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Consumer insights: The C-store tobacco buyer

Screen Shot 2019-05-31 at 8.33.25 AMDespite the many challenges of the tobacco business — declining volume, new regulations, legislative scrutiny, and more — it remains a crucial business for convenience store operators.

The c-store tobacco consumer, however, is evolving as new nicotine products continue to hit the market. Here’s a look at some of the latest consumer insights around tobacco purchasing.

Click here for a special report from Convenience Store News. 


Tips for adjusting to changing tobacco trends

Cigarettes Generic Lg_100517The tobacco industry is changing at a rapid pace. Cigarette sales are declining year after year, while vape and smokeless products have been on the rise. Now, there are new products out there that fit into the growing “ANDS” (alternative nicotine delivery systems) category, such as nicotine toothpicks, pouches and dip (no tobacco leaf present in any of these).

Modernizing categories and planograms will be a necessity for convenience retail chains looking to hold onto revenue.

While consumers are quitting cigarettes in droves, most would agree they are not quitting nicotine. Many consumers switched from cigarettes to ENDS (electronic nicotine delivery systems) such as Logic, blu and Juul. Other consumers have moved into smokeless tobacco products such as dip and spitless snus.

The rise of smokeless tobacco options and ENDS products in the past 10 years is a clear indicator that consumers aren’t quitting their nicotine altogether, but instead they have become open to finding their nicotine in other products.

Some of these products I like to call “ANDS” products. These are non-combustible alternative nicotine delivery systems that would otherwise not be able to be categorized into current and obsolete product groupings. ANDS are a fairly new subcategory of other tobacco products (OTP) and are increasingly gaining customers. People are tending to move away from tobacco leaf products, both combustible and non-combustible, and move to products that deliver nicotine.

Nicotine toothpicks and pouches are very similar. Both are flavored oral nicotine products that did away with the tobacco leaf. The toothpicks are infused with nicotine and food-grade flavorings, while the pouches are tea bags that are filled with powdered nicotine and food-grade flavorings.

Another ANDS product is nicotine dip that is made using mint leaves instead of tobacco leaves.  Nicotine dips are made with nicotine applied to chopped mint leaves. They can be used just like traditional tobacco dips like Skoal, Copenhagen or Grizzly.

ARE ‘ANDS’ RIGHT FOR YOUR BUSINESS?

So, should your business sell ANDS? It all comes down to whether your convenience store or chain is positioned to make the investment to secure customers for the present and future.

In discussions with CEOs of many of these ANDS manufacturers, they say consumers are constantly asking them where they can buy the product. Store owners should embrace this and use it to their advantage. A retailer can acquire new customers just by carrying a product that is newer to distribution. This is especially true when the products being considered have already started to take sales away from cigarettes, moist snuff and ENDS products.

By adding new SKUs to their tobacco categories, retailers will need to eliminate others or increase the real estate space for their tobacco products section as a whole.

When choosing new product lines in the ANDS category, a category manager should evaluate a manufacturer or a brand based on such factors as sell-through, branding, customer experience, customer adoption, marketing, and point-of-sale (POS) merchandising support.

Behind-the-scenes items that are also crucial toward the long-term success of the store(s) and the brands they carry include Food and Drug Administration (FDA) compliance, quality control, shelf life, liability insurance and vendor/retailer support.

We already know that Juul has emerged as the leader in the ENDS category. Which ANDS products are in line to solidify a spot on your shelf? Which ANDS manufacturers and brands meet the qualifications stated in the previous paragraph?

With sell-through and compliance being the most important direct and indirect items of importance, there are certain brands and products leading the pack on this newly paved road. Here are three types of ANDS that hold promise for the convenience channel:

Nicotine Pouches

Nicotine pouches have created a nice following throughout the country — both online and in stores. Nicotine pouches function just like spitless snus.

Nicotine Toothpicks

While nicotine toothpicks might seem like a new idea, they have been around since 2013. When merchandised and branded properly, nicotine toothpicks see sell-through. They also function as an upsell that increases a store’s average order value.  Toothpicks are one of the few products being used by smokers, dippers and vapers alike.

Nicotine Dip

Nicotine dip is another product making its way into stores. I like the idea. Why have tobacco leaves pressed up against your gums when you can have mint leaves and nicotine instead? I can see these products leading to the abolishment of traditional tobacco leaf dips.

In the end, consumers want to feel empowered to make a choice. Nobody goes to the ice cream parlour that only carries three flavours when the parlour across the street has 15 flavours plus 10 different topping options.

With the guidelines and requirements mentioned earlier, choose one to three items from each of the three ANDS subcategories (pouches, toothpicks and dip). Find products that aren’t selling well on your shelves and remove them.

