Tobacco Retailers: Coming Together

Tobacco shops and c-stores find common ground in a political world

By  Melissa Vonder Haar, Tobacco Editor

This RYO set may look like it belongs in a tobacco shop, but it actually replaced 3 feet of grocery in one of Kocolene’s convenience stores.
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“Look at what restaurants are doing today with the diversification in wines and craft beer,” he says. “There’s so much variety that’s not just flooding the market but doing extremely well. Variety is a huge opportunity, and it’s something that tobacco outlets put a big premium on. We want to be the retailer who has it all.”

Andrea Myers, president of Kocolene Marketing, Seymour, Ind., has observed this shift, as well as the challenges it presents to her company’s mix of c-stores and tobacco shops.

“The constant change of the category means a constant change of space requirements for the category,” Myers says. “Six years ago, a 4-foot roll-your-own set was sufficient for a tobacco store; now we have stores that have 14 to 16 feet.”

Having the footprint to house a 16-foot RYO set seemingly gives tobacco shops an advantage over c-stores. That’s why retailers such as Kocolene leverage their tobacco shops as a kind of retail test market for c-stores: Myers says she won’t put tobacco products into her convenience locations until they’ve proven themselves at the tobacco shops.

This has been especially important in developing the emerging (and constantly evolving) e-cig segment.

“People are really into trying this category. It’s almost a whole new customer for us,” says Myers. “More recently, we are seeing the switch from disposables to kits. I think people have tried the disposables, figured out the brand they like, and are now buying the kits.”

But will this translate to the c-store side? Though Metzinger says disposable electronic cigarettes are still performing well at Brookshire’s c-stores, the company also brought in blu’s rechargeable kits after seeing how well the units were selling in the tobacco shops.

“These kits—which have a $30-plus ring—are a very nice item and margin for a convenience store,” he says.

The emergence of vaping products and e-liquids is another phenomenon that started in tobacco shops but might just trickle down to the c-store side. Like Brookshire, Smoker Friendly is still seeing higher volumes in disposables. However, Szarmach says, “The new vapor products are high-margin and selling like crazy.”

Metzinger views the vaping products as a huge opportunity, stocking—and selling—more than 30 flavors of e-liquids at his tobacco shops.

“With kits and cartomizers, tobacco and menthol flavors were really about 90% of what we sold; the flavors didn’t take off,” he says. “But when we got into the vaping products, it was a different story. It really surprised me.”

Brookshire’s c-stores will follow this lead, but Metzinger says it will be different for every retailer. “It’s something that each operator is going to have to consider,” he says. “I think you’ll see these vaping-style products in convenience stores. They may not carry 30 flavors, but they’ll have some options and do quite well.”

“All these shifts still resulted in more gross profit dollars,” Myers says. “It’s all about managing the shifts.”

Cigarette Conundrum

While there’s a lot of excitement surrounding products such as electronic cigarettes, e-liquids and even “old” standards like MST, that excitement isn’t quite making up for lost cigarette margins on the c-store side.

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