At the close of the recent quarter, the tobacco industry remained in a favorable position.
Despite the rise in health-conscious consumers, recent data from the recent four-week period ending April 23, 2016 has revealed that the tobacco market remains strong as a whole.
A new report from Wells Fargo has revealed the driver of growth in the multiple market divisions, and the report also indicates which areas are struggling.
Strong Pricing Drives Cigarette Sales
According to the data released by Wells Fargo, cigarette dollar sales in all channels increased +1.2% during the recent four-week period. Growth was up +2.1% for the recent 12 week period, and up +2.6% for 52-weeks. Wells Fargo’s Bonnie Herzog, managing director of beverage, tobacco & convenience store research, noted that market growth can be attributed to strong +3.9% pricing, which offset the -2.6% equal unit volume (-1.5% for 12-weeks).
“As discussed in our “Tobacco Talk” surveys, tobacco consumption and pricing remains healthy,” Herzog said. “Thus, we expect strong manufacturer pricing and profit growth to continue this year.”
Reynolds American Inc. Sales Remain Strong,
Data from the Wells Fargo report reveals that Reynolds American outpaced the industry in dollar sales, as Reynolds sported sales up +2.9%, while the industry lagged behind at +1.2%. Reynolds American’s strong growth this period is being attributed to the brands exceptionally strong +4.4% pricing increase, which offset its -1.4% volume declines.
Reynolds American’s growth was supported by impressive pricing and volume increases in its brands:
- Newport dollar sales were up +5.4%
- Natural American Spirit volume was up an impressive +21.6% with steady pricing
- Camel dollar sales grew slightly +0.6%, and pricing was resilient at +4.1%, which offset volume weakness.
Altria Group Sales Increase Slightly
Altria Group has experienced a slight (+0.7%) increase in cigarette dollar sales, and Wells Fargo’s report indicates that this growth is driven primarily by pricing (+3.2%), and is partially offset by soft volumes (-2.4%).
Despite a rough year over year comparison, Marlboro market share has held steady, while dollar sales remained relatively flat. Strong +3.4% pricing was able to offset a -3.2% volume decrease.
Imperial Tobacco Group Sales Decelerate
Wells Fargo reported that Imperial Tobacco is experiencing continued volume declines, even after correcting for last month’s SKU error. In the current four-week period, Imperial Tobacco reported a devastating -9.5% decline in volume.
According to Wells Fargo, weak volumes are being driven by volume declines in Imperial Tobacco’s top cigarette brands, including:
- Maverick: -14%
- Kool: -3%
- Winston: -8.2%
However, the brand has reported that Newport is gaining momentum with +60 basis points of share gains.
Smokeless Tobacco Dollar Sales Reflect Category Shifts
Wells Fargo reported that smokeless tobacco dollar sales grew +5% this period, a significant decline from a high of +8% in December. This decline is being attributed to the stronger adult tobacco consumers shifting back to popular cigarette brands.
Data from the report revealed that Altria Group’s Copenhagen brand outpaced Reynolds American’s Grizzly. Copenhagen’s market share increased 210 basis points year over year to 34.7%, while Grizzly increased 20 basis points to 25.2% market share.
Weak Pricing Leads to Negative Growth in Electronic Cigarette Dollar Sales
All channel electronic cigarette dollar sales were down -6% in the recent period, and Wells Fargo has attributed this steep decline to negative net pricing of -7.3%, partially offset by +1.4% unit volume growth.
“Though electronic cigarette year over year pricing has been in persistent decline, we believe it is at least partially due to difficulty in capturing SKUs of the evolving vapor category and proliferation of vapors/tanks/mods (VTM) and refills, which tend to have lower retail prices,” Herzog said.
Reynolds American Leads Electronic Cigarette Market in Dollar Share
With 38.1% dollar share, Reynolds American has reinforced its position as the share leader in all channel electronic cigarettes in the last quarter, according to Wells Fargo. This growth reflects a 310 basis points year over year increase in share for VUSE.
Further stabilizing Reynold’s American’s position, its competition did not fare quite as well. Imperial’s blue Cigs has decreased -220 basis points to 19.8%, and Logic has gained +40 basis points, bringing the brand to 14.1%, while NJOY has decreased -80 basis points to 4.4%.