Disruption paves the way for new ideas, whether we’re talking about the invention of the light bulb or the way flavor regulations are leading to innovation in and around the tobacco category.
Thomas Edison invented the first commercially successful light bulb in 1879. It changed the way we live. Bright indoor lighting allowed people to work at night. It also made outdoor spaces safer. Some 140 years later, we have 24-hour convenience stores and well-lit fuel islands. Thank you, Mr. Edison.
Edison wasn’t a genius for nothing. He became wealthy when he sold his company to General Electric. By the early 1900s, electric utilities were distributing power to businesses and homes across the country. Today we pay the electric bill every month. We buy light bulbs maybe twice a year.
The need for a new idea usually isn’t obvious until somebody realizes they can make some money. Change creates opportunity.
Today, we’re seeing change create opportunity in the tobacco category.
In 2024, the Food and Drug Association (FDA) flavored tobacco ban will effectively remove about 40% of all menthol cigarettes and flavored cigars, plus a stack of daily dollars from c-store cash registers.
Tobacco industry response to flavor removal ranges from more facings of non-flavored cigarettes and cigars to unflavored vape and oral nicotine. Current estimates shrink the tobacco section by 30%. Nicotine-centric thinking is missing the chance to keep flavors in the mix. It’s not just the loss of sales volume. It’s also the chance to keep more than a few good customers happy.
Non-tobacco and nicotine-free flavored smokes and smokeless are already making their way onto retail shelves. Maybe it’s not the scale of the electrical grid, but there’s 150,000 retail doors out there. There’s money to be made rather than simply abandoning the flavors so many adult smokers like best.
Where Do We Put the Flavors?
What we know for sure is that flavored tobacco products will disappear sometime in 2024. What we don’t know is how many menthol and flavored tobacco users will quit. The Centers for Disease Control and Prevention (CDC) predicted 25%. How many may instead opt for flavors they love vs. the nicotine they need?
There’s plenty of time to develop new nicotine-free products for adult smokers and smokeless users who would like to stay with the flavors they enjoy. Edison had hundreds of failures before getting it right. Better tasting vanilla, rum, menthol and clove are not as complicated as a light bulb.
Hemp-based smokes, new flavored botanical blends and tobacco-free smokeless makers are using flavor-banned California to measure their audience. They’ll learn the best nicotine-free shelf sets soon enough.
Retail Planning to Keep the Quitters
Current plans for removal, replacement and resetting of in-store tobacco sections will involve 8 million or 9 million shelf facings representing more than $23 billion in retail sales. It might also remove the reason for a lot of fuel customers to come inside.
Convenience distribution and shelf placement of new items will be needed to sustain the current section. Setting a new nicotine-free section should be attractive to some of those 25% the CDC predicted will quit.
Where Does This Take Us?
A volume, velocity and merchandising strategy for the c-store front end will be needed. Swisher, Swedish Match, Kretek, 22nd Century, Smokey Mountain, TAAT and others testing nicotine-free flavored products will need a common framework to help chains invent and promote changes to the front end for nicotine-free smoking and smokeless in a flavor-free retail tobacco market.
Distributor and retail benefits such as excise tax-free profit, non-restrictive merchandising, social media marketing, and in many cases, better tasting products are coming. As far as regulatory response goes, it’s ironic that after 15 years, flavored cigarettes will become legal again and no premarket tobacco product applications will be required.
The light bulb is still the icon for a bright idea. Nicotine-free flavors are coming. A lot of smokers are still going to smoke.
John Geoghegan has spent the last 30 years in the tobacco business, including vice president strategic planning at General Cigar Co., U.S. manager for DjEEP Lighters, head of marketing for Kretek International Inc. and manager of LaMirada Cigar Co. He began his career 57 years ago at Procter & Gamble. Geoghegan is a graduate of the University of Cincinnati. He lives in Laguna Niguel, Calif.