38
TOBACCO BUSINESS
MARCH/APRIL 2014
CATEGORY MANAGER
retail trends
T
he times, they are a’changing. Many of the shifts
taking place in the tobacco retail landscape are, by
now, expected by the industry. Few, for example,
will be shocked to hear that tobacco volume decreased by 2
percent in 2012, according to U.S. Tobacco Trends, a February
2014 report by Bonnie Herzog, managing director of tobacco,
beverage and convenience store research for Wells Fargo
Securities. But not all categories of tobacco suffered a decline.
While cigarette volume was down 5 percent, smokeless
tobacco volume increased by 5 percent.
As many in the industry have anticipated, cigarette sales
continued to drop in 2013, while e-cigarette sales continued
to grow—reaching approximately $2 billion for the year.
“The majority of respondents from our Tobacco Talk survey
continue to be very excited about the e-cig category,” writes
Herzog. “We think consumption of e-cigarettes could outpace
combustible cigarettes over the next decade.” Blu, NJOY and
Logic have emerged as early market leaders, adds Herzog,
who also notes that while the Big Three tobacco players are
now in the category and some consolidation is likely, research
suggests that brands like NJOY, Mistic, Fin, Logic and Krave
will continue to enjoy a healthy position in the market.
“We think that e-cigs are to tobacco what energy drinks
are to beverages—highly profitable and quickly growing in
volume and shelf space at retail, and increasingly gaining
customer acceptance,” writes Herzog.
As the various tobacco companies continue to grapple for
market share, retailers are also jockeying for position in the
category. Family Dollar and Dollar General have begun selling
cigarettes, suggesting that dollar store chainsmay be a growth
channel for the category. Vape stores are another emerging
retail trend, although many question their long-term viability,
contending that the FDA may regulate them out of existence.
Meanwhile, CVS opted to abdicate, exiting the tobacco sales—
which accounted for an impressive $2 billion in sales for the
company—altogether.
To follow are some charts excerpted from the report that
offer a snapshot of current retail trends.
TB
Tobacco by the Numbers
Highlights from Bonnie Herzog’s U.S. Tobacco Trends report
Total Tobacco Estimate
Total tobacco volume decreased by 2% in 2012. Cigarette volume was down 5% and smokeless tobacco volume increased by 5%.
FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013E*
1200
1,000
800
600
400
200
0
Volume (in millions of pounds)
Total Tobacco Industry Volume (in millions of pounds)
5-Yr CAGR=1.0%
4-Yr CAGR=1.5%
Retail Channel Market Share
C-stores still top the tobacco distribution chain.
C-stores continue to account for the bulk of
tobacco sales, and are also the dominant player
in the e-cigarette category.
*Estimated
C-Stores
Mass & Others
Tobacco Stores
Grocery & Drug
