Cigars may not be firing up the backbar, but steady sales are bracing the segment ahead of possible flavor bans.
Manufacturing and distribution slowdowns during the first few years of COVID-19 impacted many product lines, but none in the tobacco/nicotine category was targeted to the extent that cigars experienced.
Convenience stores throughout the country struggled to get product to replenish backbars. At times, consumers had to set aside brand loyalty for what limited inventory offered.
By this time last year, supply chains were flowing better, but not yet fully recovered to pre-pandemic levels. Stores still dealt with distribution lags. Now, finally, that appears to have been corrected and impediments to routinely replenishing cigar inventories basically have dissolved.
“Even though the category in 2022 had a slight negative growth in many of our markets, overall, the cigar selection improved toward the end of 2022,” said Jeremy Weiner, category director of cigars and premium products for Smoker Friendly, which operates 290 stores in 13 states. The Boulder, Colo.-based company also operates Payless Cigars & Pipes and Rocky Mountain Cigar Festival.
Research firm IRI indicated nationwide cigar sales in U.S. convenience stores ended the year pretty much where they began, with only a 1% drop in unit sales and measurably no change in dollar sales. The good news for stores and consumers is that cigars’ price per unit inched up only 1% last year.
Flavor Ban Woes
Sales for the rest of 2023, however, may hit some regulatory roadblocks. Last month, New York Governor Kathy Hochul proposed a ban of all flavored tobacco products, including cigars and cigarillos. This follows in the footsteps of California’s recently enacted statewide ban and could foreshadow a federal action. Last year, the Food and Drug Administration announced it is exploring the prohibition of cigars in flavors other than tobacco. It is expected to announce a decision by summer.
“NYACS is strongly opposed to the proposal to ban flavored tobacco products in New York state and to raise taxes on cigarettes an additional $1. Prohibitionist policies and regressive taxes such as this will only hurt small businesses, strengthen the illicit underground market, eliminate jobs and have no meaningful health impact on adults or children,” said Kent Sopris, president of the New York Association of Convenience Stores (NYACS).
If bans are implemented at either level, the action would disproportionately affect c-stores due to the prevalence of cigarillos and multipacks of little cigars sold in this channel. Without cigarillos, however, there could be more room to expand premium offerings. Weiner believes this could be a welcomed opportunity to attract customers who may not have previously considered c-stores as a cigar source.
“It is still a very viable category for our company and for many of our competitors,” he said.