For most convenience store categories, flat year-over-year sales figures would not be considered good news. For cigarettes, however, it signals a reprieve from several years of declining sales.
Although IRI market research suggests the top tobacco segment lost a bit of footing in unit sales for the calendar year ending Dec. 27, 2020 — down 5% — dollar sales compensated with a rise of 1.1% to more than $56.1 billion for U.S. convenience stores.
What’s more, Nielsen reported cigarette volume expanded 4.2% the first few weeks of 2021. Combine all the data, and it appears cigarettes have at least held steady in the midst of a global pandemic.
“Tobacco sales were up all during COVID. I was surprised. I do not believe that anyone could have anticipated how c-stores would fare during this time,” said Layne Taylor Stuckey, vice president of Washington, Ind.-based Chuckles Convenience Stores.
And after an extended period during which third- and fourth-tier brands challenged well-known names, it appears consumer preferences have switched back again, at least at the 29 Chuckles sites in southern Indiana and western Kentucky.
“Premium brands performed better than expected,” said Stuckey.
Regulatory Woes
Of course, local and state legislation continue to plague the category. The New England Convenience Store & Energy Marketers Association revealed that Massachusetts lost nearly $62 million in menthol cigarette tax revenue during the first six months of the state’s ban on flavored tobacco — the menthol portion became effective last June — per the National Association of Convenience Stores (NACS).
Now that New York lawmakers are debating expanding its flavor ban to include menthol, the New York Association of Convenience Stores (NYACS) presented evidence of the possible economic impact. A study conducted by Regional Economic Models Inc., commissioned by NYACS, forecasted a loss of $3.4 billion in tax revenue over the next decade, approximately $500 million annually in lost sales for stores and a loss of 1,200 jobs in retail and related industries.
Bans aren’t the only regulation affecting the category. Even though the Food and Drug Administration (FDA) postponed the date for integrating updated cigarette warnings, there’s no time to waste for c-store promotions to meet the requirement.
“Retailers that create their own cigarette advertisements are required to file a cigarette health warning plan with the FDA, and preferably by March 16,” advised Thomas Briant, executive director for the National Association of Tobacco Outlets (NATO). “The health warning rotational plan is required to show that cigarette advertisements produced by retailers will have the correct FDA graphic cigarette health warning when the new warnings go into effect on Jan. 14, 2022.”
