Cigarettes have long been a staple at U.S. convenience stores, accounting for billions in pack and carton sales and boosting the profits from the average smoker’s market basket.
For 2012, total cigarette sales in convenience stores totaled more than $52 billion, down a slight 1.68%. Units sold slipped 2.05% to 8.75 billion.
While sales may be down, the value of cigarette customers to the convenience store industry cannot be overstated. According to MSA and Paradigm Sample’s Convenience Consumer Insights Panel (cciPanel), approximately 30% of tobacco customers reported that they visit a convenience store at least four times a week to purchase cigarettes. An additional one-third visit at least 2-3 times a week. So while cigarette sales may be slipping, visits to the c-store by tobacco customers remains strong, and that provides a steady opportunity to boost the market basket.
In an effort to learn the price tier of smokers’ preferred cigarette brands, cciPanel participants were asked: “How would you classify the type of cigarettes you buy most often?”
Among cigarette buyers, three-quarters described the cigarettes that they most often purchase as premium-priced brands. Given the vast majority of cigarettes are planned purchases, an understanding of brand preferences is beneficial to tobacco retailers in terms of managing SKU assortment and stocking preferred brands to satisfy their customers.
Regulation Concerns
There are currently two federal lawsuits challenging the Food and Drug Administration’s (FDA) graphic cigarette health warning labels. Both lawsuits were appealed to different U.S. Circuit Courts of Appeal with the Six Circuit Court upholding the graphic warning labels as being constitutional and the District of Columbia Circuit Court ruling that the graphic warnings are unconstitutional.
“In short, we have what is known as a ‘conflict between the circuits’ with two different U.S. Circuit Courts of Appeal making seemingly contradictory rulings on the same issue,” said Thomas Briant, executive director of the National Association of Tobacco Outlets (NATO).
When it comes to formulating a tobacco strategy, retailers should continue engaging consumers about cigarettes. “Price is the biggest challenge, and waiting on buy downs that are getting better due to time and direct deposit,” said Amer Hawatmeh, president and CEO of St. George Oil, which operates Coast to Coast
convenience stores.
Hawatmeh firmly believes that the restrictions will actually help ameliorate the effects among consumers. “We have absolutely no control over it. Ultimately, the consumer is going to have to get used to it.”
