Wells Fargo Securities LLC recently conducted a survey of tobacco retailer and wholesaler contacts representing 20,000+ convenience stores in the U.S. The survey focused on c-store vapor trends given the dynamics in the vapor category (including e-cigarettes).
Key takeaways from the Wells Fargo survey included:
(1) vapor category growth in c-stores remains robust (+21% in 3Q14) but flattish to 2Q14, likely driven by the heavily promoted national rollouts of both Vuse and MarkTen, which is driving unit sale momentum but not necessarily accelerating dollar sales;
(2) e-cigarette growth continues to decelerate at retail—estimating a 7% growth rate in 3Q14—down from 12% last quarter and 25% in 3Q13;
(3) blu continues to cede share to Vuse and MarkTen which is expected to continue given heightened activity behind these brands; and
(4) Logic momentum continues to accelerate.
“Despite continued e-cig deceleration, we are encouraged by the continued overall growth in vapor given our contacts believe 4.2% of combustible cig volume is being displaced into the vapor category—up from 3.4% in 1Q14. Importantly, our contacts estimate that repeat vapor purchases have accelerated to 57% in 3Q14, up from 41% in 2Q14. Bottom line, we believe consumption of vapor and other non-combustible products (such as heat-not-burn) could surpass combustible cigs in the next decade, and we remain convinced that technological innovation is crucial to driving growth. Importantly, we believe Big Tobacco will play a pivotal role in shaping the non-combustible nicotine industry,” noted Bonnie Herzog, managing director, beverage, tobacco & convenience store research, Wells Fargo Securities.