Concern for the tobacco category isn’t new among retailers, and as the Food and Drug Administration (FDA) proposes regulations and issues marketing decisions, c-store operators are continuously assessing inventory.
Cigars in particular are a question mark with c-stores as they wait on the FDA to make a decision regarding a flavor ban this fall and how consumers might respond. Additionally, vape is constantly on retailers’ radars since FDA is still issuing marketing denial orders to brands and cracking down on those who sell and market those products.
The FDA served warning letters to 30 retailers in May for selling Puff and Hyde brand disposable e-cigarettes as part of a nationwide effort to halt the sale of unauthorized vape products. In June, FDA issued 180 warning letters to retailers for selling Elf Bar and Esco Bars e-cigarettes illegally.
“It’s getting tougher for our industry to survive; we need everyone to work together and overcome obstacles, such as government regulations, by getting involved with a form of advocacy,” said Lance Klatt, executive director of the Minnesota Service Station & Convenience Store Association.
Minnesota proposed a statewide ban of flavored tobacco in February, with some cities already having bans or restrictions on flavored tobacco in place.
Massachusetts was the first state to ban flavored tobacco, followed by California.
Vape and Cigar Trends
For the latest 52 weeks ending June 18, cigar dollar sales remained flat at convenience stores (down 0.3%) at $4 billion, according to Circana, a Chicago-based market research firm. Unit sales dipped a slight 1.3%.
At Grub Mart’s 11 stores in Alabama, flavored cigars are leading the tobacco subcategory.
“Cigar (smokers) seem to be a little bit more fluid in what they will smoke. It could be strawberry this week, kiwi or whatever the next week. It could be different,” said Brian Young, vice president of Young Oil, operator of Grub Mart.
So far, Alabama has not experienced any flavor bans at the state level. However, FDA’s crackdown on certain vapes has kept the chain on its toes. For example, Grub Mart carried Elf Bar products, many of which are now no longer legal.
Vuse is a top seller for the chain, however, with the tobacco flavor being the most popular. “We’re over a hundred a week or so in (pods),” said Young. “… It’s really been a good mover for us.”
Electronic smoking devices saw a 4.3% uptick in dollar sales at c-stores for the 52 weeks ending June 18, reaching $7.09 billion, per Circana. Unit sales, on the other hand, dropped 8.9% to $419 million. This is likely due to a 14.5% increase in the price per unit.
At Grub Mart, however, Young believes inflation, particularly the higher cost of cigarettes now, is driving customers to vapes.
“Our vape business has continued to grow. We have not really had (price) increases in it. We’ve had (increases) in the others, and it may be driving people to the vapes more. … It seems like in our marketplace, our Newports have really hit the wall in what people will accept on the price,” Young said.
He added that Grub Mart has seen a pretty large decrease in two of the biggest full-priced cigarette brands that it sells.
Trends have clearly been influenced by inflation, which is leading many c-store retailers to take stock of their backbars.
“Retailers cannot absorb higher costs of goods and increases in labor. That’s always a factor. Minnesota just passed a gas tax increase tied to inflation, not the consumer price index. It may hurt inside store sales, including tobacco sales,” said Klatt.
In Minnesota c-stores, vape represents a small portion of sales, although they do sell a variety of closed systems.
Cigars are also becoming a smaller part of the tobacco business at Minnesota c-stores due to higher taxes as well as pack restrictions and flavor bans.