The way I see it, ANDS are the future of the category. The status quo has changed. Non-combustible ANDS products should be part of your offering in order to solidify your store’s ability to sustain long-term growth and success.

By: Evan Grossman is an entrepreneur and industry advocate. In 2013, he founded Pixotine Products, launching Pixotine Nicotine Toothpicks. Before founding Pixotine Products, Grossman co-founded Trans World Jets in 2011, a jet charter consulting and contracting business.

Originally published at Convenience Store News. 


Court agrees to suspend legal proceedings against tobacco companies until fall

An Ontario court has agreed to extend an order suspending legal proceedings against three major tobacco companies as they negotiate a settlement with their creditors after losing an appeal in a multibillion-dollar case in Quebec.

The stay of proceedings was granted in March as part of the creditor protection process and upheld the following month after some of the companies’ creditors challenged it.

The order was set to expire June 28, but will now be renewed until Oct. 4.

The companies – JTI-Macdonald Corp., Rothmans, Benson & Hedges and Imperial Tobacco Canada Ltd. – had initially sought to prolong the stay until December but presented a revised proposal last week.

The order was first obtained shortly after Quebec’s highest court upheld a landmark decision that ordered the tobacco companies to pay more than $15 billion to smokers in two class-action lawsuits.

The stay is meant to maintain the status quo while the companies go through mediation with all those who have claims against them, including the class-action members and several provincial governments.

Lawyers representing the class members argued in April that the stay in their case should be revoked if the companies plan to appeal the Quebec ruling to the Supreme Court of Canada.

Ontario Superior Court Justice Thomas McEwen rejected their request, saying it would give an unfair advantage to the Quebec creditors over the others.

But he ruled the stay would also prevent any of the companies from seeking leave to appeal to Canada’s top court unless they obtain the court’s permission.

McEwen also denied Ontario’s bid to push forward with a lawsuit that aims to recover smoking-related health-care costs from a dozen Canadian firms and their parent companies, including the three companies granted the stay.

The judge said allowing the lawsuit to proceed before settlement talks are complete would favour Ontario over other provincial governments seeking similar relief.

Health groups have also opposed the stay, calling it a delay tactic by companies whose profitability isn’t immediately threatened.

In a statement issued this week, the groups say the companies “have not even initiated settlement discussions, and have set no time limits to address the claims made against them.”


Screen Shot 2019-06-10 at 5.20.13 PM

McCowan: Secure tobacco merchandising is our business

image001Secure tobacco merchandising is an important factor in the Gas Convenience business! McCowan has been at the forefront of designing secure tobacco merchandising solutions that meet “Dark Market” regulations.

Security will always be on the minds of retailers who are concerned about the safety of their employees and the control of their inventory. In addition to tobacco merchandisers, McCowan manufactures backroom lock-ups, vape merchandisers and pass-through boxes for retailers who serve late night shoppers.

 

Secure counter top tobacco cabinet.

Secure counter top tobacco cabinet.

  • Industry Standard. McCowan Tobacco Merchandisers and Security Products have been an industry standard for 25 years. More than 10,000 Secure Tobacco Merchandisers have been sold!
  • Floor, Counter Top and Under Counter Solutions. McCowan offers secure tobacco merchandising solutions to accommodate any space. Floor models are 72” tall, counter top models are 52” tall; both are available in 36” and 48” widths. Under counter models are designed to fit seamlessly under your cash desk counter.
  • Pushers & Dividers for Easy Vending. McCowan provides pushers and dividers to keep tobacco or vape inventory organized for operators.
  • High Capacity. McCowan Tobacco Merchandisers are designed to hold a large inventory of tobacco products and manage multiple SKUs.
  • Anti-Theft Lock System and Security Door. The McCowan anti-theft lock system and security door have been tried and tested in the market for 25 years.
  • Dark Market Regulations. McCowan Tobacco Merchandisers meet all provincial regulations.
  • Vape Merchandising Solutions. McCowan offers locking cabinets with clear or frosted glass doors to merchandise vape products.
  • Backroom Lock-Ups. McCowan offers high capacity backroom lock-ups with anti-theft doors and locks.
  • Secure under counter tobacco cabinet with door closed.

    Secure under counter tobacco cabinet with door closed.

    Pass-Through Boxes. McCowan offers pass-through boxes to assist operators in safely serving late-night customers.

  • Built to Last. Made from high quality materials and finished with a durable powder coat.
  • Industry Leading Turnaround Times. McCowan has a long history of consistently delivering to stores in unrivalled lead times.

Call 416-291-7111 or e-mail sales@mccowan.ca for a catalogue!

For more information, visit our website.

