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budgets,” he says. “Those state tax budget
shortfalls will only increase the state tax
budget for the next year on cigarettes and
tobacco, leading to yet another state tax
budget shortfall. A never-ending cycle is
spinning due to illogical ideas at the state
level where no one really knows how to run
a business or even a budget.”
The Affordable Care Act (also known
as “Obamacare”) and increased taxes
were also on Mahoney’s list of bad and
potentially bad news.
Thinking about the challenges of the
vapor category and specifically, how
e-juices are being manufactured, is a top-
of-mind concern for Phil Metzinger, vice
president of specialty beverage and tobacco
operations for Brookshire Brothers
(Tobacco Barn) based in Lufkin, Texas
with 48 stores. “What are the standards
that must be met? I am very concerned
about the large group of people making
e-juice in their kitchen sinks and then
packaging and selling it,” he tells
TBI
.
“This is a huge liability to the industry.”
And as good as vape products were for
retailers like Tobacco Outlet Plus (Kwik
Trip) in La Cross, Wisconsin, with 39
stores, there is still the challenge of keeping
up with the “ever-changing products,”
according to Terry Schmitz, zone leader.
Still, “the loss of the cigarette business—it
just keeps declining and it’s hard to fill that
void,” remains his biggest concern.
A totally different void is being felt by
Delta Distributors, dba Discount Tobacco
Outlet based in Andalusia, Alabama, with
21 stores. “My most concerning issue was
having to eliminate our UST contract
because we could not merchandise
chewing tobacco in the storefront that was
accessible to customers, even though we
are an ‘adult only’ facility,” explains Chris
Jones, director of operations. “Moving
this category behind the counter was
impossible considering the size of our set,
plus we feel we lose our core principal as a
tobacco store if basically every product we
carry is placed behind the counter.”
But that’s not to say he doesn’t struggle
with e-cigs and vapes, too, which are out in
front. “We are also having to evolve with
the growth of the vapor category in adding
new brands/SKUs,which is causing a space
issue in our stores,” says Jones. “We are
also trying to figure out how to properly
merchandise this category so that it is all in
one space in the store and not on separate
racks, which takes up counter space. The
different sizes and the many new SKUs
that are coming out every day have made
it hard to come up with a dedicated fixture
for this category.”
And amidst all these legislative and
category woes, there was only one retailer
who mentioned an obvious foe in 2014:
competition. “With discount dollar stores
bringing in tobacco, combined with most
Quick Category Takes
Some of
TBI
’s Top 50 players were asked to “think quickly” and name a word or
phrase that, in their mind, currently summarizes key categories in the market best.
Here are a few of their off-the-cuff responses:
Cigarettes—
“maintain the decline,” “declining business,” “still the bread
and butter in profitability,” “Marlboro,” “declining,” “key”
Smokeless Tobacco—
“a good customer driver,” “steady to growing,”
“growing,” “U.S. Tobacco,” “steady,” “growth”
E-Cigarettes—
“in a state of flux,” “a declining category,” “opportunity,”
“blu,” “changing trends,” “evolving”
Vapes—
“constantly evolving,” “an exciting category with many new
changes, but I love the excitement of the category,”“stay on top of it,”“Lotus,”
“rapidly expanding,” “questions”
Premium Cigars—
“continued growth, but too many brands,” “still a good
business, but doing business in the northern states…there have been some
tough winters lately and [thus] causing a decline,” “variety and presentation
are the keys to success,” “PK Cigar,” “niche,” “strong”
Non-Premium Cigars—
“my cigarillo prediction: 9 for 99 cents,” “the
b/2 and b/3 are great, but no GP [gross profit] margin for the retail stores,”
“increasing sales at the cost of reducing gross profit,” “Global Tobacco,”
“seasonal,” “hope to see stabilization”
RYOTubes, Tobacco and Little Machines—
“still a very strong category,”
“still a good category and will be for some time,” “very strong,” “Republic
Tobacco,” “evolving,” “still kicking”
Hookahs—
“more of a niche category,” “just investigating the category, but
looks to be very interesting, and at the same time, spooky,” “steady growth,”
“Haze,” “geographical,” “no”
Pipes—
“requires more product knowledge,” “do well with pipes, but not
our forte,” “flat,” “Yellow-Bole,” “slow growth,” “no”
Tobacco Accessories—
“not one of my favorites, but still important,” “OK,
but could be better,” “many opportunities exist—great GP driver,” “Santa
Clara,” “minimal,” “growth”
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