BONUS CONTENT: Treading Lightly in OTP

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BONUS CONTENT: Treading Lightly in OTP

By Melissa Kress, Convenience Store News - 02/24/2015

NATIONAL REPORT — For the first few years electronic cigarettes were on the market, convenience store retailers were hesitant to add the products to their merchandise mix. They had lots of questions: Would they sell? Are they safe? And, most importantly, what impact would regulations issued by the Food and Drug Administration (FDA) have on the segment?

Today, while c-store retailers have widely embraced electronic cigarettes (or cig-alikes as they are sometimes referred to), there is now hesitancy as it pertains to open-system vapor products, the different flavored e-liquids offered and the future of these products.

"There is hesitancy on the part of retailers, but not if they should carry them, but how they should carry them and who they should partner with," said Miguel Martin, president of Logic Technology Development, maker of e-cigarettes and new vapor products.

"I think some retailers are learning now that some companies will have the wherewithal to get through the FDA [regulation] process and the state [regulation] process, and some won't. There will definitely be a lot of retailers left holding the bag on inventory when companies can't make it through that process,” Martin added. “You have to be thoughtful about who you partner with and what type of agreements you write up."

As for regulation, Martin believes the immediate concern for c-stores lies close to home.

"Everybody has decided that the FDA will be arbiter about what the regulations are, but the history of tobacco regulations is that the states have more to do with the day-to-day regs than the federal government does," he explained. "Retailers are aware of that. They deal at a state level on petroleum laws, alcohol laws, so the industry needs to be more in tune with what happens at the state level because that will happen quicker and have the greatest range of outcomes than what is going to happen at the federal level."

With all the talk about electronic cigarettes and vapor products, it's easy to forget there are other segments in a c-store's other tobacco products (OTP) offering. Notably, "a significant trend is the expansion of smokeless alternative products as adult tobacco consumers continue to migrate across the tobacco category," said Richard Smith, spokesman for Reynolds American Inc.

To that point, he cited that moist snuff is showing sustained growth of about 5 percent per year.

"Overall, the tobacco category remains very important for the c-store industry, representing around 36 percent of in-store sales," Smith explained. "We believe retailers that recognize this opportunity will do well overall. If you look at the top retail performers, one of the strengths they have in common is the attention they pay to the tobacco category and the role it plays in their overall profitability."

Editor’s note: This Bonus Content story is an add-on to the Convenience Store News Guide to Category Management, published in February. A digital edition can be accessed by clicking here.