While tobacco has long been a backbonefor the industry, pulling millions in individualunit sales as well as boosting the profit from theaverage smoker’s market basket, it has not come without its problems.
Consistent tax increases and society’s dour view on cigarette smoking often leaves a huge hunk of profit missing while c-stores lose regulars who decide to wean off cigarettes. To keep tobacco sales strong and steady, many retailers are finding salvation in flavored cigars, which havebeen showing strong potential over the last year.
According to the National Association of Convenience Stores’ (NACS) State of the Industry Report, cigar sales increased 5.2% to represent 30.48% of the Other Tobacco Product (OTP) sales. As their popularity and subsequent sales grow, retailers are finding that this category has been excellent for complementing rather than cannibalizing cigarette sales.
“It’s not uncommon for our cigarette customers to pick up some flavored cigars with their regular cigarette purchases,” said Keith Martin, owner of Tobacco Outlets, a c-store in the Chicago area that caters directly to smokers by carrying an extensive variety of tobacco products. “A lot of our smokers are looking for variety, and a lot of the times they find that in the flavored cigars. It’s not that cigarette smokers are switching exclusively to cigars. They just come in and purchased the flavored cigars for a change of pace, and then go back to cigarettes.”
Over the past two years, Martin has watched cigar sales grow beyond his expectations in his eight stores. One of the major reasonsMartin feels the category has been selling so well is the price, which for a pack of 20 little cigars is often $2 or $3dollars cheaper than a pack of cigarettes, depending on the taxesof a given area.
“Alot of our top-selling cigar products have reallybegun selling much better now that theyare more aggressively priced,” said Martin.”The price isn’t causing them to be used asa cigarette alternative, but it’s opening thecustomer to a larger selection of tobaccoproducts.”
Cigars, which traditionally have a reputation as being the tobacco of choice forhigh-rollers and elitists, have openedthemselves up to a more working-classaudience as well, thanks to the inexpensive offerings found c-stores. Some of thehigher-end cigar products can be foundfor as low as 99 cents. For instance,Vaquero Little Cigars, manufactured byMiami-based General Tobacco, enjoyedenormous popularity in Martin’s store,thanks to its low price tag of $1.25 fora pack of 20 cigars.
“We’re trying to provide moreinexpensive options for tobacco consumers,” said Doreen Colondres,marketing director for General Tobacco.”We launched the Vaquero Little Cigars almost two years agoand they’ve been doing very well for us, primarily because of thevariety of flavors we offer.”
Flavored cigars are a hot item because they offer cigarette smokers a flavored alternative, often ina variety of SKUs, as opposed to the simple menthol or non-menthol profiles inwhich cigarettes are typically confined.The assortment of flavors is also a hugeselling point.
“The different flavors is what reallypulls in the cigar smokers,” said Martin.”With brands like Vaquero, each flavor satisfies its own niche. The more traditionalcigar smokers usually go for the naturalflavored products. Female cigar smokersoften go for the lights or the cherry-flavored products. A lot of the youngersmokers go for the mint and vanilla flavors. It’s really about providing a productthat each niche will want to purchase.”
Placed for Purchase
A lot of the success in flavored cigars isalso letting the customer know the options that are available with the product. Manyretailers like Joe Hamza, director of marketing for Tedeschi Food Shop’s Store 24chain, have been enjoying success with theproducts not only because of the demand,but because of the aggressive placementof the products in the stores.
“OTP have always sold well for us,”said Hamza. Store 24 has seen even morebusiness come out of the category thanksto increased in-store marketing. “In all ofour stores, we’re updating the planograms, adding new items andremoving the less profitable ones.
“There’s been a lot of innovationin the OTP category,” added Hamza,who credits a lot of the category’sgrowth to flavored cigars. “There’smuch more variety and a lot moreproducts to address each niche.”
Martin also acknowledges thecategory’s surge stems from the new visibility a lot of suppliers are bringing to theproducts.
“Flavored cigars have really beenaround for a while, but people didn’tknow all the options available,” saidMartin. “For example, Swisher’s Black &Milds have been popular for a long timebecause they were one of the most commonly known products. But now Swisherand other suppliers are really going out oftheir way to make the product known.”
Giving Customers the Room toExperiment
In order to garner more interest inthe category’s diversity, suppliers likeSwisher offer various specials. For example, in Martin’s stores, they run buy-one, get-one deals that allowcustomers to try out differentproducts to find their niche.Leading customers to singlecigar sales also helps developpackaged sales in the category aswell.
“The shift toward single cigar purchaseshas helped fuel the growth of flavoredcigars,” said Jane Green, vice president ofmarketing with Swisher International Inc.”Consumers are able to purchase severaldifferent flavors at once and enjoy tryingnew items without committing to a largerpurchase.”
Regardless of how smokers purchasetheir cigars, Martin feels the category willcontinue to show potential.
“Cigars make for a good escape forsmokers,” Martin said. “Smokers will buythem for special occasions, when a cigarette just isn’t going to cut it. And withsuppliers offering more competitive pricing and SKUs, the customer has a lot moreto enjoy.”