The late-April announcement by the Food and Drug Administration (FDA) that it plans to effectively ban all flavors of mass-produced cigars (as well as menthol cigarettes) within the next year sent a loud warning signal to c-store operators, for whom flavored cigars are a popular item.
The proposed ban is intended to “help significantly reduce youth initiation, increase the chances of smoking cessation among current smokers and address health disparities experienced by communities of color, low-income populations, and LGBTQ+ individuals, all of whom are far more likely to use these tobacco products,” said Acting FDA Commissioner Janet Woodcock, M.D.
The ban is expected to pose harsh consequences for convenience stores.
The convenience store channel saw sales of cigars top $3.9 billion, an impressive 11.5% increase for the 52 weeks ending April 18, 2021, according to total convenience store data from research firm IRI. The individually wrapped, single-serve cigar share has grown tremendously, led by brands like Swisher Sweets, Backwoods, Dutch Masters, John Middleton and White Owl/Game by Garcia y Vega.
Tobacco industry veteran Steve Sandman, former president and chief operating officer of Republic Tobacco North America and now the principal of consultancy Laurevan Co. LLC in Wellington, Fla., is convinced the FDA means business.
“I anticipate the outright banning of flavors fairly soon, with the only question to be determined is whether ‘sweet’ is a flavor or is allowed to remain on the market,” Sandman speculated.
“Since flavored cigars are included in this ban,” said Buddy Gillespie, director of culinary & restaurant services for JBH Advisory Group in New York City, “a drop in sales is expected since many consumers are drawn to the sweetness and mildness of flavored cigars.”
Shortages & Growth
The proposed legislation isn’t the only change that c-stores must contend with. The COVID-19 pandemic created an inventory shortage of domestic and premium cigars due to manufacturing limitations. Many manufacturers have stopped making slower-selling items and are focusing production on their top-selling items and brands.
“Due to the manufacturing constraints, many manufacturers have eliminated several price points,” noted Chad Owen, president of Chambers & Owen Inc., a wholesale c-store distributor based in Janesville, Wis. “The most popular ones for us are two-for-99-cents, three-for-$1.29 and save-on-two.”
Jeremy Weiner, category director for cigars and premium products for Smoker Friendly in Boulder, Colo., sees the domestic cigar category continuing to enjoy strong growth for the rest of 2021, despite the product shortages. Smoker Friendly has over 160 retail stores across seven states that operate as tobacco stores, cigar lounges, liquor stores and fuel outlets.
“We shrunk up our larger domestic cigar sets to give the category a full appearance,” he said. “Many consumers that now work at home have more opportunity to smoke throughout the day.”
Smoker Friendly’s primary cigar consumers range from 21 to 40 years old in all demographics.
Key to increasing cigar sales is dedicating more space to the category, Weiner suggested. “The consumers like variety in brands and flavors.”
Window signs, shelf talkers and register display ads seem to work the best in his locations.
“As far as promotions, we offer product buydowns funded by the manufacturers, with the savings passed on to the consumer,” Weiner added. Buydowns usually last 30 to 60 days. Smoker Friendly also offers a points-based loyalty program. Customers earn points for every dollar spent in the cigar category and can redeem them on most products sold in the store.
Finding a Way Around
Veteran c-store operator Kizer Couch, who has owned and operated a Stop and Go in Bend, Ore., since 1998, said growth in cigar sales is coming from two directions — the first of which may soon change.
“Cigars still have flavors that customers want, while cigarettes are banned from being flavored,” Couch noted. “The new taxes that have been implemented have taken the costs of cigarettes up so high that customers are finding cigars are a less-expensive alternative. Most of the people buying cigars from us are tradesmen who smoke them during work.”
His primary cigar consumers continue to be males ages 25-50, and his top brands for the subcategory are Swisher and White Owl.
Couch conceded that he is unsure how badly the proposed ban on flavored cigars will impact the marketplace.
“It is my experience that any time the government takes away something people like,” he said, “private innovators will find a way around the rules to supply people with what they want.”