In many regards, the 2022 election set the stage for 2023 tobacco and nicotine sales in convenience stores.
On the one hand, voters chose more regulation. For example, California’s Proposition 31 passed with 76% of the ballots, approving a statewide ban of almost all flavored tobacco products, including menthol. Only premium cigars and hookahs remain exempted. Tobacco companies requested the U.S. Supreme Court intercede, arguing that a state doesn’t have the authority to regulate products that fall under the purview of a federal agency, in this case, the Food and Drug Administration (FDA). The court declined to review the case, so the law took effect on Dec. 21.
The same election also ushered in a Republican majority in the U.S. House of Representatives, which traditionally indicates a more pro-commerce penchant and general dislike for expanding federal regulations.
“With a divided Congress and narrow majorities in both chambers, it’s unlikely that tobacco and nicotine policy will see much action,” said Anna Ready Blom, director of government relations for the National Association of Convenience Stores (NACS).
“(However,) this means you can expect a more aggressive regulatory agenda from the Biden administration, and lawmakers who consider themselves anti-tobacco will likely encourage regulators to use their authority to affect change,” added Blom.
What the election didn’t affect are the FDA marketing decisions for e-cigarettes and vape products, many of which are still pending. The agency also is reviewing stacks of pre-market tobacco applications (PMTAs) for synthetic nicotine products. While it has issued dozens of denials, the FDA had not yet announced any marketing granted orders by November. It has stated that final reviews are expected to be completed by the end of June.
Modifying According to Market Demand
Whether on the state or federal level, product prohibitions definitely remake the tobacco/nicotine category in convenience stores.
“We have not pulled any items off of our shelves, but will continue to heavily monitor news and regulations around these flavor ban discussions. We will continue to sell synthetic nicotine products until we are told we are not able to,” said Jon Manuyag, director of marketing for Plaid Pantry, based in Portland, Ore. The c-store chain consists of more than 100 stores in the Pacific Northwest.
However, when products vanish from planograms, that space can be filled with new items, including reduced-risk options like VLN and VLN Menthol King by 22nd Century Group Inc. The brand is the only combustible cigarettes to receive the FDA’s modified risk status.
In the coming year, Manuyag is considering using the back-of-the-register section to house a greater variety of products beyond tobacco and nicotine.
“CBD/CBG; tea-leaf wraps; high ABV (alcohol by volume) alcohol, wine or malt-base; and general merchandise are just some of the areas being looked at,” he said.
Within the tobacco/nicotine category, data shows products perceived to have less risk, like nicotine pouches, are accumulating market share. IRI, a Chicago-based market research firm, lists spitless tobacco year-over-year dollar sales up more than 34% for the four weeks ending Dec. 4. Unit sales for the same period climbed by more than 27%. This segment showed similar results for each 12- and 52-week reviews.
“The nicotine pouch category continues to grow as many manufacturers have released their own products to try and compete. We receive plenty of new nicotine pouch samples at our corporate office to test. Some have made it to our store shelves, but many do not,” said Jeremy Weiner, category director of cigars and premium products for Smoker Friendly. The Boulder, Colo.-based company also operates Payless Cigars & Pipes and Rocky Mountain Cigar Festival.
He added that the cigar segment is undergoing changes, too. Last year, the FDA proposed a rule change that would eliminate cigar flavors other than tobacco. The period for public comments ended last summer, and industry watchers expect a decision within the first half of this year. Currently, though, Weiner sees a shift away from multi-pack offerings.
“In 2023, the biggest change I see in the domestic cigar category is that many of the major manufacturers are trying to move away from pre-priced cigarillos. With many of the pre-priced items going away or increasing in retail price points, there will be more profit margin for retailers to make in the (premium) cigar category in 2023,” he said.