The tobacco business is feeling the squeeze from all sides. Inflationary pressures are leading to less discretionary spending and coupled with tightening regulations at all levels of government, tobacco retailers are starting to wonder what the future of the backbar will look like. In this special “Deep Dive” report, a bonus supplement to the Convenience Store News 2023 Industry Report, we present exclusive data and insights into the cigarettes and other tobacco products (OTP) categories at convenience stores.
Diving Into the Data
— Retailer respondent
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Regulation to Prohibit the
Use of Menthol in Cigarettes
and RYO Tobacco:
In April 2022, the FDA published a proposed product standard regulation prohibiting the use of menthol as a characterizing flavor in cigarettes, roll-your-own (RYO) tobacco, and heat-not-burn products. The public comment period ended on Aug. 2. A final rule/regulation is expected to be adopted by the FDA sometime in August 2023.
Regulation to Prohibit the Use of Characterizing Flavors in Cigars:
Also in April 2022, the FDA published a proposed product standard regulation prohibiting the use of characterizing flavors in cigars, except for tobacco flavor. The public comment period ended on Aug. 2. A final rule/regulation is expected to be adopted by the FDA sometime in August 2023. When the FDA issued the proposal, the agency stated that the effective date would be one year after the final rule is published.
Potential Regulation for Maximum Nicotine Level in Cigarettes
and Other Tobacco Products:
In June 2022, the FDA announced that the agency would propose a new regulation setting a maximum level of nicotine in cigarettes and certain other tobacco products. The other products that could be subject to this regulation were not specified. A proposed rule/regulation is expected to be published sometime by October 2023 and will be followed by a public comment period. When the proposed rule is published, the FDA may identify a timeframe for the new rule to go into effect.
45%
cigarettes
sponsored by
PRODUCED by
Category Analysis: Cigarettes
2022
2022
% change
% change
-4.5%
-2.1%
1.5%
-3.9%
$352,110
$60,033
$22,732
$434,876
$52,359
$8,927
$3,380
$64,666
-3.9%
-1.5%
2.1%
-3.3%
Sales per store
Industry Total (in millions)
Premium/super premium
Mid-level
Economy/value
TOTAL
While still the top-selling category at c-stores, cigarettes took a hit in 2022
as total sales declined by 3.3% for the year.
After an $8,000 gain
in per-store sales in 2021, premium/super premium cigarettes rolled back
by about $16,000
in 2022.
CATEGORY ANALYSIS: OTHER TOBACCO PRODUCTS
2022
2022
% change
% change
-0.6%
5.9%
-0.5%
46.2%
3.5%
1.4%
-21.8%
4.0%
$55,788
$45,846
$30,814
$11,039
$2,728
$1,389
$123
$147,727
$8,296
$6,817
$4,582
$1,641
$406
$207
$18
$21,967
0.0%
6.5%
0.1%
47.1%
4.1%
2.0%
-21.3%
4.6%
Sales per store
Industry Total (in millions)
Smokeless
Vaping products
Cigars
Smokeless tobacco alternatives
Papers
Pipe/cigarette tobacco
Other tobacco nicotine products
TOTAL
OTP suffered a setback in 2022 with only a 4.6% increase in total sales — the category's smallest growth in more than five years.
OTP was kept afloat,
in part, by a 6.5% jump in sales of vaping products.
FIVE-YEAR TREND: OTHER TOBACCO PRODUCTS
After hitting a plateau in share of sales in 2021, OTP posted its first decline in five years in 2022.
Percent change
in total sales
Percent change in total unit volume
Margin percentage
Share of in-store sales
2022
2021
2020
2019
CIGARETTE SHARE BY SEGMENT
Unit volume for mid-level and economy/value cigarettes each rose slightly at the expense of premium/super premium, which lost a full point in share over the past year but remains the overwhelming category leader.
Dollar Sales
Unit Volume
77.0%
15.7%
7.3%
81.0%
13.8%
5.2%
81.5%
13.6%
5.0%
78.0%
15.1%
6.9%
2022
2021
Premium/super premium
Mid-level
Economy/value
Dollar Sales
Unit Volume
OTP Share By Segment
Smokeless remains at the top in OTP dollar share, but continues a pattern of declines while vaping products gain share, albeit at a slower pace than in previous years.
Dollar Sales
Unit Volume
Dollar Sales
Unit Volume
24.1%
8.8%
54.7%
7.4%
4.4%
0.6%
0.0%
37.8%
31.0%
20.9%
7.5%
1.8%
0.9%
0.1%
39.5%
30.5%
21.8%
5.2%
1.9%
1.0%
0.1%
25.6%
9.4%
55.1%
5.0%
4.3%
0.6%
0.0%
2022
2021
Smokeless
Vaping products
Cigars
Smokeless tobacco alternatives
Papers
Pipe/cigarette tobacco
Other tobacco nicotine products
CIGARETTES VS. OTHER TOBACCO PRODUCTS
FIVE-YEAR TREND: PERCENT CHANGE IN TOTAL SALES
2022
2021
2020
2019
2018
-3.4%
4.6%
Cigarettes
Other Tobacco Products
0.3%
8.1%
3.5%
8.3%
-1.5%
13.7%
-2.9%
23.5%
Although the gap is smaller than in previous years, other tobacco products
continue to top cigarettes in percent of sales gains.
