As tobacco products evolve, sellers of tobacco accessories must foster new market opportunities.
By Erin Rigik Del Conte, Senior Editor
As tobacco products feel a squeeze from regulations, accessories must adapt to thrive. Tobacco accessories include lighters, rolling papers, e-cigarette cartridges and other purchases that complement tobacco use.
Smoking accessories totaled $254 million for the 52 weeks ending April 16, 2017, and up 1.7% last year, according to Information Resources Inc. (IRI) Convenience All Scan data for the period. Unit sales totaled 147 Million up 0.40%.
The National Association of Convenience Stores (NACS) State of the Industry (SOI) Summit looked at rolling papers specifically, and found that papers had 2.2% share of the tobacco category, but were down 3.2% in dollar sales and saw a 4.6% decline in unit sales in 2016. Papers had a gross margin of 37.2%.
SHRINKING SEGMENT
In the tobacco category overall, prices are continuing to rise, said Steve Magestro, president of Saukville, Wis.-based Mad Max Convenience Stores with 12 locations in Wisconsin. “We are trying to run as many promotional prices on key (tobacco) items as we can to try and help drive the sales. More and more promotions seem to be a two-for deal of some sort and more promotions seem to be coming out, usually driven by the manufacturer.”
When it comes to accessories, Mad Max Convenience Stores sells lighters, rolling papers and wraps (paper tubes). “The accessories category does seem to be shrinking along with the total dollars sales for the tobacco category,” said Magestro, who has seen the segment decline over the past five years. “The category has really changed in our locations. Not for the better either.”
Magestro sees consolidation overall in the category. For example, he remembers having large selections of cigars and humidors, but he noted humidors are long gone. “We have really nice displays in our locations, but so many of the items I remember from years ago, just do not sell anymore.”
Five years from now, Magestro predicted, the accessories category will see an evolution toward new items and/or brands that will keep costs low to entice customers.
Mad Max doesn’t make a practice of upselling its accessories.
“Manufacturers are making a two-for deal (on tobacco products) the norm versus the occasion. I think because the market is getting smaller and the prices are increasing—like anything else, this is a factor,” Magestro said. “Wraps have really increased over the last several years, but they are so cheap to buy that it does not help the category drive dollars.”
“I see it being a category that will continue to shrink as time goes by,” said Magestro. He predicted inner-city stores will sell cheap wraps and other accessories, while the suburbs will see this segment “get smaller and smaller.”
Empire Petroleum Partners, with 1,600 retail partners in 32 states, sells lighters, rolling papers and e-cig cartridges among its tobacco accessories, with Bic lighters and cheap lighters being the most popular accessories with customers.
UPSELLING SUCCESS
Kip Fruge, senior director of operations and merchandise programs, Dallas-based Empire Petroleum Partners LLC, said state and local mandates to make age 21 the legal age for tobacco use will bring a further dip in cigarette sales.
“I would expect accessories would follow suit,” Fruge said. Empire Petroleum has been working to incorporate electronic cigarettes, and with that provide cartridges as part of its accessories options.
In order to drive sales in the segment, Empire Petroleum motivates its customers to upsell accessories with a tobacco purchase with monthly sales contests.
“We’ve done a couple sales contests this year for our associates tied to upselling lighters. The easiest thing to do is ask customers if they want a lighter,” said Fruge.
“The second thing is to make sure associates know how each lighter is priced. No. 3 is to offer a discount on multiple lighters, so you can sell two with one sale.”
Despite efforts to upsell, Fruge expects the category to be flat, given the pressures on the segment; however, he noted his stores have a tendency to buck trends. “We’re actually slightly above prior year in cigarette sales.”
Time will tell if tobacco accessories follow.
