Three Reasons Not to Overlook RYO
There is a chance the roll-your-own/make-your-own RYO/MYO‑ tobacco segment gets overlooked in your store. Industrywide, it accounts for approximately 1% of tobacco sales. Some might even say it doesn’t offer the glitz and glamour of other new tobacco products, such as e-vapor.
But it’s a mistake to overlook this segment, says former retailer Andrea Myers, director of business development for Republic Tobacco Co., Glenview, Ill.
“This category gets ‘missed managed’ because it literally gets missed,” Myers said during a breakout session on RYO at CSP’s Convenience Retailing University held in February in Dallas.
Pounds of loose tobacco sold per year before the passage of State Children’s Health Insurance Program. By 2011, that figure had jumped to 40 million.
Source: Alcohol and Tobacco Tax and Trade Bureau
Here are three reasons Myers listed for why convenience retailers should rethink RYO.
The Price Is Right: “The category has great margins, especially for papers,” she said, pointing out that papers offer margins of more than 50% while taking up very little space. “I’d challenge you to find a more profitable 6 inches of space in your stores.”
Those margins become all the more valuable for retailers as prices in other segments increase. Myers predicts cigarette prices will go up further this year because there’s less competition after the Reynolds-Lorillard deal.
Keeping Up With the Competition: Steve Sandman, president of Republic, described RYO tobacco as a “one-way door.”
“Once a consumer starts making their own cigarettes, they stay,” he said.
Those fiercely loyal consumers have many options of channels to shop for their RYO needs. Dollar stores, grocery and tobacco shops all offer RYO/MYO tobacco.
“What do c-stores offer that they don’t? Fuel,” Myers said. “If RYO customers can get their tobacco and fuel at convenience, they won’t go elsewhere.”
A Safe Bet: Myers pointed out that there is little uncertainty about the RYO/MYO category. It’s been around for more than 100 years and has been regulated by the federal government since 2009.
“How many of you have gotten into the vape category? It’s a lot of time to manage,” Myers said. “This category has a history; it’s here to stay. It’s not going to waste your time or your space.”