OTP Continues to Grow

CHICAGO -- The sixth largest convenience store category is other tobacco products (OTP), Don Longo, editor-in-chief of Convenience Store News, said in presenting the OTP category highlights at the AWMA C-Metrics Convenience Industry Outlook Forum.

He noted that smokeless product sales increased by 6.3 percent in 2011 vs. 2010, but said the entire category continues to be a bright spot for c-store retailers. According to C-Metrics projections, smokeless sales are expected to increase by 6 percent in 2012.

Electronic cigarettes are leading the charge in the OTP category in percentage sales growth, Longo said, noting that e-cigarettes year-to-date (YTD) dollar sales increased by 221 percent over last year and are projected to grow by 138.7 percent for 2012. Overall sales could exceed $1 billion by 2015, he said. According to the CSNews 2012 Industry Report, 2011 average sales per store for e-cigarettes were up 535 percent.

"Increased availability, longer duration on shelves and, to a lesser extent, the addition of more brands per store are driving e-cig sales," said Longo. "Most of the top e-cig brands have seen astronomical growth, led by NJOY and Logic Technologies."

Some other OTP highlights reported by Longo at the Forum included:

• Total OTP category gross retail dollar sales for YTD ending June 30 were $3.2 billion, up 2.5 percent from the same period last year.
• The dollar share of the category for the first six months of the year was: smokeless, 69 percent; cigars, 24 percent, but trending downward; pipe/cigarette tobacco, 3 percent; e-cigarettes, 2 percent; and papers, 2 percent.
• Seventy-one percent of retailers increased space for smokeless products.
• ACV (All Commodity Volume) distribution for smokeless products averaged 36.3 percent; the highest distribution percentage among products was Black & Mild cigars at 58.8 percent.

Longo predicted that OTP growth will continue, fueled by moist smokeless products and new innovations, such as snus and e-cigarettes. Retailers, he said, will continue to focus on driving value, putting pricing pressure on the category.