‘Who would have guessed that apple would be such a strong flavor?" asks Kent Raphael, vice president of merchandising for Village Pantry LLC (Indianapolis, IN). He’s not asking about a hot-selling juice drink or candy. Rather, he’s talking about an SKU from U.S. Smokeless Tobacco. Flavored items have been driving much of the growth in the non-cigarette tobacco category, according to Raphael, especially cigars.
"We’re seeing tremendous growth in the cigar category, being led by the flavors," he says. "You’re seeing flavor growth in moist smokeless as well, but it’s more traditional. In our region, five out of the top 10 moist smokeless SKUs are wintergreen flavors. And although the apple SKU seems to be doing extremely well— Skoal Long Cut Apple is in our top 10—it’s still too early to tell how well the flavors will work out in moist smokeless."
In the cigar segment, Village Pantry’s better-selling SKUs include strawberry, chocolate, grape, apple, cinnamon and mango items from the likes of Altadis, Swisher and John Middleton. In fact, flavors account for nine of Village Pantry’s 25 top-selling cigar SKUs. Some business comes through packs, but most cigars sold are individually wrapped singles, often in groups of two or three.
Village Pantry’s set caters to the "economy minded" customer, selling a lot of 69′ singles. Most of the SKUs in the chain’s various cigar sets carry price points of less than $5.
"The flavor trend has been building for a couple of years and is now coming on strong," Raphael says. "It all started with strawberry, then grew out from there, and it still seems to be building. The manufacturers are still introducing new flavors, which always drives a trial. Not all of them stick, of course, and you do see ‘flavor fatigue’ in some areas, but you see that in every category. Overall, the flavored or flavorful items have helped breathe some new life into the category as a whole."
And perhaps what’s best is that it appears as though flavored cigars have created true category growth. Raphael says sales of flavored cigars aren’t coming at the expense of other tobacco items, like cigarettes. Consumers of the flavored/flavorful cigars, he says, are primarily existing cigar customers—some new, some old and some occasional.
Trend or fad?
Don Glenn, sr. vice president of marketing for Certified Oil Co. (Columbus, OH), says he sees the biggest opportunity in the OTP category in singles rather than multipacks. The fluid nature of these items makes singles more conducive, since many customers consider the flavors "experimental" purchases.
"There’s tremendous variety now, and it seems like it starts out real big with single-serve packaging, then you have multi-packs or five-packs come out, and they do all right, but they’re just not as strong as a single stick," he says. "Customers just seem to be looking for a change of pace."
Certified Oil, which operates 102 convenience stores, gas stations and kiosks in Ohio, Kentucky and West Virginia, continues to increase its presence in the non-cigarette tobacco segment. As for the flavors, Glenn says he thinks the flavors’ strong sales are sustainable.
"These flavors are no different than cherry or vanilla—which are flavors that were readily accepted a long time ago," he says. "It doesn’t seem that there’s any popular style for any particular store or demographic; rather, if you’re attracting a cigar or moist smokeless customer, the flavors seem to be attractive alternatives."
While it may appear to be an altogether new trend, Glenn says flavored SKUs are nothing new to cigars or the moist smokeless segment.
"If you look at what’s going on with the smokeless segment, the new flavors are really just derivations of the mint flavors," he says. "Peach was a natural progression after the wintergreens, and it goes to show that customers don’t necessarily want to limit themselves to cherry or vanilla."
Despite his optimism regarding future sales growth in the flavors, Glenn says he’s not sure how much farther manufacturers can push the envelope and "stretch the customer’s palate." He’s leery of going overboard with flavors that won’t appeal to a large enough audience and, therefore, not justify taking up prime selling space on the counter.
"You can’t go wrong with grape and peach and apple," he says. "But, in my opinion, if you keep going more exotic with flavors like mango, I don’t see that going quite as well."
In the past year, Glenn has given cigars more presence on the counter, using Plexiglas displays with two to four "stair-step type" designs. These displays do an excellent job of showcasing the product, which he attributes to the efforts of key manufacturers. Smokeless tobacco has had room to grow, too, as Glenn has sacrificed some space he used to give to pouch tobacco. He has added as many as eight more moist smokeless SKUs to accommodate new flavors.
"We’re a big proponent of the smokeless tobacco business," he says. "If it looks like that business is sustainable, we’ll use scan data to drop more SKUs into the set. Snuff seems to be an easier fit to incorporate just because you’re primarily dealing with the one package size. The cigar manufacturers need to look at their collections and say, ‘This flavor may only be doing well in five-packs or blunts.’ They need to recognize the items that aren’t going to sell well and get the right packages in the right stores."
