A Big Inhalation

Retailers take in ideas on regulations, e-cigs, importance of tobacco shopper.

By
Melissa Vonder Haar, Tobacco Editor

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“I’m excited to gather with my fellow tobacco nerds,” quipped one retailer attending CSP’s 10th annual Tobacco Category Review Meeting. “My counterparts don’t always get the world we’re dealing with.”

Truly, no category except perhaps fuel offers retailers the most potential sales while also boasting the regulatory, taxation and squeezed-margin minefield that goes along with it. Indeed, even after giving a detailed presentation about local regulatory issues, NATO executive director Thomas Briant had to cut into another speaker’s session with the news that New York City had just announced intentions to try to limit—or even ban—the sale of many electronic-cigarette products.  

Yet despite the many challenges in the category, its importance to c-stores cannot be understated. It was this question of tobacco’s overall value to the channel that Don Burke, senior vice president of Pittsburgh-based Management Science Associates (MSA), addressed during his general session.

To explore this concept, Burke used MSA and Paradigm Sample’s custom cciPanel data, a mobile research panel that captures consumer shopping patterns and is particularly useful for tracking the behavior of the millennial segment.

“In this case, we looked at about 3,400 different visits to a c-store and what shoppers did on those occasions,” Burke said.

On the surface, tobacco did not appear as crucial a category as others: Of the 15 categories tracked, tobacco was only the fourth most purchased, falling behind gas and other fuel, packaged beverages and candy, gum and mints. When the cciPanel buyers visited a c-store, they purchased tobacco 21% of the time, compared to a 55% purchase rate for gas and fuel.

However, when Burke looked at how much tobacco consumers were spending, the category’s true importance began to emerge. Sixty-seven percent of the time, cciPanel’s average c-store shopper spent less than $10; 20% of the time he or she spent $10 to $20; and 13% of the time it was more than $20. There was a perceivable shift toward larger baskets when MSA looked at tobacco consumers, who spent less than $10 43% of the time, $10 to $20 32% of the time and more than $20 25% of the time.

“Compare that to any other category and it really is the strongest,” said Burke. “That’s saying to you that your tobacco purchaser has the largest cash purchases per ring of any shopper in your store.”

And though some of that increased basket could certainly be attributed to the cost of tobacco itself, the cciPanel data also shows that tobacco consumers tend to purchase from a variety of other categories within the store. Prominent add-on purchases included gas and fuel (which tobacco consumers also purchased 52% of the time), packaged beverages (35%), candy, gum and mints (17%) and lottery/gaming (15%).

“The point about a tobacco purchaser is that they will become involved in that convenience shopping experience,” said Burke. “They shop throughout the store—much more so than the shoppers in any other categories.”

This fact was even more apparent when MSA broke down how consumers of different segments within the tobacco category interacted with the store. While premium-cigarette shoppers tended to purchase a wider variety of products (interacting with 22 of the 27 categories MSA tracked), large-cigar shoppers had a strong tie to the important beer segment, presenting retailers with a great potential to increase sales.

“There’s a strong relationship—particularly on the weekends—between cigars and beer,” Burke said, pointing out that weekend consumers buying large cigars were more likely to pick up beer than any other category besides packaged beverages. “If you have some cross-merchandising opportunities, ways on the weekend of putting the cigars on display near the beer aisle, you’re probably going to sell more.”

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