Cigars can be thought of in three basic categories: the small, filter-tipped little cigars often sold in packs; the classic cigarillos; and traditional, large premium cigars. The first two categories comprise most c-store sets, and recent sales numbers have shown cigarillos to be the solid mover.
Data management and analytics firm Management Science Associates (MSA), which tracks sales in about 400,000 retail sites across the U.S., found filtered cigars sales are down in every class of trade except for dollar stores — possibly because they’re so similar to cigarettes that state and local governments have begun to tax them more. Cigarette smokers who previously shifted to this segment may switch back to cigarettes given both the taxes on filtered cigars and a more robust economy.
“Taxation levels have really influenced that little cigar, but (cigarillos) continue to be one of the real growth factors in the overall tobacco market,” said Don Burke, senior vice president at MSA. “The cigarillo market has really taken off and grown quite considerably, and it’s grown in practically every class of trade that we track.”
Strong & Steady
While overall cigar unit sales have leveled off — down 1.5% for 2019, according to Nielsen data ending Nov. 23, 2019 — they’ve risen 8.3% over the past four years, thanks to 13.3% and 13.8% boosts in 2016 and 2017, respectively. 2018 saw those gains drop, but cigar dollar sales still rose a respectable 6.6%.
That recent dip in unit sales hasn’t fazed Tim Greene, category director of tobacco and general manager at Smoker Friendly, which operates 105 stores in five states. Despite flat volume overall in cigars, he’s seen increased volume for sticks, specifically. “There’s so much pre-priced (product) out there that there isn’t much for margin with the increased volume,” Greene said. “But the volume’s there, and we’re happy with the category.”
IRI data found the unit price for cigars increased just two cents to $1.50 in 2019. Overall, cigars are holding steady and maintaining gains over the past few years.
Currently, cigar makers are offering heavy promotions, which Burke called, “a real bright spot” in the category. Despite the unpredictability and rapidly changing landscape of the tobacco category, it seems cigarillos can offer stability.
Update: The U.S. House of Representatives on Friday, Feb. 28, passed H.R. 2339, a bill that would ban nationwide sales of all flavored tobacco and vaping products, with few exceptions, as well as outlaw any remote sales not done face-to-face, effectively doing away with online purchases of any kind. The House bill’s ban on flavors includes menthol and applies not only to vaping products, but to all tobacco products, including smokeless or chewing tobacco as well as cigars. So called “premium” cigars — defined by the bill as any item costing no less than $12.00 — are exempt from the ban.