Forecast 2019: The Prognosis for Tobacco 

NATIONAL REPORT — One year ago, convenience store retailers could not reach a clear consensus on what they expected for the tobacco category in 2018. As for 2019, they are even more divided, with uncertainty regarding regulation around e-cigarettes contributing to a very mixed forecast, according to the results of the 2019 Convenience Store News Forecast Study.

In the cigarettes segment, most retailers expect a change in sales, but there is no consensus on what kind of change will occur — 44.4 percent expect their average dollar sales per store to rise, while 40.7 percent believe they will decline. Meanwhile, 18.5 percent believe their unit volume per store will increase, while 63 percent expect it to decline. The overall predicted net change for the category is dollar sales increasing 0.5 percent and unit volume falling 0.4 percent.

This is a more negative outlook than last year, when only 26.1 percent of retailers expected their cigarette dollar sales to decline and 37.8 percent expected unit volume to decline.

Why the downward slide? Foremost, retailers cite increased regulation, such as the growing movement to raise the tobacco purchasing age to 21. The popularity of e-cigarettes and vapor products is also having an effect on the cigarettes category.

Tobacco loyalty programs and better pricing are bolstering some retailers' optimism. However, one operator pointed to large retailers driving cigarette margins down and contributing to a general downward trend. Others also anticipate the legalization of marijuana to have an effect, although this factor is very region specific for now.

C-store operators are considerably more positive about the other tobacco products (OTP) category. While 28 percent expect average dollar sales per store to stay the same and 30.1 percent expect unit volume per store to stay the same, 59.1 percent of retailers believe their OTP dollar sales will rise and 56.9 percent expect an increase in unit volume.

The expected net change for OTP is an increase of 2.5 percent for dollar sales and 1.7 percent for unit volume. Overall, positive sentiment is up slightly from the 2018 forecast.

The popularity of e-cigarettes and vapor products — JUUL, in particular — is a positive factor for OTP.  Product innovation and variety are also contributing to retailers' optimism.

However, regulation, including the FDA's proposed ban on most flavored e-cigarettes, could quickly turn the sentiment negative.

"The FDA ruling on e-cigarettes could make the category a lost cause," one retailer remarked.

The 17th annual CSNews Forecast Study includes a Retailer Forecast and Supplier Forecast, both based on the results of a survey fielded in November 2018. Participants were asked to predict 2019 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.