Overall, Glenn says he’s seen the total non-cigarette tobacco category grow, though he says some of the flavors may have had a bit of a cannibalizing effect on some of the standards. "If my sales are up X%, is it X plus Y or X minus Y?" he asks. "My gut tells me there was some trade-off there, but those categories continue to grow for us. If someone comes out with even more exotic products, we’ll try them even though we might be trading those dollars for something else. Either way, the trend bodes well for incremental sales."
Even though the seemingly explosive rise of flavored SKUs in the noncigarette tobacco category appears to be a fairly recent development, some flavors have already gained a deep following. For Carey Johnson Oil Co.’s 25 EZ Go Food Stores, chocolate-and strawberry-flavored cigars rank among the most consistent sellers. "If someone comes in and is looking for a new flavor but can’t find one he likes, chances are he’s going to go with chocolate or strawberry," says Michael Fitzpatrick, director of marketing for the Lawton, OK-based chain. "The whole category has been a surprise to us because it’s not something we ever expected to catch on. It has been so popular for us that we’ve had to continually expand our cigar assortment. We’re not doing a whole lot more in terms of merchandising, just managing the general expansion."
EZ Go Food Stores has been doing good business with flavored cigars for about 18 months now. Some of the company’s stores have as much as 9 ft. of space, featuring three high-shelf racks. Originally the chain had just two shelves but has had to expand to accommodate increasing demand.
"In a store that sells a lot of blunt cigars, we may now have as many as 50 different cigar SKUs, but in general we’ve probably increased our cigar assortment by five to 10 SKUs because of the flavors," he says. "Year to date, all our tobacco is up 12%, and that’s including cigarettes. But in one store where we break out sales of cigarettes and other tobacco products, cigarette
dollar sales are up 11.5%, while OTP is up 22.8%. And that’s probably typical for a lot of our stores. In our stores off the turnpike— which don’t sell as many blunts—OTP sales are up only 6%.
"We were probably a little ahead of the curve in terms of getting heavily involved in selling flavored cigars," Fitzpatrick continues. "You really have to stay on top of the flavors, because many times the sales life of these items is only one or two months. Beyond that many of them just won’t sell, so you’re not optimizing space."
As of January 1, Oklahoma effecteda net tax increase on all tobacco products—including a 55′ per pack increase on cigarettes. Adding in recent manufacturer price increases, the average per-pack price in Oklahoma tips over the $4 mark. Fitzpatrick doesn’t expect the "sky to fall" because of the increases, but he does expect them to have an effect.
"It’s going to be an interesting first quarter," he says.
Steve Happel, general manager of Hawkeye Oil Co. (Cedar Rapids, IN), says he never thought he’d see the day when customers would come in and ask for a banana or coconut-flavored cigar. Despite his surprise when it continues to happen these days, he has remained open-minded.
"We’ve been picking up all these new flavors as they come along," says Happel. "We usually have cigars by the front counter, not as an impulse sale per se, but it gives the customer more opportunity to see that they have more choices."
For his chain’s six stores, Happel has seen a small percentage increase in "standard" or non-flavored cigars. They continue to remain strong, but customers are being more inquisitive by experimenting with new flavors.
"We went from an average of 15 cigar assortments to as many as 30 in some stores in the last six months, and it has been worth the increase," he says. "The increase in sales we’ve seen has fully justified the increase in the number of flavored SKUs we’ve had to carry."
He says he still sees a lot of people experimenting, but he’s not sure if flavored cigars will continue to drive the segment’s growth long term. For now, he’s content with the sales the flavored items are generating.
"Customers aren’t buying them in boxes, of course, though we do sell some five-packs; most or all sales are individual sales of popular-priced items," he says. "Mainly it’s a guy who smokes a cigar on occasion, but we do have some women purchasers of the flavored items. The trend has been coming on really strong in the past six months, and in that time we’ve gradually increased flavors to be in line with customer demand."
In determining which new SKUs to carry, Happel says his chain uses "a little bit of both" in terms of data from vendors and requests from customers. Presently, there’s no formal "chain of command" from the customer’s mouth to Happel’s ears, but he’s confident his chain is meeting the need for demand.
"Whatever customers are buying, our vendors are pushing, and they do a good job of letting us know what’s selling," he says. "We also have our ear to the ground for customers, and they transmit their requests for things they might have heard of by word of mouth or something they may have seen in a magazine ad. If we get enough requests for it, we’ll carry it."
