The top-selling segment among tobacco users, cigarettes, has seen a major shift in popularity over the past several years, with sales dropping as fewer customers indulge. Still, it will be some time before its top spot is overtaken.
At Stillwater, Okla.-based OnCue, with 73 stores in Oklahoma and Texas, cigarette sales are declining across all channels. Despite this, Q1 2025 has seen a stronger start than Q1 2024.
Nationally, cigarette sales dropped 4.3% in the 12 weeks ending April 20, reaching $11 billion, according to market research firm Circana. In the 52 weeks ending April 20, cigarettes were down 4.2% in dollars and 9.1% in units.
Though declining year over year, the category is still seeing $51 billion in sales for the last year, with the next-highest segment, smokeless, only reaching $12 billion.
Part of the reason for cigarettes’ descending sales status, aside from constant health warnings, is the increase in prices.
“The tobacco landscape has undergone a significant transformation in recent years. Within cigarettes, we are noticing trends lean towards the value-oriented and lower-priced products. This trend is largely driven by the steady rise in cigarette prices, which has prompted many consumers to trade down from premium brands in search of more affordable alternatives,” said Chris Stevenson, category manager — tobacco and center store, OnCue.
Cigarettes jumped 5.4% in price per unit during the last year, per Circana.
In fact, OnCue’s biggest challenge lies in the rising costs within the cigarette category, one which is “already burdened by a declining reputation as newer, ‘safer’ alternatives continue to gain popularity,” Stevenson noted.
Regardless of these rising costs, he acknowledged that cigarettes are still a critical aspect of the tobacco business and account for a significant share of sales. They continue to be a major traffic driver for convenience stores.
“That’s why we’ve had to get creative and lean in strategically to maximize value and drive performance in this segment,” he said.
OnCue has provided discounts at retail through channels such as loyalty programs, multipack offers and other promotional avenues by leveraging manufacturer funding to help offset rising manufacturer costs. And this strategy applies to more than just cigarettes.
Like OnCue, Englefield Oil, with 116 Duchess stores in Ohio and West Virginia, is seeing declining cigarette sales. The chain consistently notches a 6% decline year over year for cigarette sales.
“Price increases continue to be a concern,” said Heather Smith, category manager — tobacco, nicotine and packaged beverages for Englefield. “Only 11% of the population is currently smoking, and that number will never go up. We need to position the backbar for the future.”
Aside from any price increases that are initiated by the manufacturers, excise taxes are also surging.
Alison Ritchie, president of the New York Association of Convenience Stores (NYACS), has noticed this in New York.
“Retail and wholesale members of NYACS have long suffered under poor tax policy out of Albany,” Ritchie revealed. “Most recently, the legislature increased the cigarette tax to a staggering $5.35 per pack, making New York the most expensive state in the nation for smokers. Neighboring states like New Jersey and Pennsylvania offer cigarette consumers roughly $2.50 in savings per pack, creating enormous cross-border incentives. This has made it difficult for law-abiding retailers to compete against the illicit market, which thrives under these conditions.”
Other high-tax states for cigarettes include Connecticut at $4.35 per pack and Rhode Island at $4.25 per pack, according to the Centers for Disease Control and Prevention. Washington, D.C. has an excise tax of $5.01 per pack.
OnCue’s Oklahoma only has an excise tax of $2.03 per pack, while Englefield’s Ohio is even lower at $1.60 per pack.
Still, even a lower excise tax contributes to price increases, and c-store chains must prioritize the options for which price-conscious customers are willing to pay, such as the lower-tier and value cigarettes. Many are supplementing the backbar with options beyond cigarettes for those choosing to move away from the segment entirely.
And many of these options are helping to boost the tobacco category overall.
