Despite banking on cigar sales, more and more convenience stores face the fallout of local ordinances restricting consumer use.
By Anne Baye Ericksen, Contributing Editor
Last fall, Cleveland officials introduced proposed regulations to ban all flavored tobacco products throughout the city except at tobacco shops. Officials also wanted to raise the minimum purchasing age to 21. Convenience stores in greater Cleveland know the policy will have an adverse effect on category sales since by law patrons would only be able to frequent tobacco outlets for such products.
“What we don’t agree with is what seems to be a bias,” said Bailey Lyden, vice president of retail for convenience chain truenorth LLC, based in Brecksville, Ohio. “The city of Cleveland is saying that c-store retailers may not be allowed to sell flavored tobacco products, but tobacco outlets are. Shouldn’t they make it for everybody? If a law is going to be banning those products, shouldn’t they be banned in all channels and not just one or two channels?”
Regulatory initiatives on flavored tobacco—often associated with little cigars—have stirred up concerns among c-store owners and operators. It’s not just prevalent in Cleveland.
On Jan. 6, 2016, the St. Paul council members unanimously voted to prohibit the sale of flavored tobacco products within its city limits of Minnesota. The ban includes flavor-enhanced cigars, such as cigarillos, smokeless tobacco and flavored liquid nicotine formulas for refillable vaporizers.
However, St. Paul officials voted to exempt tobacco outlets, which have been defined as any retailer that attributes 90% of its total revenue to the sale of combustible and non-combustible tobacco products. Because c-stores offer customers a varied product mix, including beverages and snacks in addition to cigarettes and cigars, they do not qualify for the exemption. St. Paul convenience stores were informed they had 90 days to remove all flavored tobacco products from their shelves.
The newly-enacted ordinance sets price minimums for cigars: $2.60 for any packages containing three or more cigars and $10.40 for packs of four or more cigars.
The St. Paul restrictions basically mirror those passed in its Twin Cities region last July. Before that ordinance took effect in January, approximately 300 stores throughout Minneapolis sold cigarillos and other flavored tobacco products. Now, that number has dropped to fewer than 25, most of which meet the adult-only exemption, according to the National Association of Convenience Stores (NACS).
“Picking winners and losers by singling out one kind of store where flavored tobacco products can continue to be sold and banning the sale of these products in all other stores is a discriminatory prohibition,” said Thomas Briant, executive director for the National Association of Tobacco Outlets (NATO).
As of this writing, the Cleveland ban has been tabled.
“My Altria rep told me that some 40 retailers showed up for a city council meeting, and he doesn’t usually see that with city council meetings. I think that’s why it has not completely passed yet,” said Lyden.
The new age requirement did pass in Cleveland, and that has created a training challenge for Lyden. Operating 110 convenience stores in Ohio and Illinois, truenorth counts one site within Cleveland city limits, which necessitates a separate company policy when it comes to checking the age of patrons.
“Having one store that is 21 is kind of a headache,” Lyden said. “At 109 stores, I’m teaching one thing [about minimum age enforcement], but with this one location I have to teach another.”
Over the past several years, more and more municipalities have been considering restrictions on where, to whom, and for how much flavored tobacco and cigar products can be sold. For instance, Boston is the latest to raise the minimum age for buying cigarettes and other tobacco products—including electronic cigarettes—from 18 to 21.
As of Feb. 15, the new law also limits sales of flavored tobacco items to adults. The city now joins more than 85 other Massachusetts cities and towns, customers in Boston must be 21 to purchase cigarettes, cigars, smokeless tobacco and e-cigarettes.
Anna Bettencourt, category specialist for VERC Enterprises, a Duxbury, Mass-based c-store with 24 locations throughout Massachusetts and two in southern New Hampshire, said “the focus should be on compliance checks, not eliminating products that are legal simply because they are flavored,” referring to municipalities such as Cleveland, which are restricting the sale of flavored tobacco in c-stores.
Other cities have set specific parameters instead of all-out bans. In 2013, Chicago officials ruled cigarillos and other flavored tobacco products could not be sold in stores located within a 500-feet radius of schools. Last year, the California cities of Berkeley and Manhattan Beach voted in similar restrictions. Last May, Baltimore city leaders proffered a similar proposal.
In almost all instances, proponents of bans and restrictions cite concerns over increasing rates of young people picking up a tobacco habit.
“The advocates supporting these ordinances allege that the tobacco industry is targeting underage youth with flavored products,” Briant said. “A proposed flavor ban unfairly targets any law-abiding retailer because, according to national FDA retail compliance inspection data, on average, 95% of retailers do not sell tobacco products to minors.”
For convenience store businesses, bans and restrictions mean loss of revenue, and not just tobacco dollars.
“NATO analyzed actual flavored tobacco product sales data for St. Paul retailers and found that the proposed flavor ban ordinance would result in an estimated loss of $50,000 in flavored tobacco product sales per retail store, which, in the aggregate, translated into a $13 million impact on all retailers citywide,” Briant said. “This is a significant loss of revenue and will only be magnified when customers travel to neighboring cities to buy their preferred tobacco products, and at the same time purchase beverages, snacks and gasoline.”
VERC’s Bettencourt agreed.
“What hurts is when you have a store near a border with a town that doesn’t have the ban or regulations. There’s not much you can do because they have an advantage already. Also, a lot of this could drive business to the Internet and smoke shops,” said Bettencourt.
Additionally, violations are heavy. For example, in Cleveland, a first offense of the newly enacted age restriction carries a $250 fine or a maximum 30 days jail sentence, as reported on Cleveland.com. Additional violations can lead to 90 days in jail.
KEEPING IT STRAIGHT
Keeping track of the regulations is becoming more complicated, especially when managing multiple locations. In Massachusetts, for example, more than 85 cities have issued some form of restrictions.
Although she’s not aware of any pending proposals in her region, Bettencourt hasn’t ruled out the possibility that city officials somewhere could introduce new regulations. She instructs store managers to stay informed so they can be as proactive as possible.
“Most of those changes happened in 2015,” Bettencourt said. “Part of the problem in Massachusetts is that regulations are not consistent. Currently, I have three stores that do business in towns with flavor bans, and I will have five in February with Boston taking effect. It’s at the point that I have to keep a spreadsheet to keep it all straight.”