Legalized cannabis, herbal options and increasing cigarette costs could work in favor of the roll-your-own (RYO) tobacco category in 2023.
The RYO segment has always been a small player in the overall tobacco category. The $35.8 million generated by RYO tobacco sales in 2022 is a pittance of the nearly $55 billion attributed to cigarette sales, per IRI, a Chicago-based market research firm.
For some convenience stores, the subcategory is a courtesy to satisfy a unique customer demographic that prefers to roll their own cigarettes than buy mass-produced cigarettes. Tobacco/nicotine category managers keep rolling papers, loose tobacco and filters on hand, but don’t expect a lot of change in profit margins year over year. At least, that’s the case for The Rutter’s Cos., a York, Pa.-based retailer that owns and operates 78 stores in Pennsylvania, Maryland and West Virginia.
“But as with any category segment, we’ll continue to evaluate RYO tobacco to make sure it has the appropriate presence,” said Chris Hartman, vice president of fuels, advertising and development.
Herbal Opportunity
For other convenience stores, especially those located in states where recreational cannabis use by adults has been legalized, the niche category is gaining prominence. The cannabis market creates a customer base that prefers to fill papers with cannabis or herbs, including such options as lavender, rosemary and sage.
A Gallup poll last summer revealed that nearly one-third of adults younger than 35 admit to smoking marijuana. Among adults between the ages 35 and 54, 16% have used cannabis.
A Future Marketing Insights (FMI) review of the rolling papers sector also suggested the marketplace is breaking traditional boundaries. Not only is the customer base multiplying, but also manufacturers offer a greater variety of papers.
Since the 1800s, rice has been a primary source worldwide for rolling papers. Wood pulp and even flax are other common sources, too. Hemp, however, has emerged as a preferred choice these days. FMI calculated hemp held approximately 60% of the total market share last year, citing customers’ attraction to better taste and burning capacity. Producers are adding flavors as well, including chocolate, coconut and cherry.
At the moment, lawmakers have not targeted flavored papers in their state or proposed federal flavored tobacco bans.
Inflation Drives Interest
Of course, when the price per unit for packaged cigarettes goes up by nearly 5%, as it did in 2022 per IRI, then smokers begin looking to save their pennies and RYO becomes a more economic option.
Jon Manuyag, director of marketing for Plaid Pantry, which operates 108 c-stores in the Pacific Northwest, said budget concerns drove up interest in alternatives last year.
“Even pipe/cigarette tobacco are seeing strong sales, 16% growth, due to inflationary pressures from cigarettes,” he noted.