Turning to the RYO Category

Since the onset of the April SCHIP tax increase, tobacco retailers have been turning to puffed or extended tobacco to help customers deal with the skyrocketing costs of cigarettes, especially as more customers are turning to the roll your own (RYO) category in an attempt to save dollars.

Republic Tobacco’s Gambler is the market leader in make-your-own (MYO) bagged tobaccos and also the fastest growing cigarette filter tube brand. Gambler, for its part, is helping retailers have more options for consumers. It recently introduced its Turkish line of RYO tobacco in full flavor, light, menthol and ultra light. Bags of Gambler Tube Cut tobacco are available in three sizes 8-ounce, 3-ounce and 1.5-ounce bags. The price per pack goes down dramatically compared to other products when using this unique RYO tobacco.

John Tomlinson, assistant vice president of purchasing and merchandising for Englefield Oil Co., the Ohio-based operator of 131 c-stores in Ohio and West Virginia saw strong results after his Duke and Duchess and ampm stores began offering Republic Tobacco’s full Gambler line, including 15 SKU’s of the Gambler Tube Cut bags, plus its tubes and rolling machines.

“We installed a three-foot rack of Republic Tobacco’s RYO products after the NACS show last year and the products are doing really well,” Tomlinson said. “After the SCHIP tax went into effect all the RYO tobacco was affected and cost more according to weight. Republic Tobacco made a weight change in their product and that lowered the retail price, which helped sales.”

Tax Pressures
Expanded or air puff tobacco reduces the weight per cigarette by puffing the tobacco one-and-a-half to two times its size, allowing the tobacco to fill more tubes with the same weight.

This means that smaller bags of Gambler Tube Cut tobacco can roll just as many cigarettes as larger bags of regular tobacco, which is good news for retailers that want to offer lower prices for recession-strapped customers already plagued by high tobacco prices.

Tomlinson said he noticed the impact of the SCHIP taxes at his stores. The federal tax on RYO tobacco soared from $1.01 to $24.78 per pound, the largest incremental increase of any category. Meanwhile cigarettes were slapped with a $1.066 tax per pack, which caused many consumers to rethink the way they smoke.

“More people are using RYO than ever before. We were selling quite a bit of the RYO products before, but when the tax hit we brought the new Republic Tobacco Gambler product in to helped with sales. Now our tobacco sales are flat if not up just a little bit,” Tomlinson said. 

Cigars
Cigarettes are not the only tobacco product fighting amid tax hikes. When the SCHIP taxes hit in April, federal taxes on large cigars rose from 20.719% of the wholesale price with a tax cap of 4.875 cents per cigar to 52.75% of the wholesale price with a tax cap of 40.26 cents per cigar.

Having helped retailers keep prices low with its RYO tobacco line, Gambler now is introducing cigars that combine fine cigar tobacco with a low per-pack price. Gambler Cigars will initially be available in 100mm full flavor, light flavor and menthol flavor 20-cigar packs, and cartons of 10 packs of each flavor. The company also will be offering a floor display of 48 assorted cartons.

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