The cigar category may just prove a pleasant surprise for convenience stores in 2015.
Lower gas prices should translate into higher in-store rings and additional impulse sales. And while the lower-price tier remains the staple, many see greater opportunity for more expensive cigars.
Cigar singles will continue to fuel the category throughout the year. To capitalize on the momentum in this area, category managers are working to bring in new products, create new offerings and be aggressive on non-cigarillo pack pricing.
Pre-priced domestic cigars continue to be the category’s bread and butter. More and more companies are coming out with increased pack sizes at the lowest possible price, shrinking retailer margins—for example, a pack of five cigarillos priced at 99 cents.
At the same time, growth in the premium cigar category continues into 2015 as more manufacturers are offering humidified-pouch products to get distribution into stores without humidors. Manufacturers seem to be focusing attention on the c-store channel.
Sal Risalvato, executive director of the New Jersey Gasoline-C-Store-Automotive Association in Springfield, N.J., said cigars provide a better growth opportunity for c-stores than cigarettes.
“From what I can tell, cigarettes are shrinking, but cigars have some room for growth,” Risalvato said. “They satisfy the hand-to-mouth experience, and give people some of that taste bud pleasure. They are perceived as safer than cigarettes because customers are not inhaling the smoke.”
Roland Harris, retail operations supervisor for GOC Ltd. in Butler, Ala., which operates seven GOCO convenience stores, said his experience with cigars is typical.
“When it comes to cigars we’re talking about small cigarillos; that’s what’s doing real good now,” Harris said.
The stores do carry slightly more expensive cigars, he added, but nothing high end. “Those might be good in some stores, but we don’t have that type of clientele. We just go into the small, cheaper end.”
SPACED OUT
GOCO merchandises 20-30 varieties of cigars on the back wall alongside its cigarettes, Harris said. His lament is the same as that of many c-store operators: lack of display space.
What Harris has found does give cigar sales a push is the more or less regular influx of flavored products. “One of them will come in and it will take off, go for a while and then die out.”
While inexpensive cigars remain the category workhorse, Risalvato said more convenience stores have begun to carry more traditional, higher-priced cigar lines. Risalvato is tied in with a group of 50 fellow Exxon station operators who also plan on rolling out higher-priced cigar lines.
“It’s because they see a market for it,” he said. “I know a retailer who just showed it to me recently: he is actually devising a whole product line of cigars to sell in his Exxon location. I have to tell you I saw the packaging and I saw the cigars less than a month ago. He’s got cigars that are coming in from the Dominican Republic and every other place except Cuba, and they were very, very nice. They are actually going to be targeted towards a particular group of cigar smokers, with an emblem on them for this group.”