Forecast 2018: The Outlook on Tobacco

NATIONAL REPORT — Long a stalwart of the convenience store industry, the tobacco business is expected to be a mixed bag in 2018, according to the annual Convenience Store News Forecast Study. Retailers did not come to a clear consensus on what the year will bring.

"A tensed and stressed-out society smokes more," noted one retailer.

Predictions for the cigarettes category are somewhat evenly divided: 37.8 percent of operators expect their cigarette volume per store to decrease, 34.5 percent expect it to stay the same and 27.7 percent expect it to increase. Retailers are less gloomy about dollar sales in the segment, as 26.1 percent expect a decline, 30.7 percent expect the same and 43.2 percent expect an increase.

However, there’s no doubt that dollar increases will come from higher state and local taxes and manufacturer price hikes.

Retailers express concern over the growing trend across the nation of raising the legal smoking age to 21 on the city and state levels. Increased tobacco regulation and taxes are also affecting smokers, who may to turn to alternative products or less-than-legal options.

"Contraband sales of tobacco continue to increase due to higher taxes and pricing," one retailer commented.

Operators see a rosier future for the other tobacco products (OTP) category, which includes cigars, smokeless, electronic cigarettes, vapor products and more. More than half of retailers expect both their OTP volume and dollar sales to increase in 2018, at 53 percent and 57.6 percent, respectively. Less than 10 percent expect either to decline, while 38.7 percent expect volume to stay the same and 34.5 percent expect dollar sales to be the same.

Overall, retailers expect OTP net growth to hover around 2 percent this year.

"Consumers are moving to alternative tobacco products," one store owner surmised.

Heat-not-burn products and new entrants to the vaping marketplace are considered factors likely to have an impact on the business in the coming year. Cigars are also viewed as being on an upswing.

The 16th annual CSNews Forecast Study includes a Retailer Forecast and Supplier Forecast, both based on the results of a survey fielded in November 2017. Participants were asked to predict 2018 sales per store for a variety of product categories, as well as to share their opinions on overall business, economic and consumer trends. The Forecast Study also provides dollar and unit volume projections in key c-store product categories based on data from various sources, including Nielsen for category sales history; TDLinx for store counts; and government sources for motor fuel volume and pricing data.

Come back on Monday to CSNews.com for the 2018 Beer forecast.