CHICAGO -- With the tobacco category being one of four key sales drivers for the convenience-retailing industry, two of its shining subcategories were cigars and vaping in 2017, according to numbers released during the recent NACS State of the Industry (SOI) Summit.
Here's a look at how the cateogry performed in 2017, as well as the opportunities and challenges ahead ...
As a subset within other tobacco products (OTP), vaping saw a strong 51.1% increase in dollar sales and a 21.7% increase in unit throughput, according to presenter Alan Beach, senior vice president of merchandising for 7-Eleven Inc., Irving, Texas. “E-cigarettes are off the charts,” Beach said. “We’re seeing huge growth.”
Comparatively, cigarettes, which account for 85% of total tobacco-category sales, were down 3.5% in unit throughput and up only 2.4% in dollar sales. Beach said unit numbers will “continue to fall as consumption falls, but it’s propped up by inflation.”
Threats and opportunities
Beach made three points that will affect vaping sales in the future:
- Vaping numbers benefit from an evolving tobacco consumer, who appears willing to trade up to higher price points.
- In c-stores, vaping growth is coming from pod-based devices what are called “closed systems.” These are vaping devices that don’t involve e-liquids, which let users physically manipulate the nicotine-infused oils. Instead, they use pods, which are prefilled containers that insert into the device.
- The U.S. Food and Drug Administration (FDA), Silver Spring, Md., appears to be reconsidering its stance on vaping devices but currently has stringent new-product application rules and deadlines in place. As a result, Beach said retailers are focusing on growth in the short term.
Cigars and cigarettes
Like vaping, cigars turned in compelling numbers, with 14.1% in sales growth and 15.2% in unit growth. “It shows people are shifting from cigarettes,” Beach said. “It’s not all incremental, but it’s really strong growth.”
The tobacco category overall made up 34.1% of inside sales in 2017, according to SOI numbers, but only 17.1% of gross-profit dollars. Cigarettes alone, as a share of inside sales, continued a declining trend to 28.6% in 2017. In 2016 it was 31.0% of inside sales, and in 2015, it was 31.5%.