When it comes to the cigar category, c-store retailers are watching regulatory headwinds at the local, state and federal levels as legislatures increasingly target flavored tobacco.
A ban on flavored cigars would clearly change the dynamic of the tobacco category at convenience stores.
The good news is, despite the Food and Drug Administration (FDA) releasing proposed product standards to ban characterizing flavors in cigars earlier this year, it will likely be several years before any such ban would go into effect. The bad news is some states and local municipalities are moving forward with bans of their own.
2022 has seen proposed bans pop up across all 50 states, according to Thomas Briant, executive director of the National Association of Tobacco Outlets (NATO). They included outlawing everything from flavored cigars to menthol cigarettes, flavored smokeless tobacco, flavored electronic cigarettes, flavored hookah tobacco and/or electronic cigarette/vapor flavors.
Eleven states — Colorado, Hawaii, Illinois, Indiana, Maine, Minnesota, New Jersey, New York, Rhode Island, Vermont and Washington — introduced bills to ban all flavored tobacco products, according to Briant.
While the convenience store industry remains resilient, the tobacco category would definitely be different without flavored cigars.
Cigar sales in the convenience store channel totaled $4.02 billion, a gain of 0.4% for the 52-week period ending Sept. 4, 2022, according to Chicago-based market research firm IRI.
Much of the new volume in the category comes from flavor launches. C-stores are the biggest sector that the cigar companies use to launch new flavors and limited-time offers (LTOs).
Swisher Sweets, Backwoods, Dutch and Game remain leading brands at c-stores, and LTOs and two-fers continue to be the most successful promotions.
Indeed, retailers continue to report strong results with LTO launches: Swisher’s Banana Smash and Coastal Cocktail and Swedish Match’s White Owl in Dragon Fruit, Pairs and Swirls are good examples.
The natural-leaf segment has also been performing well, as evidenced by the launches of Swisher’s Leaf Peach Brandy and Swedish Match’s Game Leaf Dark. Backwoods is also said to be performing well.
A flavor ban will unquestionably hurt sales in c-stores. In fact, some have suggested that the future of c-store cigars very much depends on the outcome of the flavor ban efforts.
That said, this is an industry that adapts well, and executives remain confident that however the legislative assault plays out, retailers, manufacturers and wholesalers will ultimately figure out how to reach their consumers.
One key will be operators sticking to retailing basics: product placement and features and clean-looking cigar sets.
In Search of a Problem
David Ozgo, president of the Cigar Association of America Inc. (CAA), explained that after the FDA issued its proposed product standard to prohibit characterizing flavors in cigars earlier this year, CAA was among those that commented.
“CAA believes the proposal was a solution in search of a problem and filed comments and expert reports detailing the scientific and legal deficiencies in FDA’s proposal,” Ozgo pointed out.
More than 70,000 comments were submitted.
By law, the FDA must go through and address the issues raised by the submitted comments, make any revisions, and then publish final product standards that (according to FDA) would become effective 12 months later.
“We believe, therefore, that any FDA flavored cigar ban is quite a ways off,” Orzo suggested.
“While the proposed ban is understandably a concern to c-stores, because of both the process that FDA has to go through and potential legal challenges, any actual ban is not likely to occur for several years,” he added.
If and when it does happen, most agree, a ban would certainly be challenged in court, which would delay implementation for even longer.
Some c-store operators may not realize that bans on flavored cigars have already happened at the local level.
According to the American Nonsmokers’ Rights Foundation (ANRF), 241 municipalities in the U.S. have laws restricting flavored tobacco sales as of Oct. 1, 2022. Some 89 of those municipalities — 71 of which are in California — ban the sale of all flavored tobacco products, including menthol.
David Tooley, president of family-owned Tooley Oil Co. in Sacramento, Calif., which operates 16 Shell- and Circle K-branded convenience stores in Northern California and one in Reno, Nev., pointed out that he and his company have already been confronted with the reality of a flavored cigar ban.
“We are California-based and have a complete flavor ban, including menthol, at most sites,” he noted. “California is voting in November to complete the whole state. Thus, the (current proposals) really mean very little to us, as we are already living with bans.”
The response in California and elsewhere can only be to double down on retailing basics: having the products and promotions that resonate with consumers and pricing, promoting and merchandising them effectively.