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NEW YORK – Plaid Pantry merchandising manager Butch Fulton told guests at Convenience Store News' "Winning the Valuable OTP Customer" Webinar that he has seen other tobacco products' (OTP) sales grab 4.2 percent of in-store sales once he realized the value of this growing market.
The OTP market has seen double digit growth in past years, and has neared double digit growth for 2006. In 2005, the OTP market has seen a 9.1 percent increase of sales from 2004, with sales totaling $35,058 per store, a $3,000 increase, according to Convenience Store News' latest Future Forecast study.
Nik Modi, associate director of UBS, attributes this growth to the "proliferation of anti-smoking legislation," which will only increase, he said. Other reasons for this markets growth is customer migration from cigarettes, dual users and the lower prices of OTP products that accelerate sales.
A poll taken during the webinar revealed that 77.7 percent of store owners have increased the number of OTP items in the past year, and of the 22.3 percent that had not increased, 78.5 percent of stores will increase the number in the next six months.
OTP ranks fifth in c-stores sales, accounting for 3.8 percent of average c-store sales and 6 percent for the top percentile's in-store sales, said Maureen Azzato, vice president, publisher and editorial director for Convenience Store News. This provides the proof that OTP can be a "destination category" for c-stores.
Azzato defines a destination category as one that drives customers to the store, is highly visible, is a large category and positively impacts the business. OTP outranks milk and candy, she added.
Plaid Pantry's Fulton gave his strategies for success with OTP. Plaid has increased the SKUs of OTP, noting that the flavors chocolate, strawberry and peach "have staying power." Plaid also offers bonuses to store managers that keep 100 percent in stock levels, creating a "culture that expects 100 percent at all times," he said.
Fulton also expressed six key factors for OTP success. He recommended that retailers have the best assortment, be the first to market new products, maintain a quarterly schematic review, promote multi-pack offers, price promote snuff to reward existing customers and focus on in-stock position everyday.
"In order to grow the category, you have to take some risks and your manufacturers – if they believe in their product – will stand behind you. If you don't, your competitors will," Fulton said.