RYO/MYO: Welcome to the Machine

Value, DIY and retro mystique spark RYO renaissance

By
Steve Dwyer, CSP Reporter

Retailer Sam Odeh, president of PBD USA Corp., says convenience stores have to give RYO a “proper home” at retail to succeed. Odeh advises retailers serious about the segment to “make sure you have the machines, paper and bags all bundled together.”
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The nostalgia kick championed by 20-something millennial consumers shows a consistent desire to embrace the idea that what was once old is new again.

The 1960s-era Madison Avenue advertising world depicted in the TV series “Mad Men” triggered an increase in bourbon sales, with millennials serving as a growth driver for whiskey.

Nostalgia appears to be a gift that keeps on giving, and these days that retro mystique combined with do-it-yourself independence has created an interest in the sleepy tobacco segment of roll-your-own cigarettes, according to retailers and their supplier partners.

“I hear some 20-something consumers say, ‘I’m going to try roll-your-own for the first time because my grandfather smoked it,’ ” says Sam Odeh, CEO of Elmhurst, Ill.-based Power Mart Corp., who owns and operates six Illinois c-stores. “For some, trial leads to repeat sales, and some of the new innovations with tabletop machines add additional rise to the value.”

Still recovering from a 2009 federal tax imposition, RYO sales fell 17% in 2013 spanning all retail channels, according to data from Chicago-based IRI.

“A troika of high unemployment, higher gasoline prices and delayed tax refunds contributed to people cutting back on essentials, and this included roll-your-own cigarettes,” says Leonard Wortzel, vice president of marketing and product development for Tucker, Ga.-based Scandinavian Tobacco Group Lane Ltd., which offers the upscale Peter Stokkebye brand plus middle-tier Bugler and Kite.

Indeed, federal excise taxes stifled RYO in 2009, which financed expansion of the State Children’s Health Insurance Program. The tax saw RYO costs rise from $1.09 per pound to $24.78. In the meantime, related category pipe tobacco’s tax jumped from $1.09 to only $2.83 per pound.

According to those with a stake in RYO, a new day looks to dawn in 2014 for the segment, buoyed by an improving economy, the allure of retro elements and DIY access, and new accessories and machine innovations that facilitate easier rolling.

To entice consumers to buy into the RYO phenomenon, Lane introduced its “Built by Hand” marketing campaign that describes Bugler as the “last real cigarette.”

“With RYO, you’re appealing to this blue-collar ethos,” says Wortzel. Bugler in a 0.64-ounce pouch (SRP of $3.75 to $4) outperformed the category, he says, gaining 4 share points as of Dec. 29, 2013, per IRI data.

Weighing Options

Economic conditions might be rebounding, but not so fast. IRI’s MarketPulse shows that shoppers in general plan to be more conservative throughout 2014, with 39% feeling that their personal financial situation is worse today than a year ago.

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