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NATIONAL REPORT — Tax increases — especially California's recently approved $2-per-pack levy increase — are among the issues convenience store retailers expect to have the biggest impact on tobacco this year. Less usage, fewer smokers and an increase in vapor users are also expected to hit cigarette numbers, according to the findings of the 15th annual Convenience Store News Forecast Study.
The CSNews Forecast Study provides dollar and unit volume projections in key c-store product categories based on data from various sources, including Nielsen for category sales history; TDLinx for store counts; and government sources for motor fuel volume and pricing data. The data is then run through a sophisticated projection model and presented in summary form. Maureen Maguire, founder and CEO of New York-based ThinkResearch, oversees the Forecast Study process.
There’s no denying that tobacco retailing experienced a positive 2015. The numbers tell the story — cigarette industry unit volume grew 1.1 percent and unit volume per store ticked up 0.2 percent during that 12-month timeframe.
But, as tobacco industry insiders predicted, the cigarette segment will return to normal levels when the final numbers for 2016 are crunched. CSNews’ forecast estimates industry unit volume will see a nearly flat 0.2-percent increase and unit volume per store will dip 0.5 percent.
The forecast for 2017 calls for cigarette industry unit volume to remain flat and unit volume per store to continue on a downward trend, decreasing by another 0.6 percent.
Several convenience retailers are not expecting a repeat performance of 2015 any time soon. Only about a third say their cigarette sales per store will increase in 2017 — an equal amount to the percentage of retailers who say they per-store cigarette sales will decrease. Then, there’s 37.1 percent of retailers who anticipate their business will remain the same.
The other tobacco products (OTP) category, on the other hand, continues to perform well for convenience store retailers, with expected 2017 growth to be only slightly off from 2015. According to the research, industry dollar sales for 2015 increased 7.7 percent, followed by an estimated 6 percent in 2016. This metric is forecasted to rise 6.8 percent in 2017.
As for per-store dollar sales, OTP saw a 2015 increase of 6.8 percent. Its 2016 performance is estimated to be up 5.3 percent, with a 6.1-percent increase forecasted for 2017.
The stats for unit volume per store are similar. The 2015 increase was 6.8 percent and 2016's estimated growth is 5.2 percent. The forecast for 2017 calls for a 3.8-percent increase.
Retailers’ outlook is on par with the forecast: 48.6 percent say their sales per store for OTP will increase, 14.3 percent say sales will decrease, and 37.1 percent say they will stay the same.
On the other end of the backbar is the electronic cigarette segment. In 2015, industry dollar sales rose 5.2 percent, dollar sales per store rose 4.3 percent, and unit volume per store rose by a whopping 33.3 percent — a possible result of lower pricing and supplier consolidation. 2016 estimates are noticeably lower: increases of 1.2 percent in industry dollar sales, 0.5 percent in dollar sales per store, and 5.1 percent in unit volume per store.
The forecast for 2017 is gloomier, too. Industry dollar sales for the segment are forecasted to decrease 5.5 percent this year, dollar sales per store are forecasted to decrease 6.2 percent, and unit volume per store is forecasted to dip 0.1 percent.
Look in the January issue of Convenience Store News for the full Forecast Study.