Navigating OTP’s Legal Battleground

The prospects for OTP throughout 2012 are good, as growth remains strong. But a swelling number of revenue-strapped state legislatures continue to hungrily eye the category.

“I think the category will continue to expand,” predicted Matt Hieb, category manager for Gate Petroleum, which operates 225 convenience stores in six Southeastern states.“The growth of the brands alone will drive it. We’ve seen somewhat of a trade down among the consumers just because of the promoting. Our Grizzly growth has been astronomical over the past year.”

What will drive the category in the months ahead, Hieb believes, will be real estate, which he sees as a vital ingredient.

“I think we’ve finally given them the space that they have deserved in our fixture. I also think we’re over indexed with some other brands.”

Those players won’t necessarily be exiting, since the category itself appears to be expanding. “We’ve gone from two shelves of 16 facings to four in less than a year,” Hieb pointed out, “Essentially, the category has doubled. And everything that’s on the set has earned its place, because if it doesn’t sell it’s not going to be on the rack.”

Convenience stores, like other channels, have seen an influx of promotions in the category, Hieb explained. “There has been a lot of $1-off, $1.50-off product.”

Beyond that, individual players in the category must refine their market focus to satisfy core smokeless customers.

Regulations Impacting Cigars
The legislative battlefield that the cigar category has become is likely to consist of small, local brush wars and skirmishes over the balance of 2012, as communities try to enforce their own rules and regulations concerning what may and may not be sold at retail.

“I think success in 2012 is going to depend on the plethora of local ordinances or regulations that seem to be taking hold all across the country,” said Andrew Kerstein, president and owner of five Smoker’s Haven stores in Matawan, N.J. and president of the National Association of Tobacco Outlets (NATO). “I think that is going to shape dramatically—over the balance of this year and for the next couple of years to come—what happens to the cigar industry, particularly as it applies to convenience stores.”

Some of the more worrisome restrictions that have emerged from local legislatures around the country have been either flavor bans or package-size restrictions. Both, Kerstein underscored, are critical. “They are two key components of what’s being proposed in a number of local ordinances and how lawmakers vote will directly impact what’s sold in the convenience store channel.”

Organizations like NATO stand ready to help prepare retailers to testify at city council hearings and other meetings. “C-stores are going to have to embrace advocacy if they want to save this category in their stores,” Kerstein warned. ”We’re preparing for these battles.”

Snus or Lose

In a survey of tobacco smokers, the Center for Survey Research at the University of Massachusetts found that nearly 30% of male smokers aged 18-24 who were living in snus test markets had tried the product. Others survey results include:

• Older smokers were less likely to try snus (about 20% of male smokers 25-35 years old, and only 6% of those more than 35 years old).

• Those who tried snus were less likely to be planning to quit smoking within 30 days.

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