The ongoing evolution of the tobacco category is forcing many convenience stores to reimagine their backbars. True North Energy, which operates 171 truenorth c-stores in Illinois, Michigan, Ohio and Wisconsin, is one c-store chain that’s cutting space for cigarettes in its latest reset.
Based in Brecksville, Ohio, TrueNorth Energy is a joint venture between Shell and the Lyden family. The Lyden family has been in the business since 1919 with the fourth generation now at the helm, including Bailey Lyden, whose great-grandfather founded the Lyden Oil Co. Lyden began working for the family company when he was 14. He wasn’t old enough to work the register, but he did everything else, including cleaning the restrooms.
After graduating from the University of Colorado in 2007, he joined the company full time and has never looked back on his decision.
“We’re condensing our combustible cigarettes section more and more." -- Bailey Lyden, truenorth
Now serving as vice president of retail, Lyden knows the c-store space inside and out, including the tobacco category.
The convenience store has a typical set that includes around 12 to 13 feet, with 6 feet of cigarettes, 2 feet of vapor products, 3 feet of modern oral, and 2 feet of moist smokeless tobacco. But Lyden said that is about to change.
“We’re condensing our combustible cigarettes section more and more,” he said.
This year the company is doing a “massive” reset on many of its stores’ backbars to try to maximize the company’s vendor participation, Lyden told CSP.
The plan is aimed at setting up the store for the future.
“We think we have what we need and we’re trying to set us up for at least 24 months or a couple of years that we can grow into,” he says.
The space left by cigarettes is going to modern oral nicotine, Lyden said, which has huge growth potential. The chain is seeing double-digit growth in the modern oral segment, he said.
“We think it has staying power, and that’s why we wanted to give it ample space,” Lyden said.
Regulatory hurdles
As a Midwest retailer, truenorth faces the challenge of flavored tobacco bans, especially in its home state. The convenience-store retailer has stores in Columbus, Ohio, and Lyden said, “unfortunately we are heavily impacted by a very strict flavor ban that encompasses not only e-cigarettes but anything flavored, including Grizzly moist snuff and any menthol cigarettes.”
Lyden said the ban started in the city of Columbus and other municipalities followed. The ban affects 13 out of the company’s 16 locations in the Columbus area. He said those stores have been negatively affected and are experiencing 45% to 55% declines in the tobacco category.
“We’re really not picking [up the sales] anywhere else, so it's not good for business. And what’s odd is that you can go right across the street and be outside the flavor ban,” Lyden said.
On the national level, the White House delayed its planned menthol cigarette ban following “immense” feedback and “historic” attention, according to a statement from U.S. Health and Human Services Secretary Xavier Becerra in April.
The Biden administration’s latest delay has prompted reactions from both sides, including proponents against the ban and the effect it would have on small businesses, particularly convenience stores.
Ryan Howard, COO of truenorth, said “a menthol ban would cost our industry billions, while historically low and declining youth smoking rates do not justify pursuing such a ban.”
Howard said that “responsible retailers in our industry work tirelessly to ensure age-restricted products are only sold to intended of age parties. We strongly believe that a ban would not stop the sale of cigarettes, but rather fuel illicit tobacco trafficking where there are no considerations of age of consumers.”
Changes and Challenges Ahead
Another challenge in the tobacco category is that it’s “constantly changing,” Lyden said. But he sees some change happening for the good.
“I think more than ever before, the manufacturers are starting to understand how they can coincide,” he said. “Where Altria used to have to be so protective of the combustible space, they are starting to loosen up on that, which is a great first step for our category overall.”
Another hurdle Lyden pointed out is the uncertainty of e-cigarettes.
The U.S. Food and Drug Administration (FDA) in June issued marketing granted orders to a menthol e-cigarette product for the first time. The four menthol-flavored e-cigarette products from e-vapor company Njoy LLC include: Njoy Ace Pod Menthol 2.4%, Njoy Ace Pod Menthol 5%, Njoy Daily Menthol 4.5%, and Njoy Daily Extra Menthol 6%.
The move comes as the agency has aggressively been cracking down on illegal vape products.
In June, the U.S. Department of Justice (DOJ) and the FDA created a federal multi-agency task force to combat the illegal distribution and sale of e-cigarettes.
The FDA said it has received applications for nearly 27 million deemed products and has made determinations on more than 26 million of these applications. To date, the FDA has authorized 27 tobacco- and menthol-flavored e-cigarette products and devices, including the four authorized June 21.
When it comes to e-cigarettes, Lyden said, “we are very conservative on the e-cigarettes that we bring in,” but admitted that “we don’t know the future of it—it could go away tomorrow.”