In convenience stores, selling a new tobacco brand that’s exclusive to that specific store or chain is rife with challenges. For instance, the number of regulations and liabilities, not to mention cost and labor associated with producing a house brand, is enough to deter any retailer from doing so.
That is, however, unless the retailer partners with a producer of house brands to come up with their own line. There are many benefits to offering house brand cigarettes, including being able to expand the value-added offerings at a lower price point, improve profit margins and create yet another revenue stream in a segment like tobacco that’s seeing declining growth year-over-year. If retailers choose the right partner that will allow them to exercise more control over their product in terms of pricing and placement, the benefits only increase from there.
Here’s a closer look at the pluses of carrying house brand cigarettes on store shelves.
A boost in profits
The number of adult smokers continues to drop year-over-year, with the CDC reporting in 2017 that 14% of adults in the U.S. smoked cigarettes, down from 15.5% in 2016.
“In a declining category, having our own, exclusive brand has helped us fill some of the combustible gap that others are seeing in the tobacco category,” says Anne Flint, director of category management - tobacco, for Cumberland Farms. “We can make more margin by carrying an exclusive brand only available at Cumberland Farms.”
That’s because house brands in general offer better, more consistent margins. When consumers see traditional cigarette prices continue to go up, they often turn to the house brand, which is typically priced several dollars lower than traditional cigarettes.
And while promotional programs for premium cigarettes may help boost profits in the short-term, they rarely continue over the long haul compared to the steadiness of house brands.
“Our house brand of cigarettes is one of the fastest growing brands of cigarettes in our stores,” says Nik DiMambro, tobacco category manager at Nouria Energy Corporation. “It helps drive foot traffic that has ancillary sales as well.”
Building and strengthening a brand
“By offering a house brand of cigarettes, we are helping to create an identity for our retail brand,” says DiMambro. “Customers know that if they like our brand of cigarettes, they have to come to our stores. They associate something they like and prefer with our retail brand, and will more likely shop us even when they are not purchasing cigarettes.”
DiMambro adds that major signage in the same vein as the traditional brands helps draw more attention to the additional variety. Sales contests also help drive sales by incentivizing employees to alert customers about the house brand. And partnering with the right manufacturing vendor also comes into play.
“When we say that in today’s market, we are looking for vendors to be a partner with us, we are looking for a vendor that is willing to work with us, share the risk and share the rewards with us,” DiMambro says.
Value in variety
Offering customers more choices not only strengthens a c-store’s brand and service, it opens up the line to better margins from a business perspective.
“We can make more margins by carrying other brands, and have success stories with several retailers as they have begun to carry the house brand cigarette,” Flint says.
DiMambro shared the same sentiments. “Customers like to have choices,” he says. “In most retail locations they are stuck with the same brands over and over. Having a house brand offers them another option as well as a lower retail option that they may not get someplace else.” That extra option, of course, can lead to elevated foot traffic and perhaps even a new, loyal customer.
Working with a forward-thinking exclusive brand manufacturer allows retailers to exercise more control over how and where they want to go to market with their exclusive brand cigarettes. Some exclusive brand cigarette manufacturers give more control back to the retailer than others.
For example, Flint says, “I have more choice as to where we want to go to market with our 1st Class brand compared to other national programs, which mandate that we sell their low price brand at the lowest price point in all states. With the 1st Class’ program (always my lowest price point), I can choose to market more heavily in states like Massachusetts and New York where I know they will sell better. I also have more flexibility as far as the type of promotions we can run, and I can decide in which markets I want to give a deeper discount to encourage more sales. And one of the biggest advantages is that they have to come to Cumberland Farms to buy them and while there they pick up some of our other great offerings.”
To further ensure the success of house brand cigarette offerings, look for forward-thinking house brand tobacco manufacturers with a strong sales team. Also, be on the lookout for a brand that offers opportunities for conversion programs as well as contests, marketing collateral and other incentivizing and promotional support programs that continue long after the initial first few months on the shelf.
This post is sponsored by Premier Manufacturing