Strong pricing in the cigarette segment helps grow profits.
Smokeless tobacco and cigarettes saw dollar sales growth in February, but electronic cigarette sales declined.
All channel cigarette dollar sales increased +2.4% during the recent four-week period ending Feb. 27, 2016 (+2.9% for 12-weeks; +2.7% for 52-weeks), according to Wells Fargo Securities and Nielsen data.
The uptick was helped by still strong +3.5% pricing, which offset slightly weaker equal unit volume of -1.1% (-0.7% for 12-weeks).
Wells Fargo reiterated its report that tobacco consumption and pricing remains healthy in 2016. “We expect strong manufacturer pricing and profit growth to continue this year,” said Bonnie Herzog, senior analyst for Wells Fargo.
Smokeless tobacco dollar sales grew +6.3% this period, which Wells Fargo noted is sequentially lower than the previous three sequential reporting periods, but 110bps higher than growth in the year ago period.
Meanwhile electronic cigarette dollar sales remain negative due to continued weak pricing. All channel e-cigarette dollar sales were down -11.5% in the recent period (-13% for 12-weeks) driven by negative net pricing of -9.9% and -1.7% unit declines. “Though e-cig year-over-year pricing has been in persistent decline, we believe it is at least partially due to difficulty in capturing SKUs of the evolving vapor category and proliferation of vapors/tanks/mods (VTM) and refills which tend to have lower retail prices,” said Herzog.