Taste is everything
Village Pantry’s Kent Raphael says the flavors have gotten quite rich; the peach-flavored cigars, for example, actually taste and smell as much like a peach as they can. He credits the manufacturers for going to such lengths to produce flavors that permeate the whole product. He says he’s been surprised at the unique energy flavored SKUs have stirred up in the whole non-cigarette tobacco category. As for how to capitalize on the trend, Raphael says it’s not exactly rocket science. The simplest answer is to have flavored SKUs in stock and on display. For cigars, Village Pantry uses a countertop wire-frame rack that merchandises SKUs effectively and gives the segment a home.
"There’s no magic to it," he insists. "It’s like any other category in the store—customers seem to enjoy the new things. Keeping the flavors rotated is the key to keeping the cigarsmoking customer coming back in for trial. We try to have a ‘feature product’ as part of our set each month. It’s not always a flavored item, but when a new flavor comes out we’ll feature it. And when we do, usually its sales are a surprise to us all."
Total Dollar Sales, $MM
% Chg vs. YAGO
Trade Channel % Share
Corporate % Share
Product Type % Share
|Source: ACNielsen field report, all outlets, 3Q 2004|
Total Moist Smokeless
Total Flavored Moist
Copenhagen Snf Ms Cn 1.2oz
Copenhagen Snf Ms Lg Cn 1.2oz
Kodiak Snf Ms Wn Cn 1.2oz
Skoal Snf Ms Fn Wn Cn 1.2 oz
Skoal Snf Ms Lg Wn Cn 1.2oz
Grizzly Snf Ms Lg Wn Cn 1.2oz
Skoal Snf Ms Lg Str Cn 1oz
Skoal Snf Lg Mt Cn 1oz
Grizzly Snf Ms Fn Nt Cn 1.2oz
TimberWolf Snf MsLg Wn Cn 1.2oz
Red Seal Snf Ms Fn Nt Cn 1.5oz
Red Seal Snf Ms Lg Wn Cn 1.5oz
Skoal Snf Ms Lg Chr Cn 1oz
Copenhagen Snf Ms P Cn .820oz
Skoal Snf Ms Lg Berry Bld Cn 1.2oz
TimberWolf Snf Ms Lg Str Can 1.2oz
TimberWolf Snf Ms Fn Cn 1.2oz
Skoal Snf Ms P Wn Cn .820oz
Red Seal Snf Ms Fn WnCn 1.5oz
Skoal Bd Snf Ms P Wn Cn 200c
Skoal Snf Ms Lg V Cn 1.2oz
Skoal Snf Ms Lg Apl Bld Cn 1.2oz
Skoal Snf Ms P Berry Bld Cn .820oz
TimberWolf Snf Ms Fn Wn Cn .820oz
Kodiak Snf Ms Wn Cn -.60 1.2oz
|Source: ACNielsen Convenience Track, 11/20/2004 vs. YAGO, as provided By U.S. Smokeless Tobacco|
That’s one cool drool tool
Spittoons were as much a part of the Spaghetti Western as bar fights and black-hatted gunslingers. Today, they seem to be working their way back into the American way of life—though they’re not likely to be found on the corner of the bar at the local watering hole. The spittoon of the 21st century has been personalized and shrunk down into an ideal supplement to sales of moist smokeless tobacco products.
Often alienated by non-tobacco users for their disposal of excess spit, smokeless-tobacco users can now turn to the DipTopsTM Personal Spittoon from DipTops LLC (www.diptops.com).
The Personal Spittoon acts as a reusable, stylish replacement for Styrofoam cups or other receptacles that often lead to spills. Users simply snap one onto the top of a standard beverage can, and it becomes a spill-resistant, pocketsize spittoon. When finished, users simply remove the device for cleaning and dispose of the can.
The Personal Spittoon carries an SRP of $3.99 and should be merchandised alongside non-cigarette tobacco displays. Orders can be placed through the company’s Web site, or through a growing number of distributors across the country that now carry the innovative product.
During a recent tobacco category review, Village Pantry Vice President of Merchandising Kent Raphael noticed a bit of an upswing in sales of pouch tobacco in his scan data.
"There still are not any numbers I can retire to St. Croix on, but the segment is seeing movement that a couple of years ago we wouldn’t have seen," he says. "Maybe it’s a growing category, even though it’s not for everyone."
He says the fact that Indiana isn’t a high-tax state like Connecticut or New York may be restraining the segment’s sales potential, especially when his company’s stores offer lower-tier cigarettes that retail for less than $2 per pack. Still, he does see an audience for rollyourown/make-your-own tobacco, most notably among retirees or other people with more time on their hands.
"It’s not for most on-the-go customers—it’s not something you can do behind the wheel of a car," he says.
"RYO will have a harder road to haul than it would in an extremely high-tax state. There is a demand for it, but with the quality of the cigarettes being what they are at $2 per pack, RYO probably