Over the past year cigars continued to help boost the other tobacco products category at convenience stores.
Inexpensive two- and three-cigar packs made up less than 1% of cigar sales in 2008, but by 2015 this packaging style held 40% of the retail market share.
Black & Mild and Swisher Sweets dominate the convenience store channel and together are responsible for nearly 60% of total mass-merchandise cigar sales.
In 2017, cigars continued to bolster other tobacco products (OTPs) category sales. According to IRI, c-store dollar sales of cigars rose more than 13% during the 52 weeks ending Dec. 31, 2017, totaling nearly $3.2 billion. In addition, units were up 14%.
“I expect cigars to be the highest gross profit OTP category in 2018,” said Mike Gancedo, tobacco category manager for Savanah, Ga.-based Parker’s chain of 50-plus convenience stores.
Parker’s operates locations in Georgia and South Carolina.
Gancedo predicts that pre-priced cigars will provide profits this year.“I am expecting increased sales for 2018 vs 2017 in both sales and gross profits based on the programs we have signed for 2018,” said Gancedo.
Some of the most popular cigar brands at Parker’s includes Black & Milds, Swisher, White Owl, Game, Dutch Master, Optimo and Garcia Vega.
Gregory Moore, senior tobacco buyer, Army & Air Force Exchange Service (AAFES), said Black and Mild’s, Swisher and White Owls also resonate with his customers. AAFES recently removed pre-priced cigars from its assortment but is still looking at a 0.4% increase in cigar sales over last year.
There are AAFES 700 stores on U.S. military bases throughout the U.S. and abroad, which include Exchange Express c-stores. Moore buys for 565 military locations.
FDA MANDATE
The U.S. Food and Drug Administration (FDA) issued a final guidance related to health warning statements that are required on cigar packaging following the 2016 final rule that extended the FDA’s regulatory authority to cigars, among other tobacco products. Beginning on Aug. 10, 2018, it will be unlawful for anyone to manufacture, package, sell, import or distribute any cigar within the U.S. unless the product packaging bears one of the following warning statements:
For cigars that are sold individually, and not in a product package, the retailer must display all six of the required warning statements on a sign posted at the point of sale.
• WARNING: Cigar smoking can cause cancers of the mouth and throat, even if you do not inhale.
• WARNING: Cigar smoking can cause lung cancer and heart disease.
• WARNING: Cigars are not a safe alternative to cigarettes.
• WARNING: Tobacco smoke increases the risk of lung cancer and heart disease, even in nonsmokers.
• WARNING: Cigar use while pregnant can harm you and your baby. or SURGEON GENERAL WARNING: Tobacco Use Increases the Risk of Infertility, Stillbirth and Low Birth Weight.
• WARNING: This product contains nicotine. Nicotine is an addictive chemical.
Thomas Briant, executive director of the National Association of Tobacco Outlets, said the new warning mandate might cause consumers to pause, but it likely won’t dissuade them from picking up their favorite brand.
“Many cigar products have had warning labels since a federal court settlement between the Federal Trade Commission and seven cigar manufacturers was reached in 2000,” said Briant. “These rotating warnings on cigar packages and advertising over the past 17 years have sensitized the adult population to health impacts of cigars. The new FDA warning statements will be a continuation of the same kind of warnings required by the court settlement.”
The court settlement in 2000 mandated that new labels say cigars can cause cancer ‘’even if you do not inhale’’ and warn users that tobacco smoke increases the risk of lung cancer and heart disease ‘’even in nonsmokers.’’
‘Cigars’ largely refers to the inexpensive, machine-made cigars, cigarillos and little/filtered cigars widely available at convenience stores, unless specifically designated premium cigars.
The FDA announced an increase in the user fees for the 2018 fiscal year, which began on Oct. 1, 2017. The FDA uses user fees to help pay for the Center for Tobacco Products (CTP)’s regulation of tobacco products. Cigarette products have been paying this fee, but with the deeming regulations introduced in 2016, premium cigars, pipe tobacco, snuff, chewing tobacco and roll-your-own products will also pay user fees.
In 2018, the CTP plans to collect $672 in user fees. This is up from the $635 goal from 2017. It already has announced that the goal for 2019 will be $712 million.
Each category of regulated tobacco product has a target amount of user fees where these totals will come from. For example, cigars will rake in more than $563 million dollars in user fees and cigarettes an impressive $5 billion.
Altria in October 2016 announced plans to close the Middleton plant in Limerick, Pa. and move its operations to Richmond, Va. during 2018. The Limerick plant makes Black & Mild cigars, Middleton’s Cherry Blend pipe tobacco, etc.
