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“We’ve had a good run,” says Nik Modi,
tobacco analyst for New York-based RBC
Capital Markets, reporting on cigarette
sales. “We have seen consumers trading
up to branded premiums and exiting the
e-cigarette category to go back to brand-
ed premium cigarettes, so it has been a
good 18 months for the industry.”
Noting that cigarette sales actually
increased slightly in the first quarter of
2016, Modi cautioned retailers not to
expect that trend to continue. “We are
starting to see wobbling of the data,” he
reports. “We expect cigarette volumes
to return to a -3 percent to -4 percent
annualized decline. If you think about it,
there has not been structural change as
to why consumers have been smoking
more. The only thing I can point to is
a return of consumer confidence where
we might be seeing more smoking per
smoker as people go out more.”
While combustible cigarettes are hav-
ing a relatively good run, e-cigarettes
are not faring as well, according to Modi,
whose research suggests that c-store
retailers in particular are losing enthusi-
asm for the vapor category. In fact, 95
percent of c-store retailers in a recent
survey reported that sales of open sys-
tems never really got started or are start-
ing to decline.
“I get a lot of criticism for being too
negative on e-cigarettes,” he notes.
“But I try to be a realist. The reality is
[that the category] will be big in the fu-
ture, but product efficacy is not where it
needs to be. The hard-core, pack-a-day
smoker needs a certain amount of nico-
tine and the e-cigarettes cannot deliver
that no matter what they tell you. The
R&D will get there, but who will invest
in it without more clarity on the regula-
tory climate?”
The charts on the pages to follow
offer a snapshot of some of Modi’s latest
research on the cigarette and vapor
categories.
With gas prices down and a stable economy,
consumers are returning to premium brands.
56%
37%
7%
Marlboro
Newport
Camel
50%
56%
21%
Marlboro
Newport
Camel
50%
43%
7%
Marlboro
Newport
Camel
The New Normal
CIGARETTE BRAND EXPECTATIONS
Which brand do you expect to gain the most market share in 2016?
JUNE ’15
SEPTEMBER ’15
MARCH ’15
Source: RBC Capitol Markets-CSP Tobacco Retailer Survey
30
TOBACCO BUSINESS INTERNATIONAL
JULY/AUGUST 2016
CATEGORY MANAGER
CIGARETTES AND E-CIGARETTES