Vape Popularity Grows Despite Uncertainty

Retailers wait to see how FDA regulations affect the vape category, while continuing to promote top-selling options.

Emily Boes • Associate Editor Associate Editor

C-store retailers continue to wait in suspense for Food and Drug Administration (FDA) decisions on pre-market tobacco applications (PMTAs) to trickle in, revealing the future direction of the category and which products can legally be sold under FDA’s ongoing regulations.

Despite the uncertainty, vape sales maintained steady growth.

Dollar sales for electronic smoking devices increased by 13.1% to $6.20 billion for the 52 weeks ending April 17, 2022, according to U.S. convenience data from IRI. Unit sales at c-stores increased by 3.9% for the same period.

“Vape continues to stay strong,” said Nathan Arnold, director of marketing at Englefi eld Oil, which operates 120 Duchess locations in Ohio and West Virginia. “While other tobacco categories continue to fall, we do see some of our consumers switching from traditional cigarettes to vape. This trend has been occurring for many years and continues.”

WATCHING FDA REGULATION

“The FDA continues to be paralyzed by fear that someone somewhere could be angry with their decisions on a fl avored product,” said Greg Conley, president of the American Vaping Association, a provaping advocacy organization. “They continue to only authorize the most inoffensive products.”

One of the most signifi cant events to affect c-store operators recently, according to Conley, is the removal of blu’s nicotine salt system from the market.

“That’s something that we’ve been warning about for years that the natural end or the natural conclusion of the PMTA process was 99%plus of existing products being banned,” he continued.

For the rest of 2022, Conley predicts the end of the disposable synthetic nicotine category or the disposable vaping products within the synthetic nicotine category due to Congress giving the FDA regulatory authority over synthetic nicotine.

Lance Klatt, executive director of the Minnesota Service Station & Convenience Store Association, sees more traditional tobacco being left alone from regulators as vaping continues to be a larger trend with young adults.

Electronic Smoking Devices Retain Upward Growth

Electronic smoking device dollar sales rose 13.1% in the 52 weeks ending April 17, 2022, while unit sales increased by 3.9%.

Dollar Sales Unit Sales

Product

Current 1-Year % Change Current 1-Year % Change

Electronic Smoking Devices $6.20 B 13.1% 4.35 M

Source: IRI OmniMarket Convenience Outlet, Total U.S. Convenience data for the 52 weeks ending April 17, 2022 3.9%

He also predicted the availability of safer options.

“(I) can see higher pricing affecting the overall category through theft and gray markets,” he added.

IN-STORE INSIGHTS

Disposables dominate the vape category at Boulder, Colo.-based The Cigarette Store Corp., dba Smoker Friendly, which has 180-plus locations in eight states. Tim Greene, director of tobacco and general merchandise at Smoker Friendly, believes this will change somewhat in the second half of 2022.

“The second half of 2022 will see the disposable market slow down with the regulation, although I expect many brands to remain on the market as they await FDA ruling or challenge expected marketing denial orders (MDOs),” Greene said.

The biggest change in 2022 for Smoker Friendly is eliminating the brands it knows will not submit PMTAs.

The chain’s 2022 first quarter sales were up 53% from 2021’s first quarter sales and up 12% from 2021’s fourth quarter sales.

Meanwhile in Minnesota, c-stores’ vape sales have been flat, according to Klatt, but they have been adding “mostly closed systems due to valid and safer systems offered through respectable manufacturers.”

At Rotten Robbie Gas Stations, which operates 36 locations in California, six of which are in towns with full e-cigarette bans, sales are also basically flat (up 1.5%).

fast facts:

• Dollar sales for electronic smoking devices increased by 13.1% to $6.20 billion for the 52 weeks ending April 17, 2022, per IRI. • The FDA issued marketing granted orders and marketing denial orders for various Vuse Vibe and

Vuse Ciro e-cigarette products.

In cities with e-cigarette bans, customers cross over into nearby towns to purchase their vape products.

“Stores that are next to cities with e-cigarette bans sell more product,” said Reilly Robinson Musser, vice president of marketing and merchandising at Rotten Robbie.

Juul remains the most popular brand at Rotten Robbie, which also sells Vuse and blu products.

At Duchess convenience stores, however, Vuse is outpacing other vape options.

