The FDA has restricted consumer visibility and access to tobacco for 14 years.
During that time, cigarette consumption has declined more than 35%; down more than 4% in 2023 vs. last year (8% according to the Wall Street Journal).
The bans will rearrange everything starting in mid-2024. It will be smaller. Chain managers are already likely to be reviewing future floorplans. Independents and franchisees know their neighborhood. Rethinking the front end beyond tobacco users’ expectations should result in a larger market basket.
The “Nicotine” Section
Informed predictions indicate that alternative nicotine SKUs will see increases in facings while tobacco use continues to decline. It’s going to be more complicated than that. Availability of alternative nicotine may not be the only answer.
Menthol will still be a preference in 2025, gone but not forgotten.
Here are three examples for sustainable SKU replacement: Premium handmade cigars, non-tobacco smokeless, and nicotine-free legal flavored and menthol smokes to replace what’s been banned.
Flavored cigar smokers will need to find something different. Some will experiment with better quality, while brand loyalty will keep most with non-flavored versions of their current cigars. Value-priced imported premiums like Cuban Rounds, Quorum and Factory Smokes offer higher quality with choice of wrappers and sizes.
Given the pending number of empty flavored cigar slots, growth of premiums would seem a smart way to step up the overall image (and profit) of the section. The main issues for premium cigar importers are a.) affordable pricing for the c-store smoker, b.) pusher rack damage to pouched product and c.) the ability to produce to new volume demand.
Meanwhile, FDA’s forward attempts to corral the vape Frankenstein it created seem to be moving alternative nicotine forward and backward at the same time. While new products are coming to the shelf, the FDA is denying marketing authorizations to current products. Alternative nicotine including vape declined slightly in 2023 at around 8% of category total. We’ll see what happens next year.
What Becomes of Menthol?
Menthol cigarette smokers tell us they will either quit, smoke non-menthol cigarettes or switch to nicotine alternatives. If menthol cigarette court challenges fail, will a menthol botanical blend appeal to enough menthol smokers to sustain its value, even though it will be a fraction of current volume?
How will cannabidiol (CBD) in a menthol smoke satisfy relaxation compared to nicotine? Will menthol mask the taste of hemp after the FDA figures out what to do about it? Tax-free profit will produce a better bottom line. I think three or four legal nicotine-free menthol brands could fill eight or 10 shelf slots.
So what to do with all of this? Here’s a common-sense idea for shelf sets from John Ellegate, former VLN brand director at 22nd Century Tobacco, also a past co-worker of mine. Segment the new tobacco planogram around the FDA’s Continuum of Risk.
Category segments fall in a natural progression. For the most part, health risk is in opposite order of volume.
“Oh, yeah, let me have one of those, too.”
The diagram is a proportional grid, not a literal shelf layout. The spaces are adjusted for percent of sales vs. area needed in relation to package size. Tobacco is going to use less space. This leaves room for a commercial interior planner to pair wine, liquor (where legal), travel accessories, selected baked goods or an adjacent hot snacks bar to make the front end more interesting.
Display beverages and grab-n-go snacks together.
Flavored zero-tobacco combustibles don’t need to be on the backbar. Non-tobacco tax-free purchase choices have been waiting for this moment to arrive.
Look at your velocity and margin data. What else can make more money at checkout?
The average c-store is growing to meet increased traffic. Current locations average around 3,200 square feet. Now 4,500 square feet is the new normal, and 6,000-foot layouts are appearing in some markets. That’s a lot of new elbow room. There’s a decline in smokers, but the backbar still sets the tone when a customer walks in.
Quality and selection have been improving in other parts of the c-store for several years.
Here are some questions that may impact what you want consumers to be thinking when they finish checking out. How long do you want a customer to linger in the store? What personnel and training are needed to deliver to higher expectations?
How long should a customer’s cars hold up a pump while they’re inside? Do time and cost of improved service undercut market basket profit?
Consumers want a more enjoyable shopping experience. What will that cost? It takes more time for a customer to pick up a hot beverage than a cold one, or to select a prepared sandwich or burrito vs. an energy bar. Faster or more leisurely?
Broader range or better quality? Show them reasons to come in again when they first walk in the door.