NEW YORK -- The tides seemed to have turned in electronic cigarette sales: after five consecutive months of overall declines, Nielsen shows convenience store dollar sales are up for the second month in a row. For the four weeks ending October 25, dollar sales were up 42.4% (compared to a 14.1% increase in September).
Wells Fargo tobacco analyst Bonnie Herzog believes the increase was driven by 75% unit growth, noting that pricing continues to decelerate in the e-cig category.
“Though pricing trends have been negative for 11 consecutive periods, we believe it is at least partially due to difficulty in capturing/measuring the different SKUs given the rapidly evolving vapor category and proliferation of vapors/tanks/ mods (VTM) and e-cig/VTM refills, which tend to have a lower retail price/refill,” Herzog said in a research note.
The re-acceleration of the segment is also due in part to the continued success of R.J. Reynold’s Vuse and Altria’s MarkTen offerings. MarkTen is No. 4 in terms of c-store dollar and unit sales (with 9.4% and 10.5% respectively), representing a 5,134% increase in dollar sales and a 5,742.6% increase in unit sales from the previous month. Vuse retained its No. 1 position in c-store dollar sales (with 39.9%) and unit sales (44.8%), representing a 3,889.5% increase in dollar sales and a 4,257.2% increase in unit sales.
It’s impressive, though Herzog pointed out the unit sales might not be painting an accurate picture of Vuse’s true growth.
“We continue to be somewhat skeptical of (Vuse’s) No. 1 unit share of 44.8% given Vuse is in 35,000 outlets compared to more than 100,000 for blu,” said Herzog. “Though we note Vuse's pricing ($4.44) was 11% below the category average ($4.99), which likely explains the fast growth.”
Aside from Vuse and MarkTen, Lorrilard’s blu remained in the No. 2 position in dollar sales (20.7%, down 33.3%) and the No. 3 position in unit sales (13.9%, down 32.6%); Logic continued to grow, coming in third in terms of dollar share (15.5%, up 25.3%) and second in unit share (15.3%, up 38.4%); and NJOY rounded out the top five with 5.2% of c-store dollar sales (down 64.4%) and 3.9% of unit sales (down 62.7%)--though Herzog pointed out that according to IRI, NJOY is No. 1 in the vaping category (including e-liquids and vaping accessories) across all channels nationally.
Overall, Nielsen shows c-store e-cig dollar sales totaled $60.4 million this month and $9.2 million in the XAOC (or take home) channel, implying $900 million annual sales in Nielsen-tracked channels. This is up from $750 million annual sales projected a few months ago.
“We are encouraged that category dollar sales growth has continued to accelerate, driven by Reynold's and Altria's national rollouts,” Herzog said. “We believe the trial and awareness generated by Vuse and MarkTen should help elevate the entire vapor category and drive incremental trial.”