Strengths, Struggles & Strategies of C-Store Tobacco

DALLAS -- Regulation, a crowded backbar, pre-pricing and vaping--all these topics and a dozen more were covered during a rapid-fire panel discussion on tobacco in convenience stores at CSP's Convenience Retailing University (CRU) in Dallas.

Andrea Myers, president of Kocolene Marketing LLC, Seymour, Ind., and Ruth Ann Lilly, tobacco/OTP senior category manager for Sunoco/Mid-Atlantic Convenience Stores, Lester, Pa., discussed with CSP senior editor Melissa Vonder Haar how the biggest tobacco headlines are affecting their own businesses. What follows are quick takes on key topics.

• The "single greatest challenge" to managing the category. Lilly pointed to both regulation and managing pricing across a multi-state chain.

"When discounts change monthly or contracts change, it's days and days of work," she said. "The manufacturers could help us by giving us the discounts more timely, so we have a little bit more time to make it happen."
Running a 36-store company with both convenience stores and tobacco shops in Indiana and Kentucky, Myers' challenges come from the speed at which trends, brands and products come and go in the category. She likewise called on manufacturers to help with the shifts by moving products out to make way for new ones.

• President Obama's proposed tax increase. If you follow historical patterns, said Vonder Haar, we are nearly due for another federal excise tax, and both Myers and Lily seem resigned to this reality.

"It keeps us all on the playing field [because it's federal]. It's just more work," said Lilly.
And while tax hikes always raise the question of whether smoking is going away, all Myers needs to do is go out into the market and spend time in stores to know that smoking is not going away. "I'm not worried," she said.
Granted, Myers doesn't experience the same intense regional taxing as Lilly, who faced the $2-per-pack increase in Philadelphia last fall. Luckily, stores on the border helped buoy the loss in sales.

• Cigar challenge: Pre-pricing. The prevalence of pre-pricing is often unavoidable when the competitor down the street promises the lower prices.

"I've got really great and smart competition, and we're all selling it," said Lilly. If I lose [that customer] I'm not only going to lose that stick stale but I'm going to lose the market basket that goes with it, and that's more important."
Myers challenged manufacturers to "be careful what [prices] you throw out there, because it can hurt the retailer."

• Cigar opportunity: Premium. Both Myers and Lilly have seen growth in foil-pouch cigars, as well as natural-leaf products.

 "Were talking advantage of flavors and we think it's important to bring in the LTOs," said Lilly.
Both retailers see smokeless pouches as a big opportunity. The struggle comes with trying to find a place on the backbar that is visible for both the clerk and the customer.

• Potential "modified-risk" labeling. Potential "modified-risk" labeling for moist smokeless tobacco (MST) "would be huge," said Myers, and Lilly agreed, adding that manufacturers need to help communicate that to the customer in a backbar that's already cluttered with messaging.
• Vaping opportunities. Lilly has seen strong success with a cents-per-gallon loyalty program that's helped electronic cigarette sales, as well as special pricing.

"I'm a big proponent of multiple price points." A two-for special on e-juices is helping drive up market baskets.
Myers uses her tobacco shops to see what brands sell best, and brings those into her convenience stores. "It's a really cool customer," she said of the vaping enthusiast. To cater to them, the chain recently held a successful promotion where customers could choose a lanyard, bottle and device, with different price points for different packages.
Resource:http://www.cspdailynews.com/category-news/tobacco/articles/strengths-struggles-strategies-c-store-tobacco