LAS VEGAS -- "[Cigarette] price gaps are as narrow as they've been since Marlboro Friday," USB senior analyst Nik Modi told retailers and suppliers attending the "Tobacco: Managing the Changes" educational session at last week's NACS Show.
And Modi wasn't the only panelist who observed such a trend in what moderator and managing partner of Barrington, Ill.-based Balvor LLC, David Bishop, described as a "premium-dominated segment"--even the premium brands have been hit by trying economic times.
"There's no question about it, the big three sell wonderfully," said Mary Szarmach, senior vice president of trade market and government relations for Boulder, Co.-based retailer Smoker Friendly. "But they're all discounted aggressively now."
Just how aggressively have players like Philip Morris USA, RJ Reynolds and Lorillard discounted their products? While Modi compared the diminished price gaps to those of 1993's Marlboro, Szarmach compared it to a more modern equivalent.
"There's not much difference in price gap, certainly between Smoker Friendly's private label cigarettes and something like Marlboro 75s."
"The lowest income consumer has been hit the hardest," Modi said of the economic crash, noting that the majority of jobs lost came from the minimum wage segment of the population. "Manufacturers responded to that reality."
And while such discounts have helped retailers keep cigarette sales steady, despite less disposable income and higher taxes, Modi warned the tides could soon be turning on the discounting trend.
"Now low-income [jobs] are growing the most. ... that will translate to manufacturers," he said, meaning that despite an improving economic environment, retailers could be facing troubled time in the key category of cigarette sales.
"Next year, we'll see a more moderated promotional spending," Modi predicted. "And more pressure on retailers to hit the numbers."