Millennial Values Reshape the Tobacco Set

How ARS merchandise manager is applying a ‘craft’ sensibility to her category

In taking what she calls a “customer-centric” approach to the tobacco category, Chelsey Capps says identifying the wants and needs of emerging demographics—specifically millennials—and responding with new merchandising tactics is critical for keeping the segment vibrant and profitable.

To that end, Capps, merchandise manager for American Retail Services, better known as ARS, Oceanside, Calif., has made significant changes with contracts and store sets. So far, the yearlong gamble is paying off for the eight-state, 144-store chain.

Q: You say your tobacco category is customer-centric. How?

A: We try to innovate and navigate tobacco within the store’s message and with the consumer experience in mind. When a customer walks into an ARS location, we want to understand what they’re looking for and relate it to the total basket.

Q: How does your concept apply to the store?

A: While not every customer is a tobacco customer, we do feel that within our customer base, we have a strong craft-beer segment. So with that in mind, if that customer drinks craft beer, how does it relate to tobacco?

Q: What did you decide?

A: We talk about millennials all the time, but in tobacco, we’ve ignored them. They’re an emerging market for us. In terms of products, they’re not the most loyal group and are willing to switch brands. Millennials are also using combustible tobacco socially. They’re willing to spend more for a pack but they smoke far less of it than Gen X or baby boomers. They love innovation, seek self-expression and want brands that mean something.

Q: How did your observations translate into strategy?

A: Millennials are driven by niche brands, so we found an element within the category dubbed “craft tobacco” and, in merchandising that set, we’ve made it easy to shop—gave it logic.

Getting there took time. In the third quarter of 2015, we underwent a huge undertaking. It led to a strategy that, as far as we’ve been told by many manufacturers, is brand new. We had to be innovative and navigate our contractual arrangements. We had to creatively problem solve and look at what made the most sense for our business.

Q: Has it paid off?

A: Yes, I would definitely say that’s the case. As far as the basket is concerned, the person buying craft beer and [craft] tobacco is far more lucrative than the one who strictly buys [traditional tobacco brands].