This time last year, convenience store owners and operators were dealt a double whammy: First they had to adapt to the recently passed federal minimum tobacco purchase age of 21; then they had to pull product in accordance with the Food and Drug Administration’s (FDA) ban on most flavored electronic nicotine delivery systems (ENDS). Next, the coronavirus swept the country, and no one knew how the category would fare during lockdowns.
For many businesses, consumer response was surprisingly positive. Early in the pandemic, anecdotal reports indicated customers stocked up on virtually all tobacco SKUs.
As months passed, sales remained fairly consistent. In fact, other tobacco products (OTPs) were the star of 2020. IRI, a Chicago-based market research firm, reported double-digit gains in unit sales for spitless tobacco, electronic smoking devices and smoking accessories for each four-, 12- and 52-week periods ending Nov. 29, 2020.
“We have had growth in all categories of tobacco, but smokeless tobacco has been the biggest winner, followed by e-cigarettes. The increases in smokeless tobacco have been driven by nicotine pouch sales, specifically ZYN,” said Reilly Robinson Musser, vice president of marketing and merchandising for Santa Clara, Calif.-based Robinson Oil Corp., which operates 35 Rotten Robbie stores.
Regulation Woes
Of course, the tobacco category is always susceptible to new taxes and restrictions.
“Our sales have increased for every tobacco category except for e-cigarettes, which has been hurt by increased regulation,” said Mike Clifford, category manager for Cliff’s Local Market, owned by Clifford Fuel Co. The company runs 19 convenience stores throughout central New York state.
New York, New Jersey and Rhode Island legislatures have each issued flavor bans, including disposable e-cigarettes, which skirted the FDA regulation. And as of June 1, Massachusetts c-stores can no longer offer menthol items.
“Some people who were using menthol switched to regular flavored combustibles, but people are also crossing the state border to get their flavors. With the rise in COVID-19, it would be wise for (lawmakers) to postpone the ban. I believe it puts people at risk to be traveling to another state, or from another state,” said Anna Bettencourt, senior category manager at Verc Enterprises. Based in Duxbury, Mass., the c-store chain owns 32 stores, including three in New Hampshire, and two standalone car washes.
This January also started off with fresh regulations. Colorado’s Proposition EE, which raises taxes and sets minimum prices on tobacco products, takes effect this month. The law could erase the price advantage for discount cigarettes, which have outperformed premium brands in recent years.
“There is a pending lawsuit that is seeking to overturn that minimum pricing provision,” noted Thomas Briant, executive director for the National Association of Tobacco Outlets (NATO).
California’s ban of all flavored tobacco products, including menthol, was set to take effect this month; however, a petition to overturn it and put the issue on the next election ballot collected more than 1 million signatures, well above the minimum required to be considered for a referendum.
“Depending on what happens … we will either be taking the flavored tobacco off the shelves in January/February while the state and counties verify the signatures (and then will be able to put it back on the shelves after the signatures are verified); or there is a second scenario where we will possibly be able to continue to sell product while they verify the signatures,” Musser said.
Pending PMTA Decisions
The biggest thing that will impact the tobacco category this year will undoubtedly be FDA premarket tobacco application (PMTA) decisions. The agency has until September to determine which ENDS will be approved for future sales and whether some banned SKUs can return to tobacco backbars.
In the meantime, c-stores can continue selling items under PMTA review.
“The FDA has not yet published a list of submitted PMTAs but has indicated publicly that it intends to do so,” said Briant. Retailers, he added, should contact the manufacturers of those tobacco products for confirmation of a PMTA filing.
“I will be waiting to see how the FDA rules on flavored vapor products,” Clifford said, “but like everyone else, I’ll be watching to see what other effects the pandemic continues to have on consumers’ purchasing habits and suppliers’ ability to keep up with production.”
