Cigars, E-Cigarettes Earning More Shelf Space

Tedeschi Food Stores of Brookline, Mass., made a decision four years ago to slash the space it gave cigarettes to increase its focus on other tobacco products (OTP). Cigarette sales continued to trend downward in the chain’s New England markets—thanks to a combination of higher taxes and aggressive marketing by Native Americans—and Tedeschi wanted to ride the growing OTP sales trend.

“We felt there would be an influx of need for OTP and acted to position ourselves appropriately,” said Steve Monaco, directory of category management for Tedeschi.

It is now reaping the rewards for that foresight, especially in cigar sales. Tedeschi has seen a 25% rise in unit movement and sales dollars for cigars since giving OTP three more square feet of selling space. The manufacturers that specialized in cigars were lining up to capitalize. Tedeschi decided to go with Swedish Match as its category captain. The tobacco company planograms and re-sets for Tedeschi, as well as shares quarterly insights on sales and unit performance across the region and country.

Single cigars have been strong at Tedeschi’s over the past year. Cigarillos and flavors are strong, as is the latest in packaging.

“Anything foil-wrapped is doing well,” Monaco said, adding that Dutch Master’s vanilla cigarillo was the chain’s top seller in 2010, doubling in volume from 2009. Grape, strawberry and honey all finished in the company’s top 10 sellers last year.

One challenge Monaco has is dealing with manufacturers aggressively redoubling their promotional efforts to ride the momentum.

“You’d like to do justice to them all, but you don’t want to flood the stores with deals,” he said.

Also a sign of the successful times: Monaco recently inked his first cigar merchandising contract, with Altadis. As with cigarettes, the number of SKUs and product placement are involved.

Electronic Age
There are high expectations for electronic cigarettes, but the relatively new tobacco segment still has a way to go. The products are still working their way into convenience stores and some shops. For example, Smoker Friendly International’s stores and network of licensees have only sold the alternative-tobacco product for two years. Mary Szarmach, vice president of trade marketing for the Colorado company, said they are earning their space on the front counter thus far.

“They’re definitely worth carrying,” Szarmach said. “It’s a big ring, but so are cigarettes, there’s a really nice margin on them.”

Szarmach said the price of a starter kit—the cigarette and cartridges—ranges from $39 to $99, depending on the number of cartridges included. Each cartridge is the equivalent of half a carton, said Szarmach. Refills come in packages of varying amounts.

Szarmach’s proprietary brand, Smoker Friendly, manufactured by Freedom Smokeless, comes in a four-pack that ranges from $18 to $25.

She said Smoker Friendly chose Freedom Smokeless because it didn’t sell online. Customers have to come to one of Smoker Friendly’s 85 stores or to one of the 800 stores in its licensee network for refills.

Smoker Friendly displays its e-cigarettes in plexiglass cases. Though many e-cigarette users have claimed they have been able to quit regular cigarettes after using e-cigarettes, Szarmach is cautious about marketing them this way due to questions of FDA approval.

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