-store unit sales and 64% of dollar sales in the little-cigar category, according to IRI data, retailers are advised to deal only with trusted brand-name products. This advice stems from the goals to offer quality to consumers, while receiving supplier support.
“It seems new, less expensive little-cigar brands come on the scene each month only to lose support and increase the price as soon as they gain any significant distribution,” said LaRese Armstrong, brand manager–little cigars for Scandinavian Tobacco Group. “The quality of the cigars is inconsistent at best, so it is vital retailers offer a solid value brand.”
Lou Maiellano of TAZ Marketing & Consulting said he would only do business with companies that won’t leave him with an excess of product. “It’s wise to work with companies that support their brand, which translates into support for the c-stores selling those products,” he said. “You’re working with a partner to sell the brand vs. going it alone.”
The many options can make it hard to choose the right products to maximize profits. Whether consumers are smoking value brands as an alternative to mitigate the rising costs of cigarettes or if they are more traditional little-cigar consumers that enjoy a flavorful experience, value little-cigar consumers are very price conscious but also want a quality smoking experience, said Armstrong.
Jane Green, vice president, marketing for Swisher International Inc., said the company has been surprised by the strength of Swisher Sweets Little Cigars despite the declining volume of the category and the sharp tax increases over the past few years.
“You will always have that customer looking for the cheapest pack on the shelf, but there is more value and profit in the brand- loyal consumer,” she said.
Another way to select the best products for a store is to know a location’s regional preferences. Joe Teller, senior manager, category management for Swedish Match North America, said retailers should pick brands with the most local consumer demand.
“Failure to understand local consumer demand for price/value little cigars is a mistake many retailers make,” Teller said. Little cigars are regional in nature, so whichever are the largest and/or fastest growing will be the brands most trusted by local consumers. “If retailers don’t adequately and often enough analyze the little-cigar segment in their marketplace, they often end up carrying the price/value brands with little or declining consumer demand.”
The top-selling little-cigar value brands in c-stores include Cheyenne, Phillies, Santa Fe, Smoker’s Choice and Prime Time. And one of the fastest-growing brands in the industry is Talon by Scandinavian Tobacco. Currently at a 2.4% market share, up 139% in the last year, Talon offer retailers “a national brand from the maker of America’s first little cigar and trusted leader in the OTP industry,” said Armstrong. Talon comes in Regular, Menthol and Silver for cigarette alternatives, as well as Sweet Original, Grape and Vanilla for consumers that enjoy a flavorful smoke . For the three-month period ending Feb. 23, 2014, dollar sales of Talon increased 10%, according to IRI data provided by Scandinavian Tobacco.
Top-Selling Value Brands for Little Cigars
Source: IRI. Total U.S. Convenience, as of Feb. 23, 2014
| Brand | Current Month Unit Sales | Current Month Unit Share | Unit Share Change vs. Year Ago |
|---|---|---|---|
| Cheyenne | 965,599 | 16.5% | -4% |
| Prime Time | 723,237 | 12.4% | -5% |
| 305S | 683,003 | 11.7% | 32% |
| Swisher Sweets | 662,252 | 11.3% | -12% |
| Phillies | 558,202 | 9.5% | -21% |
| Clipper | 473,319 | 8.1% | 30% |
| Smoker's Choice | 285,563 | 4.9% | -36% |
| Santa Fe | 238,621 | 4.1% | -42% |
| Red Buck | 127,998 | 2.2% | -20% |
| Talon | 120,834 | 2.1% | 85% |
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