Cigarettes Remain on Top But Face Hurdles

NACS ranks the category No. 1 in average sales and No. 2 in gross profit

Don’t count cigarettes out.

This heavyweight category still tops the list of convenience-store merchandise categories in terms of sales, even though it falls behind in gross-profit dollars and margin percentages, according to preliminary numbers released at the NACS State of the Industry (SOI) Summit, held April 4-6 in Rosemont, Ill.

On the list of top 10 merchandise categories (not including foodservice), cigarettes ranked No. 1 at $50,740 in average sales per store per month. By comparison, packaged beverages were second at $24,784, followed by beer at $15,021. In terms of gross profit, cigarettes fell to No. 2 at $7,703, compared with packaged beverages at $10,272. Margins were thinner for cigarettes at 15.18% vs. packaged beverages at 41.45%.

Though clearly a core category at 36% of sales, the cigarette category’s numbers, in terms of both sales and volumes, continue a declining trend.

“It does not look good for the [cigarette] category,” said Andy Jones, president and CEO of Sprint Food Stores, Augusta, Ga., who moderated a general session on the category numbers.

While these numbers were not unusual compared to data from recent years, other tobacco-related figures revealed newer trends, both upbeat and ominous.

Both share-of-sales and volume numbers show cigarettes declining, with share of sales dropping 0.5% in 2016 vs. 2015 and volumes falling 1.3%. Jones said the effect of drug-store giant CVS, Woonsocket, R.I., dropping tobacco sales in 2014 appears to be wearing off.

And in terms of cigarette subcategories, the SOI numbers showed sales and unit growth in only one: subgeneric/private brands, with an increase in sales of 5.8% and unit growth of 2.1%.

In what appears to be a return to past behavior, tobacco customers are reverting to the basics. In 2015, when low gas prices were a relatively new phenomenon, soda and cold dispensed beverages were the most purchased items along with tobacco products. In 2016, gasoline became the No. 1 ring along with tobacco.

Another bright spot was other tobacco products, which performed well for the industry in 2016, ranking among packaged beverages and salty snacks as highest in sales and gross-profit-dollar growth since 2014.