Adapting to Tobacco Category Evolution

As regulations erect roadblocks to tobacco sales, c-store retailers expand into alternate segments in hope of finding new ways to grow sales.

Throughout the first half of 2019, the tobacco category has been inundated with proposed legislative restrictions. One Hawaii lawmaker attempted to graduate the minimum purchase age to 100 (it soon fizzled out in committee). Last month, the Beverly Hills City Council scheduled a vote to ban the sale of all tobacco products from any retailer in the California city other than cigar lounges and upscale hotels. And of course, the U.S. Food and Drug Administration (FDA) proposed a significant change in its compliance guidance that could demand convenience stores segregate all flavored tobacco products.

That’s just a sampling of the more extreme proposals; meanwhile, states and cities continue to weigh tax increases and flavor bans.

“Thus far, this year has not been the bloodbath many feared,” said Gregory Conley, president of the American Vaping Association. “When you consider the political situation we faced several months ago, we’re exiting a bunch of legislative sessions without too many bad laws. Indiana proposed a tax, which died. Taxes in Wyoming were killed, and a 62% tax was close to going on the ballot in Colorado but was killed by a vote of 25-10 in the state senate.” 

Not everything happening to the category is viewed negatively. In April, the FDA granted Philip Morris International approval to market iQOS in the U.S. Plus, the 2018 U.S. Farm Bill removed restrictions on hemp-derived cannabidiol (CBD) products at the retail level. Although it’s not a tobacco product, CBD has been attracting customers across multiple demographic classifications and has created new opportunities for convenience stores.

So, given the multifaceted elements at play, how do c-store owners and operators envision the tobacco category evolving over the second half of 2019?

While many in the c-store industry agree that a cohesive 21 requirement could affect the category, it’s less intrusive than the FDA’s proposed changes to its Compliance Guidance. Basically, the new rules would require brick-and-mortar stores to prohibit sales of flavored e-cigarette, vaping and cigar products ­­—­ other than tobacco, menthol and mint — by creating a 21-plus entrance or moving products to a separate area on the premises that minors could not enter.

NACS and the Society of Independent Gasoline Marketers of America (SIGMA) issued a joint formal comment protesting the proposed changes, citing evidence from the American Journal of Health Promotion, which indicates teens are far more likely to acquire e-cigarettes from vape shops than c-stores.

The associations said that the FDA’s draft guidance “will push underage consumers to retail outlets with the worst track record of compliance with age restrictions. The result will be more overall sales of (e-cigarettes) to minors rather than less.” 

Read more at https://cstoredecisions.com

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