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    Lighting Up the Back Bar

    Cigarettes still dominate, but lose some ground to e-cigarettes, other tobacco products

    FIG. 24

    Although the cigarettes category has faced some struggles lately, it still holds a top spot when it comes to convenience store revenue. Specifically, cigarettes accounted for 32.09 percent of in-store sales in 2013 and 16.57 percent of in-store gross margin dollar contribution.

    These numbers are a slight decrease from the previous year, which is not surprising considering the rise of electronic cigarettes and, to a lesser extent, smokeless tobacco products.

    Some cigarette retailers may also be losing ground to neighboring states with lower cigarette excise taxes. As the Tax Foundation reported earlier this year, illegal cigarette sales are on the rise nationwide, with New York and Arizona identified as the top two states with the highest inbound cigarette smuggling rates.

    Overall, tobacco?s performance in 2013 closely mirrored that of 2012. However, 2014 could prove to be a game-changing year. For instance, what effect will CVS Caremark Corp.?s decision to exit the category have on convenience stores? How big of a hit, if any, will the category take as municipalities across the country raise the legal age to buy tobacco products? And will President Obama?s push to increase the federal cigarette tax rear its head again?

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