Cigarettes Still King, but Facing Hurdles

CSP Senior Editor Talks Why

 

April 2017

 

CHICAGO – Cigarettes still top the list of convenience-store merchandise categories in terms of sales, even though it falls behind in gross profit dollars and margin percentages according to numbers released at the NACS State of the Industry (SOI) Summit that was held on April 4-6 in Rosemont, IL.

 

On the list of top 10 categories, cigarettes ranked number 1 at $50,740 in average sales per store per month. Packaged beverages ranked second at $24,784 followed by beer at $15,201. When it comes to gross profit, cigarettes fell to number two at $7,703 compared to packaged beverages at $10,272. Margins are thinner for cigarettes at 15.18% vs. packaged beverages at 41.45%

 

Even though a core category of 36% of sales, cigarettes numbers are still seeing a declining trend in both sales and volume. “It does not look good for the [cigarette] category,” said Andy Jones, president and CEO of Spring Food Stores, Augusta, GA. who moderated a general session on the SOI category numbers.

 

While these numbers were not unusual compared to data from recent years, other tobacco-related figures revealed newer trends – both upbeat and ominous. Both share of sales and volume numbers show that cigarettes are on the declaim, with the share of sales dropping 0.5% in 2016 vs. 2015 and volumes falling 1.3%. Jones said the effect drug-store giant CVS, dropping tobacco sales in 2014  is wearing off.

 

When it comes to cigarette subcategories, the SOI numbers showed sales and unit growth in only one: subgeneric/private brands, which is an increase in sales of 5.8% and unit growth of 2.1%. In addition, tobacco customers are reverting to the basics. In 2015, when low gas prices were a relatively new phenomenon, soda and cold dispensed beverages were the most bought items along with tobacco products. In 2016, gasoline because the number one right along with tobacco. Other tobacco products performed well for the industry in 2016, ranking among packaged beverages and salty snacks as highest in sales and gross-profit-dollar growth since 2014.

 

 

Sources: “Cigarettes Still King, But Facing Hurdles” by Angel Abcede, Senior Editor/Tobacco, CSP on April 10, 2017 https://event.on24.com/eventRegistration/EventLobbyServlet?target=reg20.jsp&partnerref=email&eventid=1406978&sessionid=1&key=BB1A113FEAFA96B2D13EB41877E40385&regTag=&sourcepage=register