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Devising a Vapor Strategy

Look out, another vape device just whizzed by.

The vapor segment has been called a “very fast-moving category” by experts like Bonnie Herzog, beverage, tobacco and convenience store analyst at Wells Fargo Securities LLC. But that is putting it mildly, according to convenience store retailers who now find themselves inundated with scores of product — some of which is moving, but a lot of which is not.

The word on the street is that electronic cigarette/vapor inventory is backing up in the convenience channel, resulting in a financial category crunch and the stalled ability to move forward with continuously advancing technology.

Observing it from the supply side, John Wiesehan Jr., CEO of Mistic Electronic Cigarettes, explained to Convenience Store News that “for the past 24 months, various c-stores from around the U.S. have taken the approach to take on multiple brands, some up to 10 different ones. They were loaded up with inventory and then it didn’t sell; now they are stuck with the inventory, forcing them to rethink their strategy.”

According to Herzog, c-store retailers are indeed concerned about SKU proliferation and over-saturation of vapor products, but they expect regulation to actually help the situation.

“Many retailers conveyed their ‘excitement’ for ultimate regulation of the category as regulatory clarity should help stabilize the overall vapor market, set product standards and clarify the ‘long-term stance’ on flavors,” Herzog observed in a recent Wells Fargo Securities Tobacco Talk U.S. Vapor Retailer Survey. “Importantly, regulation should help to improve public perception of the vapor category, which has been deteriorating according to almost 30 percent of our contacts, up from approximately 26 percent in [the previous quarter].”

The vapor scene may be chaotic, but that doesn’t mean it can’t be organized. Here are some tips to consider when devising a vapor strategy:

Buy from reputable suppliers.

Retailers need to ensure they are buying from suppliers that are currently adhering to best practices, according to Cynthia Cabrera, executive director of the Smoke-Free Alternatives Trade Association. “Familiarize yourself with the different good manufacturing practices (GMPs) and with standards and procedures. Start vetting out your supply chain and make sure the people you are buying from will be here in the long term.”

Another important qualification is to choose suppliers that will take product back. “If I don’t take product back, I can’t do business with the channel,” stated Mistic’s Wiesehan.

Educate the consumer.

“All too often, e-cig merchandising in the channel is nothing more than adding another SKU mixed in with the cigarettes,” according to Josh Kimmel, founder and CEO of Breathe Ecig Corp. “And when there is a display, it is simply that — a display.” Kimmel believes part of truly effective e-cigarette merchandising is explaining the features of the product, as well as promoting reputable e-cigarettes as a cigarette alternative.

“In short, helping to truly educate the consumer,” he explained. He maintains that this concept and belief will be part of the core strategy of Breathe in print, media and point-of-purchase at retail to facilitate more education in the convenience channel.

Start with your sales associates.

Can they answer: What is an electronic cigarette? They should be able to, and it starts with retailers taking the time to train their store associates, according to Miguel Martin, president of Logic. He also believes all sales associates should know one or two differences between the various e-cig products sold in the store.

Such knowledge comes from continually updated training efforts, even something as simple as an in-store newsletter for employees. But there is also a fine line for sales associates and retailers that may have a personal vape story to tell. “As a retailer, you can talk about your personal story and how you feel vaping benefited you personally, but be sure you and anyone working at your store steers clear of offering medical advice,” Cabrera stressed.

Set up a logical fixture configuration.

C-stores that want to be serious about e-cigs should have a “top-down fixture next to cigarettes, carrying four or five of the top brands,” Martin said. Mistic, meanwhile, advises c-stores to merchandise three to four brands and be loyal to those select brands to avoid customer confusion and inventory overload.

Offer variety across product type.

Less is more within product type, agrees Will Squier, vice president of marketing for Tryst Group. However, where variety is good for a c-store is across product type — meaning having the breadth of category items such as e-cigarettes, e-cigars, e-hookahs, disposables, rechargeables, refillable liquid systems, etc.

Promote, promote, promote.

“Always have a promotion on e-cigs. Almost half of adult smokers have not tried an e-cig in the last six months,” Martin pointed out.

Treat it like a category.

This means providing dedicated space and placing like products together, regardless of brand, advised Chris Mitchell, vice president and chief marketing officer at iSmoke. “There should be an e-cig section where the e-cigs go — clearly identifiable between disposables, starter kits and refills; an area dedicated for e-juice — clearly identifiable between flavors and strengths; and a section for vapor devices,” Mitchell said.

Place an emphasis on pricing.

“There is a significant pricing advantage over vape shops that consumers don’t often appreciate about the c-store environment,” Mitchell added. “Make them appreciate it.”

Compete against the vape shops.

Mistic’s recent launch of its Haus brand Craft Collection, featuring a 30-watt mod with a sub ohm refillable tank, is designed to help inspire c-stores to clean out some of the cigalikes that are not selling and instead enable them to upgrade their product line and offer what consumers really want in the category now.

“We want to help our retailers get the vape shop consumers back in their stores,” said Wiesehan. “This is the time when c-stores have to make a decision with dead inventory and decide if they want to stay relevant.”

The Craft Collection, which underwent a successful 2,000-store test in September and at press time was slated to be in 15,000 mass retail locations, has a suggested retail price of $49.99 for the starter kit and $23.99 for a 30-milliliter juice bottle, which Mistic says will be recognized by vape consumers as a value.

“We are helping c-stores to go after the vape shop consumer who is already shopping in their stores for gas, energy drinks and snacks,” added Justin Wiesehan, Mistic’s vice president of marketing. “That vape shop consumer is already educated and knows what a mod is. Our thought is when they see the price point, they will try it.”

Pay attention to new technology coming down the pike.

Experts agree that technology must improve for e-cigarette category growth to re-accelerate in the convenience channel. New generations of e-vapor products are expected to be continuously introduced to the market, with many newer devices having the ability to control the temperature to minimize the generation of harmful or potentially harmful constituents (HPHCs), according to industry analysts.

Heat-not-burn sticks — slender, tube-like devices that give users as much nicotine as cigarettes by heating, not burning, tobacco — are gaining traction. The main distinction between them and e-cigarettes, which use liquid nicotine, is that heat-not-burn devices contain real tobacco.

Scientific studies are underway and early reports show there is far less cell damage with heat-not-burn devices than with cigarette smoke. The heat-not-burn initiative has also given way to other innovative ideas such as an inhalable nicotine spray and a fast-acting dissolvable nicotine tablet intended for use as an alternative to smoking.

The word on the street is that electronic cigarette/vapor inventory is backing up in the convenience channel, resulting in a financial category crunch and the stalled ability to move forward with continuously advancing technology.

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