The Changing Face of Tobacco Retail

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The Changing Face of Tobacco Retail

By Melissa Kress, Convenience Store News - 01/31/2013

LAS VEGAS -- The tobacco retailing industry is in the midst of a transformation and it’s time for retailers to change with it or get left behind.

That was the overriding theme during the keynote session this morning at Tobacco Plus Expo International 2013 in Las Vegas. Research presented by keynote speaker Ed O'Connor, publisher of Tobacco Outlet Business International, pointed to a shift in the mix of the essential tobacco products found in any tobacco retail establishment, while co-presenter Dr. Brad Rodut discussed the growing emergence of "less harmful" tobacco products such as smokeless tobacco and electronic cigarettes.

According to O'Connor, a recent survey among 28 owners of companies representing 434 retail operations showed that premium cigarettes still command the majority of the tobacco retail product mix, at 50 percent. Next in line is discount cigarettes at 19 percent. However, as the economy improves, the retailers surveyed said sales of discount brands are now declining as premium cigarette sales tick up.

The "real opportunity" to grow in the changing tobacco world, though, is by adding electronic cigarettes to the mix. The survey found that e-cigarettes currently account for only 2.8 percent of the tobacco product inventory, but the majority of respondents -- 92 percent -- forecast an increase in their e-cigarette inventory over the next 18 months. In fact, some retailers said they are carrying up to four brands of e-cigarettes and intend to add a fifth, according to O'Connor.

"If you are not dedicating the shelf space and do not have the commitment to grow [electronic cigarettes], you may want to take another look," he said.

Rodut, a professor of medicine at the James Graham Brown Cancer Center at the University of Louisville, also sees opportunity in e-cigarettes. He explained that "nicotine is the reason people smoke, but it is not the reason people die.” Therefore, products like e-cigarettes and smokeless tobacco offer adult consumers less harmful options.

"We believe electronic cigarettes are a game changer for the industry," Rodut said, adding that e-cigarette sales “are booming” and projected to reach $1 billion in the United States this year.

"The transformation is now," he continued. "The winners are the consumers, and the industry can be winners as well. Tobacco retailers should embrace and participate in the transformation."