C-store RYO tobacco appeals to customers switching from cigarettes, but those customers are also drawn to vape in increasing numbers.

According to scan data from IRI, a Chicago-based research firm, convenience store sales of roll-your-own (RYO) tobacco decreased 10.9% to 545 million in the 52 weeks ending Dec. 30, 2018.

Considering that RYO earned half the market share that pipe tobacco enjoyed in the convenience channel last year in terms of other tobacco products, additional market pressures—including potential federal regulation—would not be welcome news.

E-cigarette brand Juul and other vapor products attracted significant scrutiny from the U.S. Food and Drug Administration (FDA) last year, leaving RYO relatively untouched. Chris Greer, president and CEO of the Tobacco Merchants Association said there are no indications that the spotlight will shift in 2019.

“I do not see the spotlight shifting to RYO in 2019. FDA has made very clear that flavors and connected issues of youth is the major focus across multiple categories,” Greer said. “As RYO is unflavored it would be difficult to see it sharing the spotlight on the complex flavor issue.”

NICOTINE WITHDRAWAL
Greer does voice one caveat: Namely, Scott Gottlieb, commissioner of the FDA has taken pains in all his recent announcements to note that the FDA is still at work on the issue of a nicotine product standard.

“It remains to be seen if the FDA will be able to (add) complex policy changes in 2019, but certainly RYO would be part of a nicotine standard,” Greer said. “For RYO, I think it would be quite complex as the end product being smoked is highly variable unlike machine-made cigarettes, which have standardized net tobacco weights.”

Still for many retailers, the RYO segment is still a profitable performer despite losing some traction in 2018.

“The RYO category continues to perform well in our markets, however it was down slightly in 2018, approximately 3%,” said Tim Greene, category director of tobacco and general manager for Boulder, Colo.-based Cigarette Store Corp. “Our cigarettes were up 4% in 2018; typically when we see growth in cigarettes the RYO is flat or down slightly, which we saw in 2018.

Cigarette Store Corp. owns Smoker Friendly and the Gasamat convenience chain.

Because more U.S. consumers are seeking alternative products to cigarettes, that is partly why vapor enjoyed a tremendous surge in 2018. Green said the transition from cigarettes also benefited the RYO segment.

How local legislation efforts to control tobacco affects that momentum is any retailer’s guess.

“As the FDA flavor focus has attracted significant state and local attention, I believe that RYO will likely not face more than the usual attention,” Greer said. “We have seen, however, a general increase in localities looking into retailer licensing and seeking to impose further restrictions in the form of caps on the number of licenses, restrictions on retailers located close to churches, schools and parks and restrictions on sale of flavored products.”