Smokeless Stays Strong and Steady

smokelessThe smokeless tobacco category provided another solid year for convenience stores in 2012, and all signs indicate that 2013 should remain just as strong.
According to SymphonyIRI, total smokeless sales in U.S. convenience stores for the 52 weeks ended Dec. 31, 2012 totaled $4.82 billion, a firm 5.61% increase over 2011. Units sold also jumped 3.39% to 1.22 billion

Of the two segments comprising the smokeless category, moist smokeless and chewing tobacco accounted for 96.38% of total sales, according to SymphonyIRI. Sales in this segment totaled $4.64 billion, up 5.64%. Spitless tobacco products make up just 3.62% of the category and accounted for $175.5 million in sales last year, up 4.89%
While smokeless tobacco should remain a solid category for the foreseeable future, additional government regulations and increased taxation remain possibilities in 2013.

For the time being, smokeless is on the rise. “For 2013, I expect the smokeless tobacco category to continue to grow in the mid-single digits,” said Bonnie Herzog, managing director at Wells Fargo Securities. “I wouldn’t be surprised if some of the activity stays pretty elevated in smokeless in 2013, whether it’s price competition or continued innovation through line extensions and product repositioning as brands fight for shelf space.”

When it comes to consumer trends, Herzog maintained that little if anything has changed of late. “If there is anything to note for convenience stores, it’s that we are seeing an increase in the dual user (cigarettes and moist smokeless), because of the continued smoking bans and restrictions,” Herzog said.
Smokeless tobacco is a way for the consumer to enjoy nicotine in a different way, and in a different place and time.

“Cigarettes continue to go up in price, and there are lots of places where people can’t smoke,” said Phil Metzinger, vice president of specialty beverage and tobacco operations at Brookshire Brothers, a Lufkin, Texas-based company that operates grocery and convenience stores, plus 41 tobacco outlets. “People who enjoy tobacco are looking for an alternative that can be used in a restaurant or at work. Smokeless tobacco is gaining in popularity, especially in urban environments.”

Solid Forecast
Herzog doesn’t expect the demographics of the OTP user to shift markedly, if at all.

“I don’t see anything really changing dramatically in smokeless other than trying to make sure that the category is relevant and there is some excitement,” she said. “That’s why, from the manufacturers, I think you’ll see probably some more SKUs, whether they be with the flavors or the ready cut. That’s how you increase awareness.”

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