With rules still pending for the proposed ban of menthol cigarettes and flavored cigars, as well as vape product legality causing convenience stores to remove products from the backbar, smokeless tobacco continues to be the ray of sunshine for the tobacco category.
Due to these regulations, consumers are beginning to look at smokeless tobacco, causing retailers to see an increase in sales and purchases for these items. The smokeless segment brought in $10.6 billion in dollar sales, a 14.7% increase for the 52 weeks ending June 16, per Chicago-based market research firm Circana. Unit sales for the category also significantly increased by 10.7% for that same period.
“From the way we are trending with smokeless tobacco so far in 2024, we expect to end the year up 20%,” said Sean Bumgarner, vice president of Scrivener Oil Co., which has 12 Signal Food Stores in Missouri.
Scrivener Oil Co. is not the only c-store company seeing an influx of consumers buying smokeless tobacco products.
Nathan Arnold, director of marketing for Englefield Inc., operator of 120 Duchess convenience stores throughout Ohio and West Virginia, mentioned that he expects the smokeless tobacco category in his stores to trend well for the remainder of 2024.
“We have seen some good growth in this category. When comparing to other types of tobacco, this has been an area of growth,” he said. “From data we can see of our customer base, growth has come from new customers but also some transitioning from a different tobacco category to smokeless.”
Smokeless Tobacco Rules
As smokeless tobacco products continue to make great strides in convenience stores, spitless tobacco products, in particular, have received much attention from these consumers.
For the 52 weeks ending June 16, spitless tobacco earned $3.67 billion in dollar sales, which resulted in a 65.7% increase, according to Circana. Spitless unit sales, too, have seen exponential growth, reaching 655 million, a 50% increase for the same time frame.
Aside from spitless, chewing tobacco alternatives have also seen growth in sales at convenience stores. These products brought in $18.6 million in dollar sales, resulting in a 55.1% increase for the 52 weeks ending June 16, noted Circana. Unit sales for the segment grew by 41.4%, reaching 3.62 million for the same period.
However, within these subcategories of smokeless tobacco, oral nicotine products, specifically nicotine pouches, remain a top pick amongst c-store consumers.
“The amount of nicotine in their pouches is something customers are considering when making a purchase,” said Arnold. “Customer preference in our market has been for higher-nicotine-strength items.”
Nonetheless, as smokeless proceeds to perform well, inflation still has an impact on consumers’ purchasing decisions and the way retailers offer these products.
“Our customers are demanding fair pricing and multiple-unit offers,” said Bumgarner. “We have offers for loyalty members and two-packs-for-one offers as well.”
Navigating the Backbar
With the high demand for smokeless tobacco comes the tough decision of which products stay on the backbar and which go. Retailers are taking more time to evaluate what customers are buying behind the counter so they can rearrange products accordingly.
“Our challenges are the same as with other products that must be merchandised behind the counter,” explained Bumgarner. “How do we find space? We must be proactive and willing to discontinue slower-moving items in order to place newer, promising items.”
To make decisions easier regarding which products will stay at most Signal Food Stores, additional space has been added for smokeless tobacco products.
Duchess, too, continues to analyze its smokeless offerings and make changes as needed.
“Focusing on category blocking within the tobacco set has helped our customers and store team members find products quickly,” said Arnold. “We updated our set to include a two-foot-wide vertical block of all our nicotine pouch brands.”
Retailers must also watch for state and federal regulatory updates for smokeless tobacco. For instance, ZYN continues to gain attention on the federal level.
“Senator Schumer and other federal officials have held press events over concerns. In the fall, the Annual National Youth Tobacco Survey will be released,” stated David Spross, executive director of the National Association of Tobacco Outlets. “Regulators will be looking at the youth usage numbers across all categories, but in particular, nicotine pouches.”
At the state level, no state has passed a ban on all flavored tobacco products, including smokeless tobacco, in 2024. States where legislation failed include New York, Vermont, Maine, Minnesota, Colorado, Hawaii and New Mexico. Flavor ban legislation remains pending in Michigan and Pennsylvania, as those states hold year-round sessions, according to Spross.
“A continued challenge in our market has been citywide flavor bans and the discussion of bans in additional communities,” added Arnold.
Smokeless tobacco demands are not looking to slow down any time soon, especially as more consumers gravitate toward these items while they await a menthol cigarette and flavored cigar ban.
Moving forward, convenience store retailers must keep their eyes and ears open for new trends and regulations and their backbars open and available for change.
