C-store cig dollar sales were up 4.4% (above +2.2% last period and -2.6% last year) during the recent four weeks on an increase of 3.4% in pricing and an increase of 1% equal units, Wells Fargo Securities reported, citing Nielsen data.
“We believe c-store unit sales have likely been aided by CVS no longer selling tobacco. Further, lower gas prices are likely having a favorable impact on the category. We continue to expect strong manufacturer pricing in 2015, which should help offset volume declines and generate robust profitability growth,” said Bonnie Herzog, managing director of beverage, tobacco and convenience store research for Wells Fargo.
E-cig c-store dollar sales maintained solid growth (positive dollar sales for the fourth consecutive period), but continue to sequentially decelerate (up 14.6% in the period ending Dec. 20 , 2014), driven by 43% unit growth, partially offset by a decrease of 20% in net pricing.
“Though e-cig pricing has been negative for 13 consecutive periods now, we believe it’s at least partially due to difficulty in capturing SKUs given the rapidly evolving vapor category and proliferation of vapors/tanks/mods (VTM) and refills, which tend to have a lower retail price/refill. However, we remain encouraged by continued category dollar sales growth, driven by Big Tobacco’s national e-cig rollouts and believe the trial and awareness generated by Vuse and MarkTen should help elevate the entire category and drive incremental trial. Importantly, we note that VTMs are under-represented in Nielsen but are growing 2x faster than the vapor category based on our ‘Tobacco Talk’ surveys,” Herzog said. “While we remain bullish on vapor long term, we acknowledge some near-term profitability headwinds as companies continue to invest in the category. Bottom line–we continue to believe vapor consumption could surpass combustible cigs in the next decade (by 2025), driving total profit pool growth and generating 6.6% CAGR.”