Tobacco dollar sales remain strong, while actual volume sales are declining.
The tobacco industry remains in a difficult position as smoking rates among Americans continues to fluctuate. In order to combat declines in volume sales, most tobacco distributors are relying on strong pricing to maintain strong dollar sales in the category.
Cigarette Dollar Sales Driven by Solid Pricing
According to Nielson data, as reported by Wells Fargo Securities, during the recent four-week period ending May 21, 2016, all channel cigarette dollar sales increased 0.5%, marking a 1.4% increase for the recent 12-weeks and an increase of 2.4% for the recent 52-weeks. The recent dollar sales increase was carried by solid +3.7% pricing, which offset decelerating volume sales, which were down 3.1% in the recent four-week period.
“As should be expected, cigarette volume is showing signs of deceleration. As such, we continue to expect cigarette volume to be down closer to -2%, offset by solid mid-single digit pricing,” said Bonnie Herzog, managing director of beverage, tobacco and convenience store research, Wells Fargo Securities LLC.
Reynolds American Inc. Cigarette Dollar Sales Still Strong
According to the report from Wells Fargo Securities, Reynolds American’s dollar sales are 2.4% in the recent four-week period, strongly outpacing the industry’s 0.5% growth. Data has revealed that the increase in dollar sales is being driven by continued momentum in Newport. Reynolds American’s growth was driven by a strong 4.3% pricing increase, which was able to more than offset the 1.9% volume declines.
Wells Fargo Securities revealed the contribution that each of Reynolds American’s brands were responsible for:
- Newport: Dollar sales up 4.2%. Newport has also gained share momentum with 44 basis points of share gains.
- Natural American Spirit: Volume sales up an impressive 24.7% with steady pricing.
- Camel: Dollar sales declined 0.4% on -4.8% unit volume and a tough year ago sales growth comparison (+3.6%). However, pricing remained resilient at +4.6%.
Altria Group Cigarette Dollar Sales Increased
According to Wells Fargo Securities, Nielson data revealed that Altria Group cigarette dollar sales increased 0.2% in the recent four-week period, with Marlboro retail shares showing stability, despite a tough year over year comparison.
Wells Fargo Securities reported that Altria cigarette dollar sales continue to be driven primarily by pricing (+3.1%), partially offset by soft volumes (-2.8%). Marlboro dollar sales were relatively flat on +3.2% pricing and -3.3% volume. Marlboro market share held steady on a sequential basis at 47.3%.
Imperial Tobacco Group PLC Dollar Sales Continue to Decelerate
Wells Fargo Securities reported that Nielsen data revealed that Imperial Tobacco Group has continued to post significant volume declines, including -6.2% in the current four-week period on top of -1.5% last year and -3.7% in the April period. However, Nielsen is still missing two SKUs. Weak volumes continue to be driven by sizeable volume declines in its top cigarette brands, including -2.8% Winston, -1.0% Kool and -7.9% Maverick.
Smokeless Tobacco Dollar Sales Trends Reflect Healthy Category Shifts
Nielson data revealed that smokeless tobacco dollar sales grew 4% this period, which is a marked decline from a high of 8% in December, reflecting continued shifts back into combustible cigarettes by a generally stronger adult tobacco consumer, according to Wells Fargo Securities. Data showed that Altria’s Copenhagen brand outpaced Reynolds American’s Grizzly, with Copenhagen market share, increasing 240 basis points year over year to 34.7% versus Grizzly’s increase of 20 basis points to 25.6%.
Electronic Cigarette Dollar Sales on the Rise
Wells Fargo Securities reported that Nielson data indicated that all channel electronic cigarette dollar sales have taken a turn for the better, increasing 3.2% in the recent period. This increase was driven entirely by distribution gains by Altria’s MarkTen XL, as all commodity volumes (ACVs) on non-liquid refills increased to 6.7% from 4.5% month over month, and kits/accessories increased to 5.6% from 3.4%. However, despite this recent turn, overall, electronic cigarette pricing continues to show year over year declines, reflecting the 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.
Reynolds American Is Dollar Share Leader for Electronic Cigarettes
Nielson data revealed that Reynolds American’s VUSE maintained its dollar share leadership in electronic cigarettes at 36.1% versus 19% for Blu, its nearest competitor, according to Wells Fargo Securities. However, Altria was the big surprise posting a 9.8 point gain in dollar share to 16%, reflecting a 5.6 point month over month gain by MarkTen XL to 15.5% on strong distribution gains in two of its largest SKUs.