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It may not be the most visible change, but statistics show most retailers across America are re-evaluating their stores’ tobacco shelf space, and replacing cigarette some of it with other tobacco products and electronic cigarettes.
For decades, cigarettes have dominated store shelves all around the country, generating considerable profits to shop owners, but with sales declining at an annual rate of 3% to 4%, many are starting to reassess their cigarette-dominated back bar. So far, most stores dedicated more than 80% of their tobacco space to cigarettes, but now that past years’ profits are history, it no longer seems realistic to carry on with the same strategy, and owners are taking away as much as two square feet from cigarettes and allocating the space to other tobacco products (snuff, MST, etc.), and lately, to electronic cigarettes.
Senior tobacco analyst Nik Modi has long predicted cigarettes would account for less than 50% of store shelf space by 2020, and the latest trends seem to be an indication of this. For the time being, cigarettes remain the engine driving the tobacco industry, but recent studies show very promising numbers supporting an investigation into alternatives like e-cigarettes. Bonnie Herzog, managing director of Beverage, Tobacco & Consumer Research, said “The majority of our respondents indicated that they believe e-cigarettes are not just a passing trend but that they are here to stay, with several noting [Lorillard’s] purchase of blu ecigs lending credibility and legitimacy to the entire category.“
Electronic cigarettes are still considered a fairly young product, at least for convenience stores, but most retailers believe they’re here to stay. But most of these small business owners didn’t even know these things existed until a short while ago, so what has suddenly sparked their interest in e-cigs? Ironically, it was the recent acquisition of Blu e-cigs by Big Tobacco giant Lorillard. The $135 million deal actually inspired confidence in e-cigarettes. “Smokeless increased because the majors got involved,” Nik Modi says. “It happened with energy drinks category as well–when Coke and Pepsi entered, it helped the category.”
“We continue to believe [Lorillard’s] e-cig acquisition is very positive and expect [Reynolds American] to be the next mover into this growing category, most likely organically, but we wouldn’t rule out a potential acquisition,” Bonnie Herzog says, adding that the e-cigarette industry could go from the current $300 million in revenue at retail, to $1 billion, in just a few years. Considering there are no federal or state excise taxes levied on e-cigs at this point, they are considerably cheaper than traditional cigarettes, which makes them very attractive for businesses.
Other strong points that make e-cigarettes a worthy competitor for tobacco are:
- e-cigarettes are environment-friendly (while smokers throw out 4.5 million toxic cigarette butts a year, e-cig components are easily recyclable);
- e-cigs are employer-friendly (the average employee spends an average of 64 minutes a day on cigarette breaks, but e-cigarette users can be more productive by vaping right in the work space);
- electronic cigarettes are a healthier alternative (there are more than 7,000 chemicals in tobacco cigarettes, but only five known ingredients in e-cig liquid);
With convenience stores making more shelf space for tobacco alternatives, it’s safe to say electronic cigarettes will become even more popular in the coming years. Hopefully, people who can’t quit smoking by traditional means will discover the power of e-cigarettes, before it’s too late.