Value-Seeking Tobacco Consumers Impact Cigarette Sales
NEW YORK — In what has become a recurring trend, cigarette sales are taking a hit as adult tobacco consumers turn to less expensive backbar products.
According to Goldman Sachs' second quarter of 2024 "Nicotine Nuggets" survey, continued economic pressures have led many tobacco consumers to grow increasingly selective in their purchases, turning to more affordable alternatives, such as fourth tier/deep discount cigarettes, modern oral tobacco and illicit/gray market disposable vapor products.
This is driving lower usage of cigarettes and further downtrading, reported Bonnie Herzog, managing director and senior consumer analyst at Goldman Sachs.
[Read more: Convenience Store News Industry Report 2024 Deep Dive: Tobacco]
As Herzog pointed out, takeaways from the Q2 "Nicotine Nuggets" include:
- Cigarette volumes remain pressured with declines easing marginally in the second quarter by approximately 10 basis points vs. the previous quarter, reflecting continued shifts away from the category to cheaper alternatives beyond deep discount cigarettes, such as vapor products — including illicit market options — and nicotine pouches.
- Manufacturer pricing power appears weaker relative to a year ago to a majority (54%) of survey respondents, although less than the Q1 survey at 62%.
- Promotional activity strengthened across electronic cigarettes and oral nicotine as manufacturers invest to drive market share.
- Illicit e-cigarette market activity is a growing concern and continues to negatively impact cigarette volumes with most retailers still very pessimistic that the U.S. Food and Drug Administration enforcement will improve the situation in the near term.
Feedback is based on retailer and wholesaler contacts representing 95,000 retail locations across the United States, or roughly 65% of all tobacco outlets.