Tobacco Retailers Must Be Flexible With Purchasing Decisions

JERSEY CITY, N.J. -- It is more important than ever for convenience store retailers to be flexible and maintain control of their stores in regards to tobacco purchasing decisions, Joe Teller, director of category management for Swedish Match, stressed during a webcast yesterday entitled "Putting Tobacco Growth Strategies Into Perspective."

"The economy seems to be deteriorating, something that unfortunately has become a fact of life," he said.

When discussing more specifics, Teller said hex racks being placed within c-stores could reduce available shelf space for -- and subsequently affect sales of -- moist snuff and cigar products.

"Now probably isn't the time to reduce your cigar offerings," he maintained.

The Convenience Store News webcast, moderated by Melissa Kress, the brand's associate editor, and sponsored by Swedish Match, a developer and manufacturer of other tobacco products, also featured a substantial look at the current state of the tobacco market in c-stores.

Data was presented by David Bishop, managing partner of Balvor LLC, a sales and marketing firm based in Barrington, Ill. The study, conducted by both Balvor and CSNews, included 156 retailers that operate 5,767 c-stores. Seventy-two percent of the retailers surveyed operate between one and 10 stores. The survey was fielded from late February to early March of this year.

Among the findings were that 2011 tobacco sales increased by 1.1 percent among the participants, compared to the prior year. Retailers operating 51 or more stores saw the most sales growth, at a 2.2-percent clip.

"The largest operators are growing market share at the expense of smaller operators," said Bishop.

One top area of strength was electronic cigarettes, according to the Balvor/CSNews research. In 2011, 24 percent of the survey group offered e-cigarettes in at least one of their locations. However, that number rocketed to 53 percent this year.

"A good amount of [the] increase had to do with retailers waiting for a ruling about e-cigarettes that determined they are tobacco products, not medical devices," Bishop said.

He noted that there was an interesting dichotomy among e-cigarette retailers, though. According to the findings, a large majority of retailers who have sold e-cigarettes for more than a year said sales exceeded expectations. However, those who have stocked the newest tobacco segment in their stores for less than 12 months were much less satisfied with their sales thus far.

"It will be interesting to see what those retailers say in six months [from now] when e-cigarettes become a bit more of a mature category," Bishop commented.

Sales of other tobacco products (OTP) were also robust during the past year. That category saw dollar sales rise 6.2 percent, the research revealed.

"We saw positive sales growth in all segments of OTP," Bishop remarked.

In addition, the study looked at whether retailers are devoting more shelf space to OTP. Thirty percent of respondents increased OTP shelf space, 56 percent maintained the same space vs. the prior year and 14 percent reduced space. Among those who increased OTP shelf space, the study revealed that space was most often taken away from traditional cigarette products. Click here for an on-demand replay of the webcast.