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42TOBACCOOUTLETBUSINESSSEPTEMBEROCTOBER2009Smokelesstobaccorepresentedrough-ly62percentofc-storesalesvolumedownslightlyfromthatof2007and43percentofunitvolumeupslightlyfromthatof2007.Cigarsobviouslymass-marketnotpremiumsalsosawasignificantsalesincreaseinthec-storechannelof8percentandaccountedfor32.3per-centoftheOTPcategoryx19ssalesandalmosthalfofthecategoryx19sunitvol-umeaccordingtotheCSNewsdata.x1cItx19struec-storesarebecomingabigplaceformass-marketcigarsbuttheydonx19tcarryavastarrayofproductsx1dColuccisays.x1cAtobaccostorecanaskalocaldistributortofindsomethingspe-cificforacustomerbutac-storeisnotgoingtocarryoneboxofsomethingobscureforaguywhostopsinonceinawhile.Tobaccooutletsareexclusivelyinthetobaccobusinesstheyaretheretoserviceindividualcustomers.x1dAndthereinlayoneofthebiggestwaystobaccooutletscanwinoverc-storetobaccocustomersx14onebyonethroughacompleteselectionandtheabilitytogetorspecial-orderexactlywhatthecustomerislookingfor.x1cIthinkwex19vebeenbeatingc-storesalreadyx1dsaysRoss.x1cAndnowwehaveasituationwherethosecustomersaresearchingusoutbecauseastheconve-nienceselectionwanesoursisvariedandflexible.x1dNothinx19ButtSmokesx19primaryc-storecompetitionisinthex1ckiosk-typepadsitesx1dsituatedbetweengasstationlaneswhereaclerksitsbehindglassandx1ctherex19svirtuallynointeractioncustomersstandoutsidewaitinginlinetogettheirtobaccox1dsaysRoss.Nowitseemsmanyofthesecustomersarex1cwakingupx1dtotobaccooutletsRossobserves.x1cJustasanexampleourBHvol-umehasgoneupamazinglyx1dherelays.x1cWecanstayinitbecausewehavetheflexibilitytocarryvariedbrands.Wex19lldoeverythinginourpowertobringinandmakespaceforbrandsrequestedbyourcustomerbase.Youx19recrazytocarryfourcartonsofeverystyleofev-erybrandbutaslongasyouletcus-tomersknowyoucangetittheyx19llcomein.x1dOtherOppOrtunitiesRegardingamuchx1cblackerx1dchannelthatrobstobaccooutletsoftheircus-tomerpotentialthemailorderInter-netbusinessiscomingundersomestatefirex14whichcouldpotentiallybenefittobaccooutlets.TheWallStreetJournalreportedthissummerthatstatessuchasFloridaMarylandMichiganNewYorkRhodeIslandandVirginiahavex1csteppeduplaw-enforcementeffortsx1dinanattempttorecoupsomeofthe5billionstatetaxrevenuelostan-nuallytobootlegtobaccosaleswhichincludesInternetsalesthatdonx19tpaystatetaxes.TobaccoretailerssuchasFlakstakethisasanotherpositivewayforthetobaccooutletchanneltogainfuturebusiness.x1cWhetherthiswilleverhappenwiththeIndianreservationsIdonx19tknowx1dhesays.x1cButthereareopportunitiesamongallthenegativesx14andhope-fullytheyx19llequalizeoutsowecanstayinbusiness.x1dRossbelievesx1cwhentimesarehardx14thatx19swhenwehavethemostoppor-tunitiesespeciallyifyoux19remoreofaniche-typeproviderwhichweare.x1dNothinx19ButtSmokesistakingtheopportunitytoseekoutfuturebusinesslocationswiththeattitudeofexpan-sion.x1cAsmoreplayersexitthisbusi-nessthereismoreprimerealestatetobehadx1dRossstates.x1cWex19regoingtobelookingforasix-monthplantoexpandtothreetofourstoresinacitywex19vehadoureyeonthatisstillwithinour300-mileradius.Itwastoughtothinkaboutduringtheoilboombecauseev-erythinggotsoexpensivebutthatx19sfallingbackdownnowandsotherex19ssomeviabilityinexpanding.x1dHarperagrees.x1cIthinkwex19regoingtoseethetobaccooutletsthataredoingwellgoingonmajorexpansioncampaignsx1dhesays.Ix19veneverseentheretaillandscapesopepperedbyleasespace.Youcangoinandmakegreatdealsforaslittleassixmonths.x1dOfcoursethewildcardforallchan-nelsincludingtobaccooutletsistheloomingFDAregulation.Mostadmittheyx19retakingawait-and-seeattitudeontheparticularsx14butmeanwhilenotlettingitstopthemfrommovingforwardwithcustomershareopportu-nitiesthatcurrentlyawait.TOBSharpeningYourCompetitiveedgeAsmoreplayersexitthisbusinessthereismorex1cprimerealestatetobehad.Wex19regoingtobelookingforasix-monthplantoexpand...x1d