2022
2021
2020
2019
2018
23.49%
7.98%
25.90%
8.14%
27.43%
8.12%
27.38%
7.74%
28.50%
6.84%
Cigarettes
Other Tobacco Products
Cigarettes still lead in share of in-store sales, though the category dropped below the 25% mark for the first time in 2022.
FIVE-YEAR TREND: SHARE OF IN-STORE SALES
FIVE-YEAR TREND: SHARE OF IN-STORE SALES
Convenience stores remain the go-to place for adult tobacco consumers
to make their backbar purchases.
Where Shoppers Purchase Tobacco
in a Typical Month
Base: 1,501 consumers who visited a convenience store in the past month
Source: Convenience Store News 2023 Realities of the Aisle Study
While only 12% of all shoppers surveyed said they
bought electronic cigarettes/vapor products at
a c-store in the past month, that number
jumped to 27% among Generation Z.
1. Consumers Under Pressure:
Cigarette volume declines accelerated sequentially in the first three months of this year, reflecting ongoing pressure on the consumer, according to Goldman Sachs' first quarter 2023 Nicotine Nuggets survey. Faced with broader inflation and frequent manufacturer price hikes, adult tobacco consumers are reducing their purchase frequency, downtrading to affordable noncombustible options and making fewer trips to the store, noted Bonnie Herzog, senior financial analyst at Goldman Sachs.
2. The Rise of Reduced Risk Products: Reduced risk products (RRPs), which currently include modern oral nicotine, e-cigarettes/e-vapor and heat-not-burn items, are poised to play a bigger role in tobacco retailing. How big — and how soon — depends on the Food & Drug Administration (FDA), which is still working its way through the Premarket Tobacco Product Application (PMTA) process for reduced risk products. Under the PMTA process, the FDA must issue a marketing granted order for these products — and all tobacco and nicotine products — to be marketed and sold in the United States.
3. Tobacco Harm Reduction:
A recent survey by Richmond, Va.-based Altria Group Inc. found that Americans are in favor of tobacco harm reduction over prohibition as public policy. More than eight in 10 Americans (82 percent) think it is important for the FDA to focus on making smoke-free tobacco products available to adult smokers to help them switch from cigarettes.
4. FDA Crackdown:
The FDA recently issued warning letters to 30
retailers, including one distributor, for illegally selling unauthorized tobacco products. All of the cited products were various types of Puff and Hyde brand disposable e-cigarettes, which are two of the most commonly reported brands used by youth e-cigarette users. "Protecting our nation's youth from tobacco products — including disposable e-cigarettes — is a top priority for the FDA," stated the agency’s commissioner Robert M. Califf.
This increase was topped only by a 47.1% rise in the much smaller segment of smokeless tobacco alternatives.
Percent change
in total sales
Percent change in total unit volume
Margin percentage
Share of in-store sales
FIVE-YEAR TREND: CIGARETTES
Share of sales for cigarettes continues its pattern of yearly declines, dropping 5 points over the last five years.
2022
2021
2020
2019
-3.3%
-7.6%
14.36%
23.49%
0.3%
-6.0%
14.40%
25.90%
3.5%
-2.8%
14.42%
27.43%
-1.5%
-5.5%
14.12%
27.38%
2018
-2.9%
-3.4%
14.63%
28.50%
2018
4.6%
-0.5%
31.14%
7.98%
8.1%
-1.4%
31.10%
8.14%
8.3%
5.3%
30.75%
8.12%
7.74%
29.15%
0.8%
13.7%
23.5%
5.5%
27.65%
6.84%
The Consumer View
What's Trending
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Among shoppers who purchase cigarettes at a convenience store
in a typical month, 23% report buying these products
more today vs.
a year ago.
This is a
2-point drop from 2022.
One-quarter of shoppers cite high prices
as compelling them to purchase cigarettes
and OTP at a location other than
a convenience store.
Convenience
Grocery
Mass
Dollar
Drug
CLICK IMAGES BELOW TO DISCOVER VALUES
9% cigarettes
7% cigarettes
6% cigarettes
4% cigarettes
39% OTP
9% OTP
8% OTP
6% OTP
4% OTP
23%
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Among shoppers who buy OTP at
a convenience
store in a typical month, 21% report purchasing these items more today than a year ago.
21%
This is a
4-point drop from 2022.