Under counter cabinet with door closed and door open

Under counter cabinet with door closed and door open


3 tips for protecting your tobacco sales

CigsAs the convenience channel moves away from its traditional cokes-and-smokes reputation and toward fresh and healthier offerings, it is easy to overlook the cigarettes category — with its diminishing volumes and tight margins. But, that would be a mistake, according to the experts.

As 7-Eleven Inc.’s Alan Beach stressed during the NACS State of the Industry Summit last year: “You can’t ignore this. We need to protect this; it is what got us here,”

He’s right. While cigarette sales are declining, they are still a hot in-store purchase that attracts customers and keeps them coming back for more. That alone should make c-store operators sit up and pay attention.

“Tobacco continues to be really important, particularly to the convenience retailer, by far,” says Don Burke, senior vice president of Management Science Associates Inc. “We are seeing a little bit greater decline; however…. Tobacco continues to be a very important category, and we project that it will be for many more years.”

Therein lies the reality that convenience store operators need to protect their tobacco category, and the strategy to do that is twofold: assortment and other tobacco products (OTPs).

“In a study we did in the past several years, we found that about 30% of convenience stores are able to increase their tobacco category sales each year,” says Burke.

Here’s how:

  1. “Make sure you are carrying the right number of SKUs, the right number of products and the right amount of selection. When consumers shop convenience, they are looking for selection,” says Burke.
  2. C-stores need to embrace the large cigar segment, which has one of the greatest growth rates of all the tobacco segments. “One of things we found recently is that pre-priced items, which most convenience stores don’t like, have helped this category considerably,” he noted. If a retailer does not want pre-priced items, then it needs to offer a range of price points within the large cigar segment to meet consumer demand.
  3. Take advantage of consumer interest in the vapor category, particularly in the vaporizers that typically retail for $20-plus, Burke explained. “That’s a high cash-register ring for the tobacco category and contributes considerably to revenue growth in convenience.”

A version of this article was originally published by Convenience Store News. 


Imperial Tobacco denounces plain packaging

In the wake of the Health Canada’s new legislation, Imperial Tobacco is coming out swinging, calling plain packaging a “nanny state” approach that does little to change consumer behaviour.

“We remain shocked that despite all of the evidence, the Government of Canada is moving ahead with bad public policy,” said Eric Gagnon, head of corporate and regulatory affairs at Imperial Tobacco Canada.  “The experience of other countries demonstrates that plain packaging does not change consumer behaviour and that it’s a proven way to fuel an already booming illegal tobacco market in Canada.”

Imperial Tobacco points out 20 percent of the market remains controlled by illegal operators and criminal organizations selling products outside of any regulatory framework and untaxed (depriving Canadian governments of more than $2 billion in tax revenue every year).

Eric Gagnon of Imperial Tobacco.

Eric Gagnon of Imperial Tobacco.

“The illegal tobacco problem in Canada is poised to get much worse now that it will be impossible to differentiate between a legal and illegal product.  Not only has the federal government had its head in the sand for long enough when it comes to illegal tobacco, they have facilitated the thriving illegal market by allowing illegal operators unfettered access to the Canadian market,” says Gagnon. “The RCMP have stated that there are 50 illegal factories operating in Canada and 175 criminal gangs involved in the illegal trafficking of tobacco, and the feds have done nothing about it.  They now need to step up and address the issue they created themselves.”

Still, plain packing continues to gain traction around the globe. In 2012, Australia became the first country to introduce plain packaging of tobacco products, leading the way for others to follow suit. Today, New Zealand, France, Norway, Ireland, Saudi Arabia, Thailand and United Kingdom required standardized packaging. Singapore, Belgium and Turkey will institute plain packaging in 2020.

Global uptake notwithstanding, Gagnon maintains plain packaging isn’t effective.  “Despite what some Canadian anti-tobacco lobbyists will claim, plain tobacco packaging has been tried, tested and failed, and it will have the same result in Canada,” he said. “The plain packaging experiment in Australia, New Zealand, France and the United Kingdom have yielded the same results: plain tobacco packaging does not work.”


Industry reacts to Health Canada plain packaging rules for tobacco

Canadian cigarette packs will have to be plain drab brown with standardized layouts and lettering under new rules that start this fall, Health Canada says.

The government says plain packages will increase the impact of graphic health warnings about the dangers of smoking, keeping them from getting lost amid colourful designs and branding.

Health Canada says plain packages will increase the impact of graphic health warnings about the dangers of smoking.

Manufacturers will have to begin complying with labelling rules for packages and dimensions for cigarettes by Nov. 9, 2019, while retailers will have to sell only products meeting the new rules by Feb. 7, 2020.

