Maverik’s Front-Row Seat to the E-Cig Action

NORTH SALT LAKE CITY, Utah — In the summer of 2013, subsidiaries of Reynolds American Inc. (RAI) and The Altria Group Inc. entered the electronic cigarette arena, completing the trifecta of Big Tobacco throwing their hats into the e-vapor category ring.

R.J. Reynolds Vapor Co. unveiled its digital vapor cigarette, VUSE, at a launch party in New York in early June 2013, one month before introducing the product to Colorado stores. VUSE entered its second market, Utah, several months later.

In August 2013, tobacco retailers in Indiana began selling Nu Mark LLC's MarkTen. Nu Mark is a subsidiary of Altria. The e-vapor product then hit store shelves in Arizona that October.

Fast forward to this past summer and both VUSE and MarkTen began their national rollouts. To date, the products are still making their way across the country.

North Salt Lake City-based Maverik Inc. has had a front-row seat to the action.

Maverik operates more than 250 convenience stores in 10 western states, including Colorado and Utah. Today, all Maverik stores carry VUSE and MarkTen — MarkTen hit its shelves in early June and VUSE arrived later that month portfolio-wide, said Jeff Arnold, category manager. Maverik also was a test market for both products in certain states.

VUSE is doing well in the stores; in fact, it is Maverik's leading brand for its electronic cigarette and vaping category. "It took off immediately in our stores," Arnold said.

MarkTen started off strong. However, it is now struggling with supply, according to Arnold. He noted that Maverik has had an issue with out-of-code product.

Brian May, senior manager of communications for The Altria Group, acknowledged that Nu Mark has received some retailer feedback about shelf life. The company is working to address their concerns and making good progress, he said.

"E-vapor is a new and rapidly evolving category and we're continuing to learn about supply chain and inventory management in this space," May noted.

MarkTen can be found in about 80,000 stores as the company makes its way eastward toward national distribution, according to May.

R.J. Reynolds Vapor Co.'s VUSE digital vapor cigarette continues to progress smoothly, now in nearly 70,000 outlets nationwide, according to company spokesman Richard Smith.

With the introduction of these brands and the evolution of the category as a whole, Maverik will be making a shift from e-cigarettes to more vaping products, including e-juices and vaporizers. There is no timeline for the shift to be completed.

"I think this will always be in transition," Arnold said. "Things are changing so quickly right now. For example, the vaporizers are going from open systems to closed systems and different types of juices keep hitting the market. "It's ever evolving. We're just trying to keep up with what's new and what our customers want."

To that end, Maverik regularly conducts customer focus groups to collect feedback.

Looking at the overall tobacco category, the growing e-cigarette piece has not taken a toll on Maverik's traditional cigarette business. As Arnold explained, e-cigarettes are still a very small percentage of Maverik's total tobacco sales and while e-cigarettes are the fastest-growing segment, any declines in cigarette volume are "more than made up for in sales and profit."

Currently, Maverik carries four brands of e-cigarettes, not including vapor products. Now with VUSE and MarkTen on the national scene, Arnold believes the industry will see some of the small players fade away.

"I think it's very similar to what we saw with energy shots five or six years ago," he said. "You had a lot of small players getting into it and they slowly disappeared."

For more on how VUSE and MarkTen are changing the tobacco scene, look in the December issue of Convenience Store News.