Maintaining Strong Cigar Sales

Despite a demand from adult consumers, retailers are continually forced to defend their right to sell flavored cigars responsibly.

By Howard Riell, Associate Editor

While tobacco has long been a bread-and-butter product for convenience stores, accounting for millions in individual unit sales and boosting the profits from the average smoker’s market basket, it remains a category under attack at the federal and state levels.

Consistent tax increases and society’s dim view of smoking, which has resulted in a spate of anti-tobacco legislation, have hurt overall sales and profits. These efforts have also caused c-stores lose regular adult consumers that enjoy tobacco products.

To keep tobacco sales strong and steady, retailers have turned to flavored cigars, which have seen a spike in demand since federal regulations outlawed flavored cigarettes. But even here storm clouds are gathering, warned Thomas Briant, executive director of the National Association of Tobacco Outlets (NATO) in Minneapolis.

Briant is concerning himself with a pair of recent ordinances—one in Providence, R.I., that bans all flavored tobacco products, including all flavored cigars, and another in Miami-Dade County in Florida, that would  also place a ban on all flavored tobacco products (see sidebar).

Why target flavored cigars specifically? Briant said the answer may be that the newest ordinances are viewed as an extension of the Food and Drug Administration’s (FDA) ban on flavored cigarettes.

“The advocates claim—although we don’t believe there is any scientific data to back it up—that flavored cigars are attractive to underage youths,” Briant said. “But we have statistics showing underage youths smoking flavored cigars at a very low rate, much lower than even cigarettes. We don’t believe there is a significant concern regarding that, but they believe there is, so we’re responding to that ordinance.”

“The FDA and individual states have really come down hard on carding,” said Andrea Myers, executive vice president of Kocolene Marketing LLC. “I’m not going to say it’s impossible, but it’s pretty hard for kids to get their hands on tobacco, at least in our stores.”

The FDA’s ban on flavored cigarettes in 2009 opened the door for both little and large cigars to capture that flavored niche. For example, Djarum clove cigarettes were banned under the FDA ruling. The company, like many others, reblended and changed the product to become a filtered cigar, while maintaining the flavor profile customers enjoyed. The change from cigarettes, which are inhaled, to filtered cigars, which generally are not, took a while for consumers to adapt to.

Mike Patel, operator of three Five Points Mobil convenience stores in Flagstaff, Ariz., said once his customers got used to the transition, sales have picked up. “The flavored Djarums are selling very well,” Patel said, adding that flavored cigars overall “are picking up big time. Swisher’s peach flavor is my No. 1 seller in little cigars. Customers really like the fruit flavors.”

Retailers Compliance Crucial

Age-verification issues aside, Myers said neither she nor her colleagues have seen any tendency of youngsters toward flavored cigars. In fact, it’s been just the opposite.

“You smoke for 50 years you might as well try something new, right?” Briant said. “Generally, the demographic is your older adults who smoke flavored cigars, not young children or underage children.”

In its legislative bulletin in July, NATO said that while federal law already bans the sale of certain

flavored cigarettes, the new Florida proposal would not allow retailers to sell cigars, pipe tobacco or smokeless products that have a prohibited flavor.

“It is important to remember that Florida law already makes it illegal for retailers to sell any kind of tobacco products, including flavored tobacco products, to an individual under the age of 18,” Briant said. “There is no need to single out certain tobacco products for a ban and make them unavailable to adult customers.”

While reducing tobacco use by minors is an important goal that all retailers share, prohibiting the sale of flavored tobacco products will harm retailers and is unfair to adults who prefer the variety of flavored tobacco products.

“Specifically, the Prohibition-style ordinance will preclude retailers from selling tobacco products that have a characterizing flavor other than the flavors of tobacco, mint, wintergreen or menthol,” Briant said.

Looking Ahead

In addition to flavored cigars, filtered cigars have helped the cigar category. “Many customers have turned to filtered cigars from cigarettes due to the tax advantage,” Myers said. “The foil fresh concept has helped boost the cigar category, as well.”

For right now, Myers believes, the foil fresh concept has shown itself to be the name of the game in the cigar category. “The foil packaging pretty much guarantees freshness,” she said. “General Cigars has now even come out with foil fresh premium cigars.”

According to Briant, 2012 has been a good year in terms of its small number—just three states—to introduce tobacco tax increases.

“But now we’ve seen the shift to the local level. We probably have responded to just as many local issues nationwide as state legislative issues,” he said. “So there has been a shift, and it is the new trend. It begins on the state level and then shifts back to the local level, and then in time shifts back to the state level.”

The legislative assault on tobacco will continue, Briant predicted. “These local cities are targeting tobacco and bringing these kinds of ordinances forward. We notice that these kinds of ordinances begin on the local level. They go from city to city until they have a certain number of them, and then the anti-tobacco advocates attempt to take it to the state level. That’s why we are responding to the Providence ordinance on the one hand, and then also opposing the Miami/Dade one.”

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