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Tasty Tobacco

Take a peak at a c-store beverage cooler, or a walk down the snack aisle, and innovation and variety jump off the shelves. Manufacturers in most convenience categories continue to reinvent the wheel when it comes to product offerings, especially with flavor options.

Now, manufacturers of one of the channel's biggest sellers, tobacco products, have injected flavors into smokeless tobacco, cigars and even some cigarettes. And for the most part, the products are performing well.

"There has been an increase in our tobacco category, and I think smokeless and cigars have contributed," said Rick Zamarchi, tobacco category manager at Tesoro Petroleum, the San Antonio-based owner of 200 c-stores and operator of 125 Tesoro 2 Go stores. "The biggest increase has been in the cigar category, but we have seen an increase in smokeless as well."

The same is true at Heath, Ohio-based Englefield Oil Co., which operates 96 Duke & Duchess Shoppes. "Variety has increased the category," said Edward Stephens, vice president of c-store operations at Englefield. He has seen a 7 percent increase in the category with the rising popularity of flavors.

In the past two years, tobacco companies introduced a number of new products and flavors, but smokeless and cigars have seen the greatest response. While some manufacturers dabbled in flavored cigarettes, the response has not been as favorable. Brown & Williamson introduced flavored varieties to its Kool brand, including Caribbean Chill, Midnight Berry, Mocha Taboo and Mintrigue, and R.J. Reynolds introduced Camel "Exotic Blends," in 1999, including Crema, Dark Mint, Izmir Stinger and Twist.

"Camel and Kool cigarette flavors came out at a premium and didn't do well," said Zamarchi. "I think the traditional cigarette smoker is less likely to expand out and try something new. They are more loyal, where as a cigar smoker or smokeless customer is willing to give something a shot."

But while c-store retailers continue to suffer from cigarette tax hikes and Internet sales, flavored tobacco is offering a bright spot in the category. "I think it has helped our cigar sales, especially with an increase in blunt sales," said Keith Bailey, merchandiser at Fast Phil's of South Carolina, a 13-store chain based in Spartanburg, S.C.

Popular Flavors

Retailers have a broad selection of flavors to choose from in both the cigar and smokeless categories, and manufacturers continue to introduce new varieties.

"I think manufacturers were looking at flat trends and needed something to expand the consumer base," said Zamarchi. "They stumbled into flavors, and they have done surprisingly well from their perspective. The biggest new flavor [for us] has been the Skoal apple blend, and the White Owl line did very well. In the case of smokeless tobacco, you get a new flavor about once every quarter."

At Tesoro's c-stores, Zamarchi stocks Swisher chocolate and strawberry cigarillos, Optimo peach cigarillos and Swedish Match's White Owl strawberry and apple. The stores also have a selection from U.S. Tobacco, including Primetime brand flavored cigars sold singly and in packs. Under the smokeless banner, Tesoro offers wintergreen, cherry, vanilla and apple. However, the selection does vary in different locations.

"In different regions, different flavors do better," noted Zamarchi. "We have stores from Alaska to Hawaii and Utah, and there are wide market variances, so my schematics are by market, not uniform throughout."

The cigar and smokeless products are often on display at the checkout, either on the counter or behind, but always in a highly visible area, according to Zamarchi. "The Primetimes do extremely well, and I think it's because the visibility is good on the counter. Most of the best-sellers are single-serve rather than by the pack, which is good because there are higher margins on the single-serve," he explained. "The standard flavors of smokeless are still the best-sellers, but Skoal's apple blend did extremely well and so did vanilla. But they are certainly not displacing the top sellers."

At Englefield's Duke & Duchess stores, the company offers Timberwolf peach, Skoal apple and White Owl grape, peach and blackberry. While Skoal's apple is the top seller in the smokeless category, Phillies blunts in the apple variety are tops in cigars, according to Stephens. Other innovative options include Phillies chocolate, apple berry, strawberry, honey and banana. The products can be found in a 4-foot section of the store.

Phillies blunts and cigars are also popular at Fast Phil's. "Phillies are the most popular cigars, and Skoal's wintergreen is still the favorite in smokeless," said Bailey.

Staying Power

This isn't the first time innovation has caused a category in the c-store business to blow up in terms of sales and contributions to the bottom line. It continually happens in the beverage cooler — whether it is a new category like energy drinks, or a new flavor to an existing line. And lest we forget, the low-carb craze is still affecting how c-stores do business. So is this flavorful tobacco going to stick around, or will it die out as people return to old-time favorites?

"I think it is similar to the malternative beverage category where everyone had one and now it is settling down," said Zamarchi. "I think the category will always be with us, but not as big as it is right now. It's hitting its stride right now."

Bailey agreed. "The categories have become more popular with the flavors and I think the trend will last a while, as long as they keep coming out with new flavors."

In the meantime, retailers can enjoy the increase in sales the flavors are bringing to their balance sheet.
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