Last month, Hawaii State Rep. Richard Creagan presented a bill to raise the statewide cigarette minimum purchasing age from 21 to 30 by next year.
His proposal also planned to raise the minimum multiple times over the next several years—40 in 2021, 60 in 2023 and finally 100 in 2024. The bill doesn’t apply to e-cigarettes, cigars or smokeless tobacco.
The continued regulatory crackdown on cigarettes sales is affecting both Hawaii retailers and the convience industry as a whole.
“We thought it was an unusual bill. It’s the first time we’ve seen a bill like this,” said Neil Ishida, director of employee relations and government affairs for ABC Stores. The convenience store company operates 77 sites on the islands of Kauai, Maui, Oahu and Hawaii.
The aggressive approach in this particular bill grabbed headlines, but many in the tobacco and convenience store industries doubted it had much of a chance to survive the process.
Indeed, a few days later, the Honolulu Star Advertiser reported Rep. Creagan agreed to amend HB 1509 to simply raise the minimum purchase age for tobacco products to 25 during testimony before the House Health Committee.
Hawaii isn’t the only state contemplating a higher minimum age. Legislators in Virginia voted to go 21 last month. West Virginia and Mississippi recently announced minimum-21 bills.
States lawmakers across the country hope to raise taxes, too. For example, Indiana lawmakers put forth two bills: HB 1551 would add $1 per pack and raise the legal purchase age to 21; HB 1565 leaves the minimum age, but levies a $2-per-pack tax. Wyoming officials are debating a $1 increase and Vermont is weighing a new $1.25 tax.
According to IBISWorld, cigarettes, including menthol, account for more than 71% of the U.S. tobacco wholesale market, but retail volumes keep falling. Each top brand registered year-over-year unit sales losses for both the 12- and 52-week periods ending Jan. 12, 2019 per Nielsen data reported by Wells Fargo Securities. Natural American Spirit was the only brand to post positive numbers. Even price increases, from 1.5% to as much as 6.7% for the same periods, couldn’t compensate, and most Big Tobacco brands earned less in dollar shares.
“Cigarette manufacturers realize almost three times the leverage on earnings from a point of pricing than a point of volume,” said Bonnie Herzog, senior analyst for Wells Fargo Securities. “Virtually all of the [2018 Q4 Tobacco Talk Survey] respondents expect a list price increase to be led by Philip Morris USA in March.”
Not only are fewer people smoking, some smokers are switching to e-cigarettes or vaping, or dividing their tobacco dollars between combustible cigarettes and these devices.
“We are continuing to see a slow migration to Juul and other vaping devices,” noted Sean Bumgarner, vice president for Ozark, Mo.-based Scrivener Oil Co., which owns and operates the Signal Food Stores convenience chain.
Although industry analysts suggest lower gas prices could help cushion further decline of cigarette sales in 2019, they still forecast a downward trajectory for upcoming quarters.