Tobacco Retailers: Coming Together
Tobacco shops and c-stores find common ground in a political world
What about in tobacco shops? Yes and no, especially when you consider how reliant the channel has been on carton sales.
“[E-cig] cartridge refill sales are nowhere near the ring of a carton,” says Metzinger. “A carton of cigarettes in Texas is $50 to $60; an e-cig cartridge is not anywhere close to that. It’s a much better margin, but the dollars just aren’t there.
“With tobacco shops, there’s a lot of little specialty things that you carry, but the dollar sales are still tied up in premium cigarettes,” he continues. Cigarettes account for nearly 80% of sales and 50% of the product mix at his smoke shop locations, he says.
If cigarettes are important to the c-store channel, they’re essential to the tobacconist, as evidenced by the sheer volume of SKUs. Kocolene’s smoke shops average more than 300 cigarette SKUs (as opposed to 225 in its c-store locations), and Metzinger says it’s at least 250 for Brookshire.
The extra space allows these tobacco retailers to carry more than just premium brands, with a big focus on value, third- and fourth-tier brands. As with OTP, cigarette consumers are demanding diversity, which can be difficult to manage.
“Tobacco preferences vary so much from store to store that even within my small six-store chain, I have products I cannot keep in stock in one store and can’t give them away in another,” says Kerstein of Smoker’s Haven.
“To me, it comes down to having the right variety,” Metzinger says. “We’ve always done a very good job with third- and fourth-tier cigarettes, and we’ve tried to keep the very best of what’s out there stocked. There are some strong offerings, though they tend to be regional in nature.”
For the West Coast-dominant Smoker Friendly, this means a heavy concentration of private-label brands. Brookshire has found success with lines such as Pall Mall, Seneca, Pyramid and Altadis’ recently revamped Montclairs.
Myers says Kocolene customers’ preferences vary from store to store, especially considering her company has sites in Indiana and Kentucky, but the trend is clear.
“Throughout the past several years, the average has swayed toward fourth tier vs. premium,” she says.
It’s a lesson that should resonate on the c-store side, even if an operator can’t stock quite as many fourth-tier options.
“There are still people dabbling in the (cigarette) market,” says Metzinger. “Consumers are willing to experiment, so you have to stay close to the market to remain relevant.”
Relying on Relationships
While space is certainly an advantage smoke shops have on the c-store channel, perhaps the channel’s biggest edge is its personnel. A tobacco-savvy clerk is especially valuable when it comes to getting consumers to dabble in new, higher-margin products.
“The people at our locations are really the most important asset that we have,” Metzinger says. “Continually bringing in good information and training to those people who run the registers is a key part of growing our business: it’s the pathway to having a satisfied consumer who will come back and try new things.”