Smokeless tobacco market plans, snue and spit free product information

TOP PERFORMERS
  • Copenhagen (Philip Morris USA)
  • Skoal (Philip Morris USA)
  • Grizzly (Conwood Co./
  • Reynolds American)

HONORABLE MENTIONS

  • Kodiak (Conwood Co./
  • Reynolds American)
  • Timberwolf (Swedish Match)
  • Longhorn (Swedish Match)

Few product categories are as dynamic as smokeless tobacco, which helps make managing the set all the more interesting. With so many new products, flavors and line extensions to choose from, some operators say it’s a challenge to stay on top of the hot new products.

Keeping sets fresh—allocating shelf space, rotating product, keeping tabs on expiration dates and weeding out slow sellers in favor of new and hot items—can prove tricky, especially when the fortunes of product segments within the category begin to noticeably rise and fall. Snus and spit-free products are among the hot items gaining prominent shelf space in convenience stores.

Whatever else it accomplishes, consolidation among tobacco companies should help firm up planograms in traditionally complex and fast-paced c-store tobacco products sets. Most notably, Altria Group Inc., parent company of Philip Morris USA, completed its $11.2 billion acquisition of UST Inc. in January, greatly expanding Altria’s presence in the smokeless tobacco segment. UST’s brands include powerhouses Skoal and Copenhagen.

“It’s a lot of brands in a small space,” said John Kelly, chief operating officer and vice president of operations for Mountain Empire Oil Co. “And it’s a really fast-growing category—especially the smokeless and the cigars.” The company operates 56 Roadrunner Markets in Tennessee, North Carolina and Virginia.

“The smokeless category has grown for us and, I think, for the industry pretty dramatically over the last two years,” said Kelly. He believes a big reason for the growth is a tendency by some smokers to cross over to smokeless tobacco “for those times they just can’t smoke. If it’s not that, then I can’t explain the growth of that category.”

Mountain Empire has increased the amount of space that it devotes to smokeless products, from 48 SKUs last year to 55, with a couple of the highervolume items getting two facings. That said, anywhere from 15-20 items are discontinued in a given year.

USB Investment Research analyst Nik Modi said moist smokeless tobacco’s popularity is only in its early phase, and it can expect 6-8% annual growth up until 2010 as retailers position the category as a means to recover margins that are shrinking in the cigarette category.

There are opportunities to increase market share at convenience stores, according to CSD’s 2009 Brand Preference Study. Of the 94 smokeless tobacco buyers to participate in the study, 19% reported no sales presentations from smokeless tobacco suppliers in the last two months. In fact, 52% reported less than five presentations from the 11 major supplier companies serving the market. Philip Morris USA’s acquisition of UST should yield dramatic improvements in this area. The world’s largest tobacco company also has a large, experienced sales force now handling UST’s venerable brands.

Smokeless tobacco buyers identified UST’s Copenhagen and Skoal, and Conwood’s Grizzly as the top performers in the category. Copenhagen led every smokeless brand for product quality and most effective sales program. Honorable mentions were Kodiak, Timberwolf and Longhorn.

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