On the Plus Side
During one of the expo’s educational sessions, David Bishop, managing partner at sales and marketing firm Balvor LLC, explained that consumers have seen sequential declines in the price of fuel per gallon for three quarters now. These lower pump prices have helped take some pressure off consumers, in turn leading to an uptick in discretionary spending.
Several states also increased their minimum wage rates as of Jan. 1 and President Barack Obama is proposing a hike in the federal minimum wage. While this could result in higher operating costs for retailers and manufacturers, higher disposable income among consumers will lead to higher product demand, Bishop said.
When it comes to tobacco retailing, the growth opportunity for 2014 lies in other tobacco products (OTP), particularly the segment Bishop calls electronic nicotine devices (END), which includes electronic cigarettes, e-hookahs, vaporizers and e-liquids.
Among OTP sales, the END segment currently ranks third behind smokeless tobacco and cigars. Bishop noted that electronic nicotine devices are seeing about 65-percent growth annually, and convenience stores are among the retailers trying to capture that growth.
Where c-store retailers can especially find opportunity is in the other END products aside from e-cigarettes. Bishop’s research shows that only a quarter or less of c-stores now stock e-cigars, e-hookahs and e-liquids.
A potential stumbling block for the END segment could be regulation by the U.S. Food and Drug Administration (FDA). Calling FDA’s deeming regulations the “800-pound gorilla in the room,” Bryan Haynes, partner in the tobacco practice at Troutman Sanders, said people ask him every day when the FDA is going to publish its deeming regulations for tobacco products. His answer, jokingly, is that anyone who tells you they know “is a liar.”
Deeming regulations stem from a provision in the 2009 Tobacco Control Act (TCA), which states that other tobacco products not specified in the TCA fall under the FDA’s authority. Those other tobacco products mainly include electronic cigarettes and cigars.
It is widely known that the FDA prepared deeming regulations and submitted them to the federal Office of Management and Budget (OMB) in October for review. That step, according to Haynes, is an important check on the agency’s authority and prevents over-regulation.
Once the OMB finishes its review, the deeming regulations will be published and a 60- to 90-day public comment period will be opened. The FDA could take up to six months to review the public comments before preparing a final rule, which must then be submitted to the OMB for a final analysis.
Haynes told Tobacco Plus Convenience Expo attendees that he predicts it will take roughly one year from when the deeming regulations become public to when the final rule takes effect.