As 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.
- “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.
- 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.
- 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.