Vapor Is a Category in Flux — Again

C-store retailers are cautiously optimistic about the segment despite its challenges.
vapor category

NATIONAL REPORT — It wouldn’t be the “e” category without constant eruption. Electronic cigarettes and vapor products are the subject of much attention in tobacco news and regulation, and convenience store retailers are responding with mixed reactions.

On the regulation front, the biggest news revolves around the Food and Drug Administration’s (FDA) still-ongoing decisions for or against the premarket tobacco applications (PMTAs) filed by suppliers for their electronic nicotine delivery system (ENDS) products.

Under the PMTA pathway, manufacturers must demonstrate to the agency that, among other things, marketing of the tobacco product would be appropriate for the protection of public health. The FDA must approve PMTA bids for e-cigarette and vapor products to stay on the market. As of mid-December, the FDA had given the greenlight to just seven products.

The agency handed out its first approval on Oct. 12, authorizing R.J. Reynolds Vapor Co.’s Vuse Solo END system and its accompanying tobacco-flavored e-liquid pods for the U.S. market. The FDA, though, also issued 10 marketing denial orders (MDOs) for the flavored ENDS products submitted under the Vuse Solo brand. 

On Oct. 19, the agency granted PMTA approval to four oral tobacco products manufactured by U.S. Smokeless Tobacco Co. LLC under the Verve brand. The products include Verve Discs Blue Mint, Verve Discs Green Mint, Verve Chews Blue Mint, and Verve Chews Green Mint. Verve, however, has been discontinued since 2018.

Before authorizing a tobacco product via the PMTA pathway, the FDA puts it through the lens of: the likelihood that current tobacco users will stop using tobacco products; and the likelihood that current nonusers will start using tobacco products.

The agency received PMTAs for more than 6.5 million tobacco products by its Sept. 9, 2020 deadline. As of late October, the FDA said it was close to wrapping up its sweeping review. The agency is already being sued for several of its refusals.

The Retailer Perspective

Tim Greene, category director at Smoker Friendly, told Convenience Store News that the chain has taken “a relatively conservative approach as it waits for the fallout of the PMTA process.” Still, the vapor category continues to perform well at Smoker Friendly’s stores, driven by disposables and leading pod-based brands.

The Boulder, Colo.-based chain of 181 tobacco stores operating in eight states has decided to limit its disposable selection to just a handful of brands that it feels meet customer demand and have aspirations of long-term success, Greene said.

“In addition, we are testing a few non-nicotine options in select markets. It’s too early to tell, but early returns are positive,” he noted. “We will continue to monitor the regulatory climate and adapt accordingly as customer demand, regulation and innovation dictate.”

There’s a similar conservative undercurrent at Energy North Group, which owns and operates c-stores, gas stations and car washes throughout New England.   

“We are still gun-shy about adding any product that is non-returnable or non-guaranteed,” said Jonathan Ketchum, vice president of retail. “But having a larger assortment makes a bigger impact on the backbar and draws more attention to the category.”  

The retailer plans to continue monitoring the category on a weekly basis, and will perform a seasonal reset in the first quarter of 2022 based on consumer trends and spending.

Currently, the category is outperforming total store sales by triple. Additionally, category sales are double 2020 numbers, and up by double-digits compared to 2019 results, Ketchum said, crediting increased SKU and brand count, albeit conservatively.

At Greenville, S.C.-based The Spinx Co., the vapor category has been consistent when looking at year-over-year performance in both sales and volume, according to Chris Dillard, tobacco category manager. The fourth quarter of 2021 was slated to bring some deep-discount and targeted promotions in the category, with a focus on driving foot traffic and volume through the end of the year.

“I’m cautiously optimistic on the e-vapor category as a whole and believe that post-PMTA, the category will continue to grow,” Dillard said. “However, we have been very conservative in our e-vapor product expansions, shying away from many of the ‘pop-up’ disposable companies pushing flavors. And given the recent denials from the FDA, we were smart to take this approach, with many of these products now having to be pulled from the market.”

For 2022, Dillard believes the category will see a rise in “synthetic nicotine” and nicotine from fruits in an effort to bypass FDA regulation. He intends to take a conservative approach to all new products, including synthetic.

“We want long-term, consistent growth in the category, offering reliable products and not taking an opportunistic approach to bringing in products and companies that are unproven,” he explained. “I’m all in for new products and testing new subsegments, but it must be done in a methodical manner with reliable manufacturing partners.”