C-stores Dominate Competitors in Tobacco
LAS VEGAS — Tobacco is still king. That holds true whether you are a convenience store operator, tobacco outlet owner or dollar store retailer.
Speaking on trends and insights at the 2015 NATO Show Thursday morning in Las Vegas, Don Burke, senior vice president of Management Science Associates Inc. (MSA), noted that convenience stores account for 47 percent of tobacco retailers and 62 percent of tobacco volume. By comparison, tobacco outlets account for about 3 percent of tobacco retailers and 8 percent of tobacco volume.
The new kid on the tobacco block, dollar stores account for about 5 percent of tobacco retailers and 1 percent of tobacco volume. While this figure is minor compared to c-stores, their growth in every segment is exploding.
Total nicotine delivery volume (the majority of tobacco products) is down by 1 percent across all outlets. While c-store volume has increased 1 percent, dollar store volume has jumped 42 percent, Burke explained.
MSA's data was sourced from wholesale shipments to retail in all trade through Feb. 21 and transaction store-level POS data from the fourth quarter of 2014.
Looking at the various segments of the tobacco category, Burke said e-vapor products are up 84 percent across all outlets — and up more than 100 percent in the convenience channel. However, even with this growth, cigarette volume still drives the tobacco category, he added.
Specifically, premium cigarette volume is 67 percent of the tobacco volume in c-stores, with discount cigarettes accounting for 22 percent. The numbers tell a similar story in dollar stores: premium cigarettes at 63 percent and discount cigarettes at 27 percent, according to Burke.
The numbers are similar, he said, "because they are probably shopped the same way."
Where tobacco outlets have a real advantage over convenience stores is in the number of SKUs offered. On average, tobacco outlets carry more SKUs in every category. In addition, tobacco outlets carry "significantly more loose tobacco SKUs" than c-stores or dollar stores, Burke said, which represents a real opportunity for tobacco outlets.
MSA is also taking a look at vape shops with a survey it began fielding April 2. The survey is still being conducted, but early data indicates these new retail establishments may pose less of a threat to convenience stores than first feared.
When asked who they see as their competition, a subset sample size of 66 vape shop owners said online retailers, followed by other vape shops, c-stores and then tobacco outlets.
In addition, the majority of vape shops' business is much different from other channels as vapor/tanks/mods, e-liquids and replacement parts account for their top three items. Also, while the typical convenience store customer is young and male, vape shops say their customers range between 31 and 50 years old. The vape shop customer is looking for different flavors and different nicotine levels, Burke cited.