Officials said plain packages will increase the impact of graphic health warnings about the dangers of smoking, keeping them from getting lost amid colourful designs and branding.

The government wants to stop cigarette companies from using their packs as tiny ads for their products, insisting even on a single shape and design for the packs themselves – meaning soft packs are out, as are creative designs with bevelled edges and any other distinctive features.

Health Canada picked the same dark brown for the packages as Australia did for its tobacco products a few years ago, one identified by market researchers as the ugliest colour in the world. Several European countries have used the colour as well.

“Packages with darker colours were perceived to be more ‘harmful to health’ and their products ‘harder to quit,’ in contrast to packages with lighter colours,” the department said in a summary of the plans.

Health Canada said there could be a shortage of the new packs in the early going as a very limited number of suppliers retool to make just one design instead of many different ones.

The regulations released May 1 also standardize the size and appearance of cigarettes, cigars and other tobacco products inside the packages.

Specific rules have been awaited since Parliament passed a law requiring them last fall, joining 13 other countries that have adopted similar measures.

The new rules are part of a larger strategy aimed at driving the rate of tobacco use among Canadians down to five per cent by 2035. Federal statistics show that in 2017, 18 per cent of Canadians over the age of 15 said they used tobacco in the previous month, an increase of 15% from 2015.

The Canadian Cancer Society praised the government’s regulations, calling them “the best and most comprehensive in the world.”

On the flip side, the industry association representing convenience stores said plain packaging increases the appeal of contraband tobacco products and makes them harder to distinguish from legally marketed ones.

“Instead of addressing the 20% of tobacco that is sold illegally in Canada, government is adding one more burden to law-abiding retailers who don’t sell to minors, comply with display bans, and partner with government to collect and remit most of the $9 billion in tobacco tax revenue every year,” Anne Kothawala, president of the Convenience Industry Council of Canada, said in a statement.

Representatives from the Ontario Korean Businessmen’s Association agree, saying the new rules will hurt small businesses.

“The only way the government can guarantee this will occur is if the law is applied equally to all products being sold and purchased in Canada, including the up to 40 percent of illegal tobacco consumed in Ontario today. To date, this government has shown no willingness to crack down on illegal manufacturers,” stated OKBA spokesperson Kenny Shim. “The booming black market of illegal, unregulated, and untaxed products not only leads to a loss in market share for our members – it also leads to a loss of hundreds of millions of dollars in government revenue, contributes to the funding of organized crime, and further compromises Canadian public health by introducing unregulated products to the market.”

The convenience industry has long advocated that plain packaging is not an effective tool to reduce smoking. In its recent eNewsletter, CICC stated: “We were successful in one key area: standardized packaging (slide and shell) will not happen for another 24 months for manufacturers, with retailers being given an additional three-month transition period to comply. On plain packaging, a few technical issues arose out of last week’s regulations that the CICC is working to clarify. We will be providing comprehensive information to both wholesalers and retailers in the coming weeks to help prepare them for this significant policy change.”

With files from Michelle Warren


Ontario court upholds stay of legal proceedings against 3 tobacco companies

An Ontario court has upheld an order that suspended legal proceedings against three major tobacco companies, rejecting arguments from lawyers representing Quebec smokers.

Ontario Superior Court Justice Thomas McEwen issued his decision Wednesday but did not lay out his reasons, saying those would be released at a later date.

The companies _ JTI-Macdonald Corp., Rothmans, Benson & Hedges and Imperial Tobacco Canada Ltd. _ were granted the stay last month as part of the creditor protection process.

They obtained the protection shortly after Quebec’s highest court upheld a landmark decision that ordered them to pay more than $15 billion to smokers in two class-action lawsuits.

The companies have said they had no choice but to seek the stay so they could continue to operate as they try to negotiate a global settlement with all those who have claims against them, including the class-action members and several provincial governments.

But lawyers representing the class members argued the stay in their case should be revoked if the tobacco companies plan to appeal the Quebec ruling to the Supreme Court of Canada.

At a hearing earlier this month, they said the companies cannot negotiate a settlement in good faith while also challenging the findings of the court.

The lawyers said if the companies plan to seek leave to appeal, the matter should be sent back to the Quebec court so it halt the implementation of its ruling until the appeal process is complete.

In his decision, McEwen said the stay order would require parties to seek the court’s permission before launching new proceedings involving the companies, including any applications for leave to appeal to the Supreme Court.

The judge had previously extended the order to June 28, with a hearing to be held a few days earlier.

The Quebec Council on Tobacco and Health, which was behind the class-action suits, said it would hold off commenting on the ruling until the judge’s reasons were released.

Lawyers representing several provincial governments had opposed the Quebec lawyers’ application, saying one group of claimants should not be prioritized over others.


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