Despite COVID-19 disrupting the nation’s economy and looming tobacco category regulation at all levels of government, vape and e-cigarette sales continue an upward trend.
Dollar sales of electronic smoking devices ticked up slightly at an annual rate of 1.4% for the 52 weeks ending Nov. 1, 2020, and unit sales were up a solid 10.8% for the U.S. convenience channel, according to IRI, a Chicago-based market research firm. The numbers picked up steam for October, with four-week dollar sales growing at 6.7% and units up 14.7%.
“Overall, since the pandemic started, we are up about 3% in volume,” said Mark McCarty, director of category management with Clark’s Pump-N-Shop, which operates 67 stores in Kentucky, Ohio, West Virginia and Florida. “Manufacturers in the last few months have started doing more in the way of promotions to help drive sales back into the category.”
Last year’s vape crisis — heavily fueled by an illicit product market — was felt across retail outlets. And the current uptick in sales could be a sign that consumer concern caused by the event has dissipated.
The U.S. Army Public Health Center in September 2019 issued a Public Health Alert advising soldiers and families not to use e-cigarettes or vaping products. Shortly after, the Army & Air Force Exchange Service (AAFES), which operates 238 fuel and convenience outlets in the U.S. and more than 3,100 stores at military installations all over the world, decided to halt sales of vape products.
“The Exchange made a business decision to remove all electronic cigarettes and vape products from shelves on Oct. 12, 2019, as its vaping category sales represented less than 0.5% of the total tobacco category,” said AAFES Senior Public Relations Manager Chris Ward.
Ward added that overall tobacco sales at the AAFES stores had also seen declines in 2018 and 2019. Bases were instructed to begin enforcing the minimum purchase age of 21, effective in August.
Recently, though, the chain reversed its decision. “The Exchange plans to reintroduce a limited assortment of electronic cigarettes and vape products at approximately 100 locations,” Ward said. The plan to resume sales began in late November.
PMTA & New Products
The Food and Drug Administration (FDA) is evaluating Premarket Tobacco Product Applications (PMTA) submitted before its recent deadline. That’s of great interest to many retailers who want to know which labels will be available down the road.
“For myself, I see the need to expand into some new brands, but I was cautious not to jump in too deep until I saw who had filed their PMTA,” said McCarty. “Now that we have reached the deadline on this, I will be looking a little more at adding some new brands.”
Vape product makers aren’t slowing down, either, as they move ahead with new products and innovations.
“I have seen a lot of expansion in flavored disposables,” observed McCarty. “It seems that this may be the new trend for the category for the time being.”
The big question, though, is whether those flavored vaping products will be subject to a ban at the federal level. Last year’s passage of H.R. 2339 in the House called for a national ban on flavored vape as well as other flavored tobacco products — like menthol cigarettes, flavored cigars and smokeless flavors. The measure was never taken up by the Senate.
Lyle Beckwith, senior vice president of government relations with the National Association of Convenience Stores (NACS), and Anna Ready Blom, NACS director of government relations, both said that while a new version of the bill will likely surface, there are simply too many variables to judge whether it’ll become law, given a smaller Democratic majority in the House and a nearly even Senate with both Georgia seats yet to be decided in early January runoffs.
“Well, the first thought is, we’ll know a lot better after Jan. 5,” Beckwith added. “If Republicans hold control of the Senate, it’s a different environment.”
Local & State Regulation
While NACS focuses on national policy, it still acts as a resource for stores facing local and state regulation that creates an uneven playing field for tobacco product retailers in areas bordering others with fewer restrictions. The level playing field is extremely important to the industry.
“I think one of the biggest things retailers can do, especially on that local level, is be involved in their state associations,” said Ready Blom. “But even (more so) at the local level where you have some of these city councils who can propose these ordinances very quickly and push them through quickly.”
McCarty is hopeful that with municipal coffers at a low point due to a COVID-19 downturn, those local ordinances would move to the back burner.
“My hope was that, with the pandemic, the focus on regulation would take a back seat,” he said. “Obviously, that is not the case, as certain areas continue to increase regulations on the tobacco category.”
Still, he’s encouraged that there’s little talk of tighter restrictions affecting any of Clark’s Pump-N-Shop locations. “Legislative discussions in our markets are pretty quiet right now,” added McCarty, “and hopefully they will stay that way for some time.”
