No trends or new products in the vape and cigar segments impact the market as significantly as federal, state and local regulations do.
Although plenty of consumers enjoy vape and cigar products, regulatory measures prohibit convenience store retailers from selling certain items, significantly affecting their backbars and potentially impacting their customers.
With this in mind, tobacco category managers must find creative ways to keep these customers interested in what they’re allowed to offer.
Regulating Cigars
The Food and Drug Administration (FDA) has long been waiting to establish a decision on a flavored cigar and menthol cigarette ban.
Officially announced in April 2022, the proposed product standards prohibit characterizing flavors other than tobacco in cigars. The public comment submission period was extended to Aug. 2, 2022, and since then, multiple delays have pushed a decision further away. Retailers still await a final rule.
“Earlier this year, the White House administration announced that the finalization of a flavored cigar ban rule would be delayed since significant feedback was garnered on this and the proposed menthol cigarette ban,” said David Spross, executive director of the National Association of Tobacco Outlets (NATO). “The outcome of the presidential election will also likely influence both the timing and whether or not a final rule moves forward.”
State legislation, too, has attempted to ban flavored tobacco products.
For instance, in Minnesota, the last two years have seen tobacco legislation introduced. A Senate hearing occurred in 2023 and in 2024, there have been House hearings, noted Lance Klatt, executive director of the Minnesota Service Station & Convenience Store Association.
However, Minnesota has adjourned its 2024 session, NATO reported, with efforts to ban flavored tobacco products failing.
“(Currently), Pennsylvania and Michigan have bills pending that would ban flavored tobacco products (both state legislative sessions are year-round),” said Spross.
A potential flavored cigar ban is not the only regulation retailers are concerned with regarding cigars.
Increased taxes on the products have also influenced how retailers view this section of the backbar.
“Since New York State (NYS) imposed the 75% tax on cigars we have had to drastically cut back our offerings,” said Bill Laraby, purchasing manager for Clifford Fuel Co., which operates 22 Cliff’s Local Market locations in New York.
Only Florida and Pennsylvania do not impose a state cigar tax (as well as Washington, D.C.). Other states tax cigars by a percentage of the product price or a per-unit basis, according to the Centers for Disease Control and Prevention.
Recently, New York enacted the 75% cigar tax, and as of August, the little cigar excise tax rate is around 27 cents for each little cigar.
“There are many smaller retailers getting product from across state lines and selling cigars for much less than we can. Due to the lack of enforcement, we have no choice but to cut back our offerings,” Laraby continued.
Nationally, cigars at c-stores have seen a 7.7% unit sales drop but a 2.5% uptick in dollar sales due to price per unit increases for the 52 weeks ending July 14, according to market research firm Circana.
Vape’s Legality
Vape products have received much scrutiny by the FDA, causing c-store retailers to constantly wait on tenterhooks to know which vape products they can sell and which they cannot.
Electronic smoking device dollars dipped by 4.3% over the past year, reaching $6.95 billion, per Circana.
Mostly, retailers see vape products receiving marketing denial orders. However, marketing granted orders (MGOs) have been given to certain vape products for the first time since June 2022. These include VUSE Alto tobacco pods and NJOY menthol-flavored vape products.
These represent the first flavored e-cigarette MGOs, Spross stated. Now, 34 vape products have been approved by the FDA.
Laraby noted the approval of the NJOY menthol products has been an exciting opportunity for Cliff’s.
However, the illegality of other vape products has been negative. And, just as with cigars, New York plays a role in Cliff’s vape segment.
“NYS regulations play the biggest factor in vape and cigars for us. It is hard to compete being a law-abiding retailer. There are shops selling flavored vapes illegally in every town we operate,” said Laraby.
NYS banned the sale of flavored vape products in 2020. Laraby noted the unfair playing field the company has in the state as well as lack of enforcement are the biggest factors affecting the category currently.
In response to these restrictions, Cliff’s has focused on the burgeoning growth of modern oral as well as its success with tobacco-free alternatives with nicotine.
A lack of enforcement is an issue with more than just Cliff’s, however.
Spross noted when it comes to enforcement, there is still a need for clarity from the FDA.
“The need for an effective regulatory system requires a more coherent compliance framework that clearly communicates the FDA’s enforcement priorities, what categories of products the agency wants immediately removed from the marketplace and what categories can remain on the market pending review of timely filed applications,” he said.
In the meantime, Klatt advised, “be aware of your community and have a relationship with your local city council member, state legislator and member of Congress. Make them understand your business, your commitment to your community and being a responsible retailer.”
