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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Moreover, IRI’s Shopper Sentiment survey for fourth-quarter 2013 indicated that consumer sentiments have fallen— unlike the previous three quarters of 2013, when they rose. Shopper sentiment dropped 10 points among millennials alone, the budding demographic group with an appetite for RYO.

What might shopper sentiment trends mean for the fate of roll-your-own cigarettes? Strapped consumers might actually find the offer more appealing, some believe.

“RYO consumers are waiting to be tapped as taxes and regulations have an effect on pricing. So since RYO allows a consumer portion control, this in turn allows for controlling cost of use,” says Steve Sandman, president of Glenview, Ill.-based Republic Tobacco Co., which in addition to Gambler offers TubeCut, Drum, Top and Tin Star, a lighter and smaller, 0.30-ounce package at $3 per tin.

Complicating matters for full-fledged premium and middle-tier RYO brands is the fact that pipe tobacco became a cheap option after the 2009 tax hit, a trend recently reflected in the 13% dollar sales increase pipe tobacco registered in 2013, according to IRI Convenience AllScan data for the 52 weeks ending Dec. 1, 2013.

“Pipe tobacco had astronomical growth, going from zero to 40 million pounds in the space of a year,” says Wortzel. “There were crazy year-after-year increases of pipe tobacco, but we saw velocity begin to level off last June.” With people still feeling a pinch in personal finances, pipe tobacco might look appealing. But RYO purists say bottom-feeding brands in any product category typically produce “you get what you pay for” results.

“The premium connoisseur smoker has kept the segment strong,” says Wortzel. “There are die-hard fans that had all the reasons to switch to cheap brands but didn’t. From a category-management viewpoint, if you want to be in this business, make sure you have No. 1 menthol and regular brands, and make sure you have a premium brand to represent you. Consumers tell us they consider factory-manufactured smokes as generic commodity and a harsher smoke. They regard pipe tobacco as poor quality.”

Exposure and Promotions

Segment players say that to better leverage the RYO value proposition, retailers and supplier partners should put their heads together and treat in-store merchandising with the same brio they do other categories in the store.

“If retailers treat the category in this same fashion, RYO could up its position,” says Sandman. “A store might sell one Starburst SKU well; they add another and then another until they see sales peak, according to their ROI,” Sandman says. “C-stores should continue to expand the RYO assortment until they maximize their opportunity, as opposed to just thinking subjectively that they have enough items in their assortment.”

To enhance appeal, Republic Tobacco introduced a merchandising rack that adds traction to the RYO conversation, making it more appetizing to drive trial and repeat sales. Rack sizes vary from countertop units all the way up to a 4-foot rack, with one popular model 15 inches deep, 24 inches wide and 68 inches high. Depending on product mix and store type, racks can be placed either on the floor or behind the counter.

Lou Maiellano, president of Sevierville, Tenn.-based TAZ Marketing & Consulting Group, is impressed with the merchandising. “The rack provides the presence to properly showcase this product, and it’s modular: You can position it on the floor, in the corner at the checkout area, or behind the counter,” he says.

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