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Over the course of just a few short years, electronic cigarettes grew to become the darling of the tobacco category, the segment that just might help a struggling back bar regain its footing.
Now, though, e-cigarettes ? which are viewed as a threat to traditional or combustible cigarettes ? are facing a threat of their own and it?s coming from within the same segment. New e-vapor products, including vaporizers and tank/mod technology, are experiencing rapid growth.
This blossoming subsegment has even led David Bishop, managing partner at sales and marketing firm Balvor LLC, to coin a new phrase: electronic nicotine devices (END). E-cigarettes are considered END products, as are e-cigars, e-hookahs, vaporizers and e-liquids.
E-cigarettes, sometimes referred to as ?cig-alikes,? include both rechargeable and disposable devices available as singles and kits. Mods/tanks, referred to as ?open systems,? are personalized devices that users can refill with different e-juice/e-liquid flavors and brands.
Taking e-cigarettes out of the mix, Wells Fargo Securities LLC?s first-quarter Tobacco Talk survey of tobacco retailer and wholesaler contacts (including convenience stores) showed that vapors/tanks/mods (VTMs) are growing at twice the rate of the overall e-vapor category.
In fact, shelf space devoted to VTMs has grown by 30 percent, and 65 percent of the Tobacco Talk survey respondents said vape shops are either currently, or soon could be, taking a bite out of convenience store traffic, noted Bonnie Herzog, managing director at Wells Fargo Securities, which estimates U.S. vape shops number between 5,000 and 10,000.
While current distribution of vapors/tanks/mods is still primarily through online outlets or vape shops ? dubbed by Herzog as the ?Starbucks of e-vapor? ? many retailers and suppliers believe there is a place in convenience stores for this new crop of products.
?The convenience store channel has always been a place where the consumer goes to buy a single-serve item. If you want a 20-ounce Pepsi, you go to a convenience store. If you want a 24-pack of Pepsi, you go to a grocery store,? said James Conrad, category manager for Lisle, Ill.-based Royal Buying Group, a national organization dedicated to maximizing sales and profitability of convenience store and petroleum locations.
There is an exception, however, when it comes to tobacco products. ??C-stores have always been a destination place for tobacco. It?s not like if I only want to buy a single pack of cigarettes, I go to a convenience store [and] if I want to buy a carton, I go to a grocery store,? he explained. ?If I want to buy a carton of cigarettes, I still go to a convenience store. It?s one of the exceptions to the rule of a convenience store being a stop for a single-use purchase or lower-price-point item.?
This will also hold true as users of e-vapor products transition from trialing a disposable e-vapor product to utilizing a more complex rechargeable system, according to Conrad.
?Once you become a regular user of an electronic nicotine device, you naturally make the transition to a more complex system; you can enhance the experience. They are generally higher price points that don?t tend to work in a convenience store channel, but they fall into that tobacco/nicotine category that is sort of the exception to the rule,? he reasoned. ?People don?t have a problem going into a convenience store and spending $80, $90 or $100 for a carton of cigarettes because that?s where they know to go to buy tobacco products.?
He acknowledged that vape shops and tobacco outlets will offer more in the way of e-vapor products, from vaporizers to e-hookahs to e-juices, and that is to be expected. However, c-stores could capture their fair share of the segment as these products go mainstream.
?You go to a convenience store for the top-selling brands and top-selling products,? Conrad said. ?Once the vaporizers and e-hookahs are established and there?s data that supports the top players in that program or area of the category, then you will see it more.?
Consumer demand will also dictate product mix. ?At some point, there will be more room in the convenience store for vaporizers and e-hookahs, especially once the customer demand happens,? he predicted. ?Word-of-mouth, customer demand, marketing and media will eventually force the hand of convenience stores to bring these products in.?