The industry has been especially awaiting FDA decisions on market share leaders Vuse and Juul, particularly when it comes to their menthol varieties, Conley pointed out.

On May 12, FDA issued marketing granted orders (MGOs) to R.J. Reynolds Vapor Co. for its Vuse Vibe e-cigarette device and accompanying tobacco-flavored closed e-liquid pod, as well as for its Vuse Ciro e-cigarette device and accompanying tobacco-flavored closed e-liquid pod.

The FDA also issued MDOs to R.J. Reynolds Vapor Co. for multiple other Vuse Vibe and Vuse Ciro e-cigarette products. Any of those products currently on the market must be removed or the FDA may take enforcement action.

“Little can be read from this decision,” said Conley of the Vuse MDOs and MGOs.

The FDA has not yet issued a decision on Vuse menthol products, which are still under review, Conley noted. “The authorization of a tobacco flavor, delays on a menthol flavor (decision) and bans on other flavored products have become a pattern for FDA,” Conley said.

Arnold admitted consumers and retailers are wary considering the FDA discussions on the category.

“However, it seems that our consumers are knowledgeable about the press around vape,” he said.

Recently, Duchess has increased signage and promotional offers for its vape products to promote awareness of its brands and offerings, despite the historical absence of tobacco marketing on its forecourts or in store.

Rotten Robbie offers two three-foot sections for the category, Musser noted. Smoker Friendly is continuing to feature brands and offerings its customers are searching for by highlighting the category on the backbar. CSD

Smokeless Tobacco Faces Local REGULATORY PRESSURE

Smokeless tobacco sales are rising with nicotine pouches showing strong growth, but regulation looms in some parts of the country as local and state legislators take flavored tobacco bans into their own hands.

Erin Del Conte • Executive Editor Executive Editor

After the Food and Drug Administration (FDA) outlined its proposed rules to ban menthol cigarettes and characterizing fl avors in cigars last month, all eyes are turning to cigarettes and cigars, allowing smokeless tobacco to fl y under the radar.

Smokeless tobacco has so far remained unscathed by FDA fl avor bans. However, some state and local legislatures increasingly have smokeless in their crosshairs as they push ordinances banning tobacco fl avors. But for now, smokeless sales are trending upward at convenience stores as rising interest in nicotine pouches continues to buoy the category. Smokeless tobacco dollar sales rose 3.7% to $8.72 billion for the 52 weeks ending April 17, 2022, with unit sales fl at (up 0.2%) at 1.41 billion. Dollar sales of chewing tobacco/snuff dipped 1.5% to $7.17 billion, with unit sales down 8.1%. Spitless tobacco dollar sales climbed 36.9% to $1.54 billion, with unit sales up 44.2% for the period. For the four weeks ending April 17, 2022, smokeless dollar sales grew 2.2%, while units dipped 1%. Chewing tobacco/snuff dipped 3.3%, with unit sales down 9.7%. Spitless dollar sales grew 31.9%, with unit sales up 34.6%.

SMOKELESS TRENDS

“Moist smokeless tobacco (MST) continues to dominate the smokeless category even as volumes continue a slight decline and the shift to nicotine pouch/spitless continues,” said Tim Greene, director of tobacco and general merchandise for Boulder, Colo.-based The Cigarette Store Corp., dba Smoker Friendly, which owns and operates 180 locations in eight states.

Greene expects the trend toward nicotine pouches and spitless tobacco to continue throughout 2022. When it comes to MST, Greene expects to continue to see natural and wintergreen SKUs dominate the category. “…Value brands continue to take market share from premium,” he said. Smoker Friendly hasn’t made any major changes to the MST category at its stores this year. “We continue to work manufacturers’ programs to offer our customers the best possible value,” Greene said. “We have, however, expanded our nicotine pouch offerings in strategic markets where volumes warrant additional offerings.”

Smokeless Sales Rise

Smokeless tobacco sales ticked up 3.7% for the 52 weeks ending April 17, 2022, per IRI. Chewing tobacco/snuff sales dipped slightly, down 1.5% for the period, while spitless tobacco sales soared 36.9%.

