NATIONAL REPORT — Nicotine and the convenience store industry share a mutually beneficial relationship, which was especially evident during the coronavirus pandemic.
During a recent webinar hosted by the Convenience Distribution Association, entitled "A Quick Update on Tobacco," Management Science Associates Inc. (MSA) Senior Vice President Don Burke provided a snapshot of the overall nicotine category and how it was impacted by the pandemic, what trends MSA is seeing, and what these factors mean for convenience channel distributors and retailers.
For the 52 weeks ending March 31, 2021, 59 percent of all stores across the U.S. were convenience store and gas station retailers, which was slightly up from 57 percent for the same period in 2020. By volume, 72 percent of all nicotine sales in the U.S. are accounted for by the convenience channel.
"By far, this shows the importance of the tobacco industry to the convenience channel, and the importance of convenience to the tobacco industry," Burke said.
Consumer nicotine units in the convenience and gas retailing sector were up 4.2 percent vs. 1.7 percent at dollar stores — a channel that has traditionally rivaled convenience at selling tobacco products.
"This shows that more consumers are moving to convenience stores and tobacco outlets during the pandemic to purchase nicotine items than dollar stores. That is a healthy and positive sign since this is the first time we are seeing this," Burke pointed out.
Based on servings of nicotine, or when a consumer chooses to consume nicotine, the top five usage occasions are: cigarettes (78.2 percent), moist (7.2 percent), vapor (5.6 percent), papers/tubes/wraps and large cigars (tied at 3.2 percent).
During the pandemic, consumers were encouraged to partake in tobacco items as they wished without any kind of workplace or social restrictions. This helped to bolster overall nicotine units, which were up 2.4 percent in 2020 vs. down 3 percent in 2019. MSA anticipates the upward trend to continue and is projecting an increase of 1.5 percent to 3.5 percent for 2021.
Cigarettes accounted for 61.8 percent of nicotine units rung up at c-stores' registers for the 52 weeks ending March 31, followed by large cigars (23.4 percent), moist (8.8 percent), papers/tubes/wraps (2 percent), and vapor (1.6 percent).
Here is a snapshot of the yearly volume trends of nicotine products across all classes of trade for the 52 weeks ending March 31:
- Cigarettes: -0.8 percent
- Large cigars: +17 percent
- Moist: -0.5 percent
- Papers/tubes/wraps: +26 percent
- Vapor: +4 percent
- Little/filtered cigars: -13 percent
- Modern oral: +112 percent
- Snus: -5 percent
- Roll your own: -4 percent
- Pipe tobacco: -21 percent
Burke also discussed the impact of the vapor closed system flavor ban on the convenience channel. When the flavor ban went into effect on Jan. 1, 2020, flavored disposable items took off, but have since tapered, while non-flavored cartridges continue to grow.
"Consumers got used to smoking cigarettes during the pandemic and then thought, 'Well, if I move to vapor, which is a little less of a harmful product, I am going to go back to my tobacco flavor that I have been smoking,'" Burke concluded. "So, if you've seen your cartridge sales decline lately, keep in mind that they are coming back."
Reston, Va.-based Convenience Distribution Association is a trade organization working on behalf of convenience products distributors in the U.S. Its distributor members represent more than $102 billion in U.S. convenience product sales, serving a wide variety of small retail formats. Associate members include leading convenience product manufacturers, brokers, retailers, suppliers and others allied to the industry.