Tobacco Trends Through 2016
Overall trends
For the first half of 2016, C-Store tobacco sales were up 2.4%, an improvement over the halfway point a year ago (up only 1.4%). Other tobacco products showed increases of 5.1%, with smokeless tobacco increasing 6.4% and cigars growing 6.6%. E-cigarettes continue to struggle, down 4.1%, after a 5% decline during the first half of 2016.
Cigarette trends
For cigarettes, the largest subcategory increases were seen in sub-generic/ private label brands, up 2.7%. Premium brands were up 2.5% and branded was up 2.3%. Fourth-tier brands took a big hit once again, down 13% (after a 14% decline in the year-ago half-year period). While dollar sales are up, volume is seeing historic declines, in the 3-4% range
What this all means
While there may be no “perfect” OTP POG, or any category POG for that matter, the goal is to get
your sets as close to “perfect” as possible, and maintain that level, which will help to grow your sales and profits. So what should we be looking at when building our OTP assortments?
Evaluate space to sales; if cigars are 40% of your OTP sales, they should be 40% of your assortment; this should also be done for brand. Make sure you evaluate both unit sales as a percentage of space and profit dollars as a percentage of space. If you do not have space to expand, focus on improving visibility and accessibility to encourage sales of highly profitable groups of product.
Make sure you check top item reports from vendors/suppliers to make sure you are not missing any top ranking items; you have already looked at sales of what you carry, but maybe you are not carrying something you should.
Remember, when building your assortment, do not focus on margin, as “you can’t take margin to the bank”. A product that generates a 75% margin but only represents 1% of your total profits should not take a prime shelf position. The practices above can be applied to other category POGs throughout your store, making your whole store more profitable.
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