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Tobacco

SOI 2019: Tobacco's Dual Storylines

The strongest retailers move away from declining or highly competitive categories
cigarettes
Photograph: Shutterstock

CHICAGO — More proof that the bottom quartile has not changed its business model in almost 10 years: Tobacco’s share of inside sales at these stores—cigarettes and other tobacco products (OTP) included—had dropped by only 0.66 points, according to CSX data. And the share of sales from candy, snacks and packaged beverages was largely flat or grew modestly. Beer was the only category that significantly grew its share of inside sales, up 3.4 points.

Top-quartile companies, on the other hand, showed a significant movement away from declining or highly competitive categories such as tobacco, where share of inside sales had declined 7.52 points from 2009 to 2018; packaged beverages fell 0.57 points; and beer was down 3.14 points.

In 2018, top-quartile companies outpaced the bottom two quartiles in all six categories. In tobacco, the top saw 2.3 times more sales dollars vs. the bottom two quartiles. Sales of both packaged beverages and snacks were 2.4 times greater at top-quartile operators’ stores, while candy sales were 2.7 times higher.

Within the c-store industry overall, cigarettes remained the top-selling in-store category by dollar sales, averaging $54,249 per month per store in 2018, according to CSX figures.

Sales by Subcategory

Sales of cigarettes decreased 3.1% in 2018 to hit $54,249 per store per month.

Source unless cited: NACS preliminary data. Final data to appear in the NACS State of the Industry Report of 2018 Data.

Premium cigarettes sold the most per month per store at an average of $41,949 in 2018, according to CSX and Nielsen. Branded discount cigarettes came in second with sales of $5,085.

Unfortunately, monthly sales per store fell 3.1% year over year and total units fell by 4.6%.

“It’s a melting ice cube, although it’s a big percentage of sales,” said summit speaker Charlie McIlvaine, chairman and CEO of Coen Oil Co.

Adding to future declines for cigarettes are impending excise-tax increases. More than a dozen states have increased cigarette taxes in the past three years, but another 10 have not done so in the past 10 years. McIlvaine warned that those dormant states—Colorado, Georgia, Idaho, Maine, Missouri, Montana, North Dakota, Nevada, Virginia and Wyoming—may start playing the tax game soon.

Subcategory Sales Breakdown

Although c-store cigarette unit sales fell 4.4% in 2018, the subgeneric/private-label segment saw growth, increasing 8.5%, according to Nielsen.

SubcategoryShare of dollar salesDollar sales PCYA*Unit sales PCYA*
Premium81.6%(1.7%)(3.9%)
Branded discount15.1%(6.2%)(8.7%)
Subgeneric/private label3.0%6.9%8.5%
Fourth-tier0.3%(20.1%)(28.2%)
Imports<0.1%14.0%5.5%

Source: The Nielsen Co. | *Percent change from a year ago

Click here to view complete NACS State of the Industry Summit coverage.

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