Smokeless Sales Grow Strong

On Feb. 7, 2017 the U.S. Smokeless Tobacco Co. (USSTC), a division of Altria Group Inc., issued a nationwide recall of numerous Copenhagen, Skoal, Cope and Husky smokeless tobacco product lines after receiving complaints of foreign objects found in containers.

“We go through manufacturer product recalls pretty regularly, but this is the biggest one as far as [removing] fast-moving core items,” said Mike Clifford category manager for Clifford Fuel. The company operates 21 retail sites, including a franchise of Nice N Easy c-stores, throughout central and upstate New York.

“We instructed our managers to apologize to customers and recommend an item in stock, such as Grizzly,” he added. “We’ve also instructed our stores to ramp up on their orders of Grizzly.”

Despite the isolated incident, spitless tobacco has performed well overall.

According to Nielsen data, reported by Wells Fargo Securities, Copenhagen’s dollar share rose to 31% during the four weeks ending Jan. 28, 2017. Grizzly still recorded an impressive 26.8% in dollar share during the same period.

In dollar sales, Copenhagen marked an increase of 8.5% for all retail channels during the four weeks ending Jan. 28. Grizzly gained 3% during the four-week period.

“While Copenhagen remains a clear winner on recent line extensions, we expect Grizzly to benefit in the near term from USSTC’s recent smokeless product recall,” said Bonnie Herzog, senior analyst for Wells Fargo Securities.

Over the past year, Clifford has worked to grow the other tobacco products (OTP) category in his stores.

“It was a pretty good year. We’re up 3% in units and 6% in sales. There have been price increases, so sales growth is a little higher,” Clifford said.

Part of that category expansion has included adding new flavors. For example, he started stocking Copenhagen Dark Mint, which had a national rollout this quarter.

“It was one of the best-selling SKUs,” Clifford said. “Skoal also came out with some fruit blends, apple, berry and citrus. We pushed the different flavors harder this past year.”

In the Wells Fargo Securities 2016 Q4 “Tobacco Talk Survey,” Herzog observed that the recent launch of Grizzly Dark Mint received a more tempered reception.
SPITLESS IN THE SPOTLIGHT
Within the smokeless tobacco sector, chewing tobacco continues to dominate in both dollar and unit sales. According to Information Resources Inc. (IRI) Total U.S. Convenience Store All Scan data for the 52 weeks ending Dec. 25, 2016, chewing tobacco earned more than $6.1 billion in dollar sales. Unit sales totaled more than 1.3 billion.

SNUs and dissolvables rang up more than $277 million in dollar sales for the same 52 weeks, which represented a 13.17% jump compared to 2015 figures; whereas chewing tobacco only grew by 5.86%.

Unit sales for spitless also experienced greater gains: 9.29% versus 1.71% for chewing tobacco, according to IRI. Some industry analysts point to the steady stream of state regulatory legislation—including increasing taxes on e-cigarettes—are driving some consumers to the spitless segment.

As more municipalities pass restrictions on where users can indulge in chewing tobacco products, SNUs and dissolvables may command even more market share in the short-term.

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