With the tobacco category under continuous scrutiny by the Food and Drug Administration (FDA), c-store retailers must consider how they need to respond, especially with the vape and cigar segments.
Vape sales increased by 3.5% in Q2 2022 compared to Q2 2021, whereas cigar sales decreased by 3% for the same period, according to store data from National Retail Solutions (NRS).
Retailer Response to JUUL Decision
On June 23, the FDA issued marketing denial orders (MDOs) to Juul Labs for all its products marketed in the U.S. The Juul device and four types of Juul pods — Virginia tobacco flavored pods and menthol flavored pods, both at nicotine concentrations of 5% and 3% — are among those prohibited from distribution.
A temporary administrative stay of the MDO for Juul was granted on June 24 by the U.S. Court of Appeals for the D.C. Circuit. On July 5, the FDA administratively stayed the MDO, but did not rescind it. According to the FDA, scientific issues unique to Juul’s application warrant further review.
“My personal plea to retailers is to sell what your customers want,” said Greg Conley, president of the American Vaping Association, a pro-vaping advocacy organization. “These are products that are popular with consumers and demand isn’t going to go away. If you don’t sell these products, someone in your town is going to, and chances are, the FDA’s not going to knock down their doors with guns drawn.”
In New York, Juul products have been popular in recent years, along with other vaping products. “While I am uncertain of the exact market share Juul comprises, it is my understanding these products sell regularly and quickly,” said Kent Sopris, president of the New York Association of Convenience Stores (NYACS).
Whereas some stores have chosen to sell down their products since the FDA ruling, he said, others have decided to continue selling a large amount of Juul products.
“Regardless of the final outcome, c-stores are highly adaptable and will continue to find ways to serve their customers by offering safe and legal products,” Sopris continued.
Prior to the ruling on July 5, Omaha, Neb.-based Cubby’s, which owns and operates 40-plus convenience stores, supermarkets and quick-service restaurants in Nebraska, Iowa and South Dakota, kept Juul products on the shelf but removed the ability to order from the store level, choosing to manage its inventory from its Support Center.
Mike Wilson, chief operating officer of Cubby’s, noted the loss of Juul would be a significant hit, as it makes up 37% of the chain’s cigar and vape profit.
“Juul takes up 60% of our vaping product space and 30% of our overall (cigar and vape) offering,” Wilson said.
Adam Long, senior category manager for The Rutter’s Cos., agreed the Juul MDO would be bad for the industry. “Each of us stand to lose sales and profits from a brand that represents half or more of the category,” he said.
The Rutter’s Cos. operates 80-plus convenience stores in Pennsylvania, Maryland and West Virginia.
“We try to be as vocal as we can be throughout the regulatory process, and I think that’s the first (and most important) thing each of us can do. The future of the category is highly volatile right now,” continued Long.
Juul Menthol seems to be the strongest flavor for Cubby’s, but Vuse Menthol continues to increase market share. At Rutter’s, Juul and Vuse are also the big brands in the vape category.
“Most people believe this will end up being tied up for years in the courts, but we must be prepared,” said Wilson.
Cigar Regulation Inspires Action
In April, the FDA announced a proposed tobacco product standard that would prohibit an artificial or natural characterizing flavor (other than tobacco) in cigars. The time period that allowed for comments to be submitted by the public had been extended to Aug. 2.
NYACS and others continue to oppose the ban, including the proposed ban of menthol in cigarettes.
“Bans of any kind are futile public policy as they have no impact on the number of smokers — currently at an all-time low — and only drive consumers away from the taxed and regulated market to the underground market,” said Sopris.
At Cubby’s, nothing has been changed in terms of its cigar offerings, and the Black & Mild brand dominates the segment. Backwoods and Game are also popular at Rutter’s.
“I continue to reach out to our Congressional representatives and the National Association of Convenience Stores (NACS) to do anything that I can to fight this and all these FDA ‘bans,’” said Wilson.
Rutter’s intends to be heard on the issue as well, and it is currently in the process of submitting comments. Additionally, the chain is educating its employees.