In the twilight hours of the Biden administration, the Food and Drug Administration (FDA) released two decisions that could impact how convenience store owners and operators plot out inventory and market the tobacco/nicotine category this year and for years to come. Meanwhile, as the Trump administration took office, retailers saw some regulation reprieve.
Positive Pouch Performance
On Jan. 16, the Biden administration FDA authorized market orders for 10 ZYN flavors in each three milligram and six milligram nicotine strengths. This decision is the first of its kind for nicotine pouches and allows stores to spice up backbars with Chill, Cinnamon, Citrus, Coffee, Cool Mint, Menthol, Peppermint, Smooth Spearmint and Wintergreen. Undoubtedly, it was welcome news for an already high-performing subcategory.
“Pouches and other modified-risk items have continued to be strong. These categories have always been a very important part of our business and for our specific geographic area. This year we look for the focus to shift to some new products and line extensions, which always bring a new interest from customers,” said Nathan Arnold, director of marketing for Heath, Ohio-based Englefield Oil, which operates 117 Duchess Convenience Stores in Ohio and West Virginia.
On the West Coast, Jon Manuyag, director of marketing for Plaid Pantry, has observed a similar response. The Beaverton, Ore.-based convenience store chain owns and operates 110 retail sites in Oregon and Washington.
“Modern nicotine pouches/modern oral pouches continue to perform extremely well for our chain. As Plaid Pantry was an early adopter into this space many years ago, we have a high share of our market for volume and continue to grow share. We are positioned for continued growth for years to come,” he said.
In the Midwest, Sean Bumgarner, VP of Scrivener Oil Co., which runs 12 Signal Food Stores in southwest Missouri, has seen how demand outweighs supply at times. “Despite occasional stock shortages, our sales (of pouches) have maintained a rapid upward trajectory,” he said.
Market research confirms the growth is not a regional phenomenon nor a fleeting trend. According to data from Chicago-based market research firm Circana, for the 2024 calendar year ending Dec. 29, 2024, both chewing tobacco alternative and spitless tobacco, which includes pouches, dominated all other tobacco/nicotine segments: posting gains of 45.4% and nearly 58.8% in dollar sales, respectively, and 33.8% and 44.1% in unit sales, respectively. Traditional smokeless product families, chewing tobacco and snuff, each experienced declines — 6.3% and 4.8% falloffs in sales, respectively, and 5.6% and 8.6% for units, respectively.
Cigarettes: Still Firing Up Profits
The second proclamation from the Biden administration FDA officials came in mid-January and has the potential to change the future of cigarettes. One week before transitioning to the new administration, the FDA issued a proposed rule change to reduce the maximum level of nicotine allowed.
“The proposed rule would cap nicotine levels at 0.7 milligrams per gram of product for cigarettes, smaller cigars and other combustible tobacco products. However, premium cigars and hookah tobacco are explicitly exempted from these new limits,” explained Jeremy Weiner, category director of cigars and premium products for Smoker Friendly. The Boulder, Colo.-based company is part of the family of stores owned and operated by The Cigarette Store Group, which also includes Tobacco Depot, Smoke ‘N Go, Havana Manor and Gasamat.
By rule, the FDA opened a call for public comments on the change for up to 240 days. But just two days after President Donald Trump took office, a notice from the Department of Health and Human Services noted that the FDA’s plans for nicotine limits had been moved to the long-term actions category, meaning they are now a low priority. The deprioritization, however, is unlikely to impact the comment period, which is still open through September, but time will tell what happens after that.
In a major win for the industry, the day after President Trump took office, the FDA also withdrew its two proposals that would ban the sale of menthol cigarettes and flavored cigars. David Spross, executive director of the National Association of Tobacco Outlets, told CStore Decisions that it is unlikely the menthol and flavored cigar bans will be reintroduced under the Trump administration, however it’s possible they could reappear under a future administration. If this were to occur, the final rules would have to be sent back to the Office of Management and Budget before they could be published and implemented.
While these legislative victories are reason to celebrate, cigarettes are nonetheless continuing to lose traction.
“The cigarette segment has continued to decline year over year. However, through loyalty, signage and other efforts, we have declined at a slower rate than our trading area. While we do offer some premium cigarettes, these have been less of our focus than the traditional brands,” said Arnold.
Circana reported that convenience stores nationwide earned $51.3 billion from cigarette sales in 2024, but that’s down almost 3.8% year over year. Unit sales last year added up to 5.47 billion, but that fell by 8.3%.
Another regulatory decision for the segment came from the U.S. Supreme Court in November when it declined to hear the tobacco manufacturers’ petition to dismiss the mandated cigarette warnings rule. Established in 2020, manufacturers are required to print a warning on at least one-half of both sides of packaging that includes illustrations of the health consequences of smoking. The rule applies to advertising materials, too, such as countertop displays or in-store signage.
After years of lawsuits traversing the myriad courts, the U.S. Court of Appeals for the Fifth Circuit affirmed an earlier decision that photorealistic medical portrayals would convey the pertinent health facts and therefore didn’t impinge on companies’ rights and met the legal standards for compelled speech. The high court’s denial keeps that decision in play. The lawsuit now returns to a lower court to hear petitioners’ claims that the labels violate the Administrative Procedure Act.
The FDA was originally expected to begin enforcement in December 2025, but on Jan. 14, the District Court entered a preliminary injunction and postponed the rule’s effective date until entry of final judgment in the litigation.
