Cigar dollar sales four weeks-ending March 29, 2015 posted a gain of 6.4%, increasing the average per store week sales to approximately $475. Retail units sold also advanced 7.6% versus last year based on the Balvor Retailer Composite (BRC).
“The vast majority of the growth in Cigars came from Pouches as convenience retailers carried significantly more variety in this package segment,” according to David Bishop, managing partner of Balvor. Pouch assortment expanded on average by over 20% versus 2014; whereas, the other segments all contracted on a SKU count basis.
Pouches’ 20% plus sales growth continues to be driven by intense manufacturer competition in the segment that has drove weighted average retails down 70 basis points to under $1.25 per unit sold. And, while three-for Pouches are helping drive up retail slightly, this segment mainly sells the two-pack configuration.
Singles saw dollar sales drop over 6% as the price gap between it and Pouches narrowed further during the month versus last year. One reason for the gap shrinking is due a slight shift in the sales mix toward higher-retail Single SKUs, another positive sign for improving conditions.
Packs posted nearly a 3% gain in dollar sales even as average retail prices edged up by almost 2% versus last year. “Growth—no matter how small—in Packs is a generally a good thing for retailers as it generates over five times more gross profit per unit sold than Pouches,” Bishop mentioned. “And, beyond that, it indicates that consumers either have more money in the pocket or confidence in their outlook.”
Little Cigars reported retail units and dollar sales declines of over 9% and 11% respectively. Bishop speculated that some of the decrease may be attributed to demand shifting to Electronic Nicotine Devices given similarities between the flavor profiles of the two product segments.
Gross margins contracted to 33.6% during March, decreasing penny profit by around a nickel versus last year. This performance reflects a broader trend that retailers are experiencing across other tobacco categories.
The composite is based on item-level data from 14 convenience retailers, representing retailers of different size and from various regions across the U.S. Balvor utilizes custom segmentation and equalizes chain-wide data to an “average per store week” (APSW) basis. This approach removes much of “noise” associated with changes in store count between periods, minimizes sample bias that would skew toward larger-stor e operators, and provides more actionable insights.