Dollar Sales Unit Sales

Product

Smokeless Tobacco

Current 1-Year % Change Current 1-Year % Change

$8.72 B 3.7% 1.41 B 0.2%

Chewing Tobacco/Snuff $7.17 B -1.5% 1.09 B Spitless Tobacco $1.54 B 36.9% 321 M -8.1%

44.2%

Source: IRI OmniMarket Convenience Outlet, Total U.S. Convenience data for the 52 weeks ending April 17, 2022

REGULATORY HURDLES

C-store retailers can rest assured that the FDA won’t be targeting smokeless tobacco anytime soon.

“The FDA’s proposed tobacco product standard regulations regarding a ban on menthol in cigarettes and flavors in cigars do not mention or refer to any future possible regulatory action on smokeless tobacco products,” said Thomas Briant, executive director of the National Association of Tobacco Outlets (NATO). “The FDA has requested comments on whether the proposed regulations prohibiting the use of characterizing flavors in cigars should be expanded to also include traditional pipe tobacco and hookah/water pipe tobacco. However, there is no reference to smokeless tobacco in the proposed regulations.”

But while the FDA might not be targeting smokeless tobacco in the near future, states and cities are already pushing legislation targeting smokeless products.

“The immediate concern regarding menthol or

fast facts:

• Smokeless tobacco dollar sales rose 3.7% to $8.72 billion for the 52 weeks ending April 17, 2022, per IRI. • More customers are gravitating toward nicotine pouches/spitless tobacco. • While the Food and Drug Administration isn’t targeting smokeless tobacco, local and state ordinances are popping up with proposals to ban flavors, including menthol.

any flavored offerings is at the local and state level where we continue to see proposed flavor bans,” Greene said.

“The number of state legislatures that are considering total flavored tobacco product bans is increasing,” Briant agreed.

For example, the San Diego City Council on April 25, 2022, passed an ordinance to ban the sale of flavored tobacco products in the city as of Jan. 1, 2023. The state of California is set to vote on the California Flavored Tobacco Products Ban Referendum on the Nov. 8, 2022, ballot. The bill is a veto referendum that looks to overturn Senate Bill 793, which was signed into law on Aug. 28, 2020, banning the sale of flavored tobacco products.

Colorado’s House Bill 1064 looks to ban the sale and distribution of all flavored tobacco products and nicotine products in the state. Hawaii Senate Bill 3118, which bans the sale of flavored tobacco products, passed the Senate Health Committee in February. In Illinois, Senate Bill 3854, which aims to ban the sale of all flavored tobacco products and vapor products, including menthol, mint and wintergreen, is under consideration.

“The trend in banning the sale of all legal flavored tobacco products began on the local level and has now migrated to the state level,” Briant said. “Generally, the main focus of such bans is on youth usage of flavored electronic cigarette/ vapor products and is then expanded to include all flavored tobacco products despite the fact that underage use of traditional tobacco products is at historic lows and continues to decline.”

C-store retailers are encouraged to become active in their local legislature and speak with their representatives about how such ordinances impact business. CSD

Expanding

TOBACCO ACCESSORIES

As the tobacco category evolves, the tobacco accessories segment is transforming with it, opening up opportunities for retailers when it comes to unconventional items from screens to vaporizers.

Howard Riell • Contributing Editor

Displays and sales of tobacco accessories at convenience stores are shifting as c-stores incorporate new items to meet customer demands. The evolution mirrors the changing algebra of the tobacco category as a whole.

A nationwide drop in cigarette smoking; the growth of smoke shops, dollar stores and cannabis-related products; rising taxes; increasingly restrictive legislation; and differences in regional markets are all contributing to the changing fortunes of this must-have category of products.

In the convenience store channel, dollar sales of smoking accessories, including pipes and other items, totaled $430 million, up 4.2% for the 52 weeks ending April 17, 2022, according to Chicago-based research fi rm, IRI.

Dollar Sales for Smoking Accessories Grow But Unit Sales Come in Flat

Smoking accessories, such as pipes, etc. saw a 4.2% boost in dollar sales for the 52 weeks ending April 17, 2022. Dollar sales for lighters were fl at (up 0.3%) for the same period, while sales of matches fell 17.8%. Meanwhile unit sales came in fl at for smoking accessories (0.3%) and fell for lighters (-6.0%), while matches saw a large decline (-24.1%).

