Winning the Vapor Segment Takes Focus

LAS VEGAS — Convenience store players looking to win with the growing vapor segment of tobacco received a few key tips during the AWMA Marketplace Solutions & Expo, held last week.

Speaking on the show floor Feb. 26, David Bishop, managing partner of Balvor LLC, and Ray Johnson, operations manager at Las Vegas-based Speedee Mart, explained that manufacturers and wholesalers could win more business by improving their retail game plans.

One area to focus on is closing distribution gaps. For wholesalers, this means winning back distribution they've lost as retailers are sourcing from other suppliers. The gap is being created as consumer demand moves faster than the supply chain, pushing retailers to find alternative distribution sources.

Bishop pointed out that while InRhythm Inc.'s CMetrics database shows vaping all-commodity volume (ACV) distribution at 33 percent, recent retail analysis completed by Balvor — covering part of the same time period — found significantly more retailers are selling these products. CMetrics data covered the 52 weeks ended Dec. 27.

Speedee Mart uses several suppliers to meet the c-store chain's needs, Johnson said, noting his wholesaler supplies around one-third of his products. 

Retailers like Speedee Mart are doing this as a way to defend their base business and protect sales associated with some of their most important customers, Bishop added.

A second important area to focus on is understanding the vapor business. To this end, CMetrics data now breaks out electronic cigarettes from vaping. According to Bishop, this is key because e-cigarettes and vaping "are really two, very different segments with very little overlap amongst the top-selling manufacturers."

Beyond that, Bishop said many of the top performers this year were barely on the radar last year, underscoring the need to stay on top of trends as the business is shifting so rapidly. He also compared trends from Balvor's recent analysis to CMetrics trends, which painted two pictures of the business.  

"It's natural to wonder which source is correct. However, when both are, it becomes critical to understand the value of each source," he said. "Most sources have a bias; the question then becomes knowing what it is and then how you should leverage."

In addition to closing distribution gaps and understanding the business, improving speed-to-market is another important factor to winning the vapor segment. Just like in other categories, retailers want to get the biggest bang from new products and the support that is extended by the manufacturers, Bishop explained.

With innovation occurring so fast, Johnson said he realizes some products won't be around that long. So, he wants to get new items in as quickly as possible to satisfy his customers. To improve speed-to-market, he said suppliers need to get more aggressive if they want the space in his stores.

Removing barriers to getting products on the shelf is crucial. According to the presenters, product guarantees are not much of a selling point with less-established manufacturers. "If they go out of business or close shop, who's going to honor the guarantee?" Johnson asked.

Aggressive sales strategies involve shifting to front-loaded programs that reduce the risk to the retailer, such as free-product fill or buying out dead inventory. 

In terms of buying out unproductive inventory, Johnson suggests that companies ensure the product is physically removed from the store so that it doesn't take valuable shelf space. Many retailers may be inclined to try and sell it down. 

C-store retailers are hungry for a trusted source of information on vapor. According to Johnson, he sifts through various trade publications across industries and visits different retail formats for most of his insights because he finds very few suppliers are sharing insights into this business that demonstrate they understand the business.