On Nov. 6, members of the Boston Convenience Store Owners Association, along with independent c-store owners throughout Massachusetts, closed shop for the day in protest of a proposed ban on menthol and mint tobacco products. Their frustration is shared by many in the industry as lawmakers across the country float various bans and new regulations on the top c-store category.
Cigarettes and other tobacco products (OTP) account for nearly 40% of all inside sales, according to the National Association of Convenience Stores (NACS).
But public scrutiny on underage use of e-cigarettes and vaping devices, coupled with an outbreak of vaping-related illnesses, has rallied policymakers to target the category. In fact, several governors issued emergency temporary bans on e-cigarettes and vaping sales in reaction; however, at press time, lawsuits brought by retailers resulted in judges halting these orders in Massachusetts, Utah and New York.
“(New York) Gov. Cuomo put an emergency order in place in October, which effectively banned all flavored tobacco products. This was overturned by a judge, so for the time being, flavored products are still legal. However, most expect a ban will be put in place through legislation in the near future,” said Mike Clifford, category manager for Clifford Fuel, which operates 20 Cliff’s Local Market stores in New York state.
Directives by the Food and Drug Administration (FDA) continue to be another source of frustration. Federal officials have taken an aggressive stance against access to e-cigarettes and vaping items by minors, including a proposed national ban on mint and menthol flavors, which could disproportionately affect smokeless tobacco sales. In October, though, Bloomberg reported the Trump Administration might reconsider its approach on a mint and menthol ban. Then, last month, the president announced support for a national tobacco 21 age minimum.
Bright Spots Amid Confusion
“It is understandable there is confusion in the market at the moment,” said Lyle Beckwith, NACS senior vice president, government relations. “With mixed signals coming from FDA and the administration and a patchwork of state/local bans, some of which are being challenged and overturned, retailers are in a vortex of regulatory uncertainty. The FDA can stabilize this by releasing reasonable guidelines that do not discriminate between retail formats.”
Despite all that, there’s optimism OTP sales could be buoyed by the FDA’s approval of IQOS (heat-not-burn tobacco) as well as granting Swedish Match the authority to market eight General snus as modified-risk products.
“We view this as very good news for the broader tobacco/nicotine industry as it demonstrates the FDA’s commitment to a ‘continuum of risk’ strategy and provides a viable pathway/process for manufacturers,” noted Bonnie Herzog, senior analyst for Wells Fargo Securities.
“I believe Swedish Match now can market the product more prominently, but for retailers, sales volume will drive the placement,” said Robert Perkins, vice president of marketing for York, Pa.-based Rutter’s, which operates more than 70 locations in central Pennsylvania, West Virginia and Maryland.
That said, he’s pleased with consumers’ acceptance of new smokeless options.
“Recently, the introduction of ZYN pouches and R.J. Reynolds VELO pouches has done very well,” he said.
Ahead for 2020
As for what’s coming in 2020, Beckwith hopes Congress passes the electronic cigarette PACT (Prevent All Cigarette Trafficking) Act, which has passed in the U.S. House of Representatives and has bipartisan sponsorship in the Senate. “This would require internet and remote retailers of electronic cigarettes to use a face-to-face age verification delivery service. It would also require the collection and remittance of all applicable taxes for the zip code to which the product was shipped,” he explained.
There could even be positive reception from the industry for a federal 21 age minimum.
“Multistate operators and those in states that have already raised the legal age to 21 may very well welcome a consistent age,” Beckwith said.