Dollar Sales Unit Sales

Product

Current 1-Year % Change Current 1-Year % Change

Smoking Accessories (Pipes, etc.) $430 M 4.2% 216 M 0.3% Lighters $625 M 0.3% 316 M -6.0% Matches $309,036 -17.8% 173,107 -24.1%

Source: IRI OmniMarket Convenience Outlet, Total U.S. Convenience data for the 52 weeks ending April 17, 2022

But unit sales rolled in fl at, up just 0.3%. Sales of lighters totaled $625 million, up slightly by 0.3%, while unit sales fell 6%. Matches topped $309,000 in sales, but were down 17.8% versus the previous period, with unit sales falling 24.1%.

Competition is one factor impacting sales of tobacco accessories. “Here in California, you have smoke shops that sell these items, and in so many examples they are next door to convenience stores on every block,” said veteran convenience store operator Amer Hawatmeh, the longtime president of 52-store St. Louis-based St. George Oil and most recently Coast to Coast Bodega in Santa Clarita, Calif. “But for our industry, wraps and different lighters — cheap lighters — always sell.”

Major shifts continue to impact the tobacco category overall. The tobacco category is shrinking, taxes on tobacco products are growing, cannabis is becoming legal in more states, and vape and organicsmoking SKUs are getting more space on the backbar, Hawatmeh pointed out. These changes are opening the door for sales of unconventional tobacco accessories, from pipes to screens to grinders and vaporizors. Accessories can also help grow basket sizes as sales dip in other areas. Tobacco accessories remain an important segment, generating strong sales and high profi t margins for retailers, Hawatmeh noted. “Every store around the country should be focused and adding all these items into their mixes to add sales,” he said. “Where there is no competition for these items, be the leader and do it strong.”

And, it’s not just tobacco that’s evolving. At c-stores, every item from gas to candy is in transition, Hawatmeh added. “Moving and adding big-ticket items is what every owner and company should be seeking.”

UNCONVENTIONAL ACCESSORIES SHINE

Sharan Kalva, the chief operating offi cer of Huntsville, Ala.-based C-StoreMaster, a national distributor of convenience store products specializing in the tobacco and beverage categories, said he sees overall unit sales growth in the tobacco accessories category of 6.39%. “We are seeing a steady decline in traditional tobacco accessories like ashtrays, matches and rolling paper at a rate of 1.07%,” Kalva said. “We are seeing an increase in unconventional tobacco accessories like vaporizers, water pipes and grinders at a rate of 16.09%.” The factors behind the changes, Kalva continued, include hemp consumption

moving from plant-based smoking to vaping, pill, gummies and tinctures, and cigarette volume shrinking year over year.

A proprietary breakdown of unit sales by subcategory shows: • Lighters — up 3.11% • Rolling papers — up 6.21% • Ashtrays — down 11.21% • Matches — down 9.21% • Water pipes — up 3.11% • Grinders — up 11.77% • Vaporizers — up 29.16%

“Medical and recreational marijuana and increased hemp usage will sharply fuel the growth of rolling papers, water pipes, lighters and vaporizers going into the future,” Shalva added.

MAPPING GROWTH

“We are seeing the accessories category grow depending on the area we are servicing,” said Chad Owen, president of Chambers & Owen Inc., in Janesville, Wis., a U.S. convenience store distributor, supplying customers in Wisconsin, Minnesota, Michigan, Illinois and Iowa. “Accounts in Illinois, where marijuana has been legalized, are doing very well. We are also seeing that spill into border areas/cities around states — for our purpose, Illinois — that have legalized it. Consumers seem to like to try new accessories.”

Owen added that it is difficult to talk about the growth of the lighter category as that was greatly affected by lingering supply chain issues in 2021.

“All of the other areas have seen some nice growth that can be attributed to them,” Owen said.

“We have not gotten into the glassware/water pipes arena yet,” he added. “With the way the category seems to be moving, it may not be long though.” CSD

fast facts:

• Customer demand for unconventional accessories from vaporizers to water pipes is growing. • Shifts in the tobacco category are leading to new opportunities for accessories. • Smoking accessories totaled $430 million, up 4.2% for the 52 weeks ending April 17, 2022, per IRI.