Cigars: Meeting a Niche Demand
Generally speaking, large mass and premium cigars had a stable year in 2024. Thanks to a price increase of 10.5%, the large mass segment grew slightly (2.2%) in dollar sales, and premium cigars dropped a bit (-2.1%). Little cigars, however, experienced a 45% loss in dollars year over year on a more than 73.4% drop in units. Of course, flavor bans impacted this subcategory whereas premium cigars have been exempted. That probably will be an issue again this year as more cities contemplate enacting local restrictions, such as the new one in Denver.
“The city council passed the ordinance with an 11-1 vote, and the ordinance was signed by the mayor on Dec. 18. It will go into effect on March 18 and will affect six of our locations,” said Weiner.
Cigar accessories, on the other hand, recorded a very good year, per Circana. In 2024, accessories specifically designed for cigars cashed in more than $235 million for c-stores. That’s a jump of more than 15% in sales.
Vape: Adjusting to Current Conditions
The biggest development for the vape segment in 2024 was basically no change to the slow rollout of premarket tobacco application (PMTA) decisions. As of last month, the FDA had granted only 34 market orders, mostly for disposable e-cigarettes, which have been excluded from the federal flavor restrictions. Rather, more states set out to mandate databases of authorized flavored vape products to clarify confusion. More than 24 registry laws were proposed last year, with six states gaining governor signatures. However, both Utah’s and Iowa’s enactments, which were supposed to begin this year, have been put on ice for the moment pending the outcomes of lawsuits. Utah stores are still able to sell vape products not on the list until a legal decision is reached. In Iowa, an early March hearing is slated for the courts for additional motions.
“While some sort of list of authorized or provisionally authorized products will be necessary, presently, the hurdles to marketing granted orders are still too high for most manufacturers. I expect to see a greater push for directory laws during the 2025–26 sessions,” said Alex Clark, CEO, Consumer Advocates for Smoke-free Alternatives Association.
Additional flavor bans at the state and municipal levels still pose issues for the vape sector in c-stores.
“We are now one year into a flavor ban in Columbus, Ohio. While we are waiting for this to be overturned and hopeful it will be this year, we continue to see a decline in sales. Flavored tobacco customers can cross city and municipality lines and purchase these items outside of Columbus. It has had a negative impact not only on this category, but other categories within these impacted stores,” said Arnold.
Sales data from Circana shows vaping products declined in dollar and unit sales by 9.1% and 12.3%, respectively, in 2024. Interestingly, the vaping accessories subcategory experienced a bump in both sales gauges (18.6% and 30.8%, respectively). The cross functionality with cannabis vaping could be a contributing factor for this positive performance.
Additionally, last year saw a greater push on enforcement. For example, a multiagency federal task force seized an estimated $76 million worth of illegal imports of unauthorized e-cigarette products last fall.
Perhaps the biggest market influence on vape sales right now comes from modified-risk offerings.
“I’m not sure if the recent market authorizations for ZYN will accelerate adoption of nicotine pouches, but that may be something that cuts into the relative dominance of vaping. The popularity of nicotine pouches continues to grow, and I think more and more people who smoke are going to turn to them as they move away from cigarettes, or start looking for alternatives they can use in smoke-free/vape-free areas,” Clark reflected. “I’ve always seen the two products as complementary and I’d like to see more e-liquid companies entering the category.”
Modified Risk and CBD: Creating Opportunities
Pouches aren’t the only modified-risk products hitting backbars right now. The FDA is accepting public comments on modified-risk renewal applications for iQOS 3.0 and 2.4 system holders and chargers plus HeatSticks in Amber, Green Menthol and Blue Menthol.
Herbal cigarettes is an alternative catching the attention of tobacco/nicotine category managers, too.
“This is on our radar, but we’re not moving forward with it at the moment,” noted Manuyag. “We’re waiting for large distributor partners to carry these items, which will provide additional layers of risk control. For now, we’re taking a wait-and-see approach to observe the performance and consumer demand for herbal products and CBD-related items.”
Indeed, interest in cannabidiol (CBD) items seems to be a bit mercurial at the moment. According to Circana, some CBD products posted extraordinary gains, while others incurred substantial losses. The top sellers for 2024 were premixed cocktails/coolers/hard seltzers with more than 2,882.8% growth, whereas sleeping aids fell by 85% in dollar sales. Interestingly, tobacco accessories within the CBD silo grew by 795.6% in dollar sales and 144.1% unit sales.
Tobacco Accessories: Welcome Surprise
In fact, tobacco accessories overall for convenience stores posted profits, up by 6% year over year for dollars although units rolled in flat at 0.7% for calendar year 2024 ending Dec. 29, per Circana.
At Duchess, Arnold added emphasis to these add-ons last year.
“Our display and marketing efforts for accessories, papers and lighters have changed over the last year. Some additional SKUs in these categories have been added to meet the demand from customers,” he said.
Scrivener Oil’s Bumgarner also plans to reassess the tobacco/nicotine category.
“While we have not altered our displays or marketing efforts so far, we plan to implement changes this year to prioritize our high-growth products. This will include reducing the space allocated to slower-moving or declining products,” he said.
Acclimating to Change
With cigarettes and other tobacco products among the top five profit-producing categories for convenience stores, per NACS, category managers cannot afford to be stuck in the past when it comes to inventory formulations. Adding flexibility to planograms that makes room for alternatives empowers stores to respond to customer trends and keep backbars busy.
