Bumpy Regulatory Path Raises Questions for Tobacco Category

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Bumpy Regulatory Path Raises Questions for Tobacco Category

By Melissa Kress, Convenience Store News - 03/28/2012

JERSEY CITY, N.J. -- How do you manage a category when much of the management process has been taken out of your hands?

More than a dozen convenience tobacco retailing executives came together for the Convenience Store News Tobacco Roundtable yesterday and tried to answer that very question.

Sponsored by Logic Technology Development and Swedish Match, the event brought together category leaders from CF Capital Assets, Mac's Convenience Stores, The Pantry, Quick Chek, 7-Eleven, Royal Buying Group, Nice N Easy, Circle K Southeast and Jubilee Food Stores.

Topping the agenda was a discussion of the challenges and opportunities facing tobacco retailing today. Although the majority of attendees have "category management" in their titles, all agreed that much of the management process has shifted outside of their control -- subject to government regulations, taxation issues and the tobacco companies.

The Food and Drug Administration is drawing the lion's share of attention from the industry – given the agency's regulation of flavored cigarettes; the still-up-in-the-air status of menthol in the marketplace; and the question mark surrounding any possible regulation of cigars. State and local policy decisions -- and decision makers -- should not be ignored, however. For example, individual municipalities in California have been pushing for specific tobacco retailing licenses. As one retailer noted, the licenses would not be transferable, so where does that leave franchisees who want to sell their businesses? And in New York State, Madison County officials are working on a tobacco display ban that would force tobacco retailers to essentially go dark.

Canada is not immune to government regulations, either. As of June 30, three-quarters of every cigarette pack will be covered by a graphic image. A similar regulation in the United States will have its day in a federal appeals court next month.

In addition to tobacco regulation and taxes, the group of retail executives also discussed trends in the category's various segments. Other tobacco products (OTP) is growing and taking shelf space from cigarettes in some stores; more retailers are carrying electronic cigarettes now, even if not in all their stores; and except for some pockets in the Northeast and Southeast, sales of small cigars are taking over large cigars -- just to highlight a few.

Check out the April issue of Convenience Store News for in-depth coverage of the roundtable and retailers' take on the category.