Tobacco

Drug Store News, May 20, 1996

The news in the tobacco category has little to do with cigarettes. After a flirtation with discount brand cigarettes, smokers are back in the branded camps since manufacturers have gotten more competitive with prices. Marlboro, the brand with the muscle behind closing the price gaps, continues to grown in share in the flat cigarette category, according to John Maxwell. publisher of The Maxwell Report, an industry newsletter.

"The 'no brands' are not an issue anymore," said one retailer. "Why should consumers buy those products, when branded cigarettes are not much more expensive?" Maxwell said there is only about a $3 difference between a carton of discount and branded cigarettes.

While a consumer focus on good health has put cigarette sales in a slump. retailers are seeing increases in the sale of smokeless tobacco. "Brands like Skoal and Copenhagen are growing popular with younger men," said one retailer. "The products are shedding the redneck image they once had.

Sales of smokeless tobacco grew about 5 percent at Sioux Falls. S.D.-based Lewis Drugs. according to buyer Carol Kuyper. Lewis devotes an average of four feet to tobacco and tobacco-related products. Smokeless tobacco has also been a steady performer at L.F. Widmann, based in Lock Haven, Pa. Retailers say that smokeless tobacco is not price sensitive and carries strong double-digit margins.

Cigars are back

Younger consumers are also enamored of cigars and the aura about them. With the success of the magazine Cigar Aficionado and the frequency with which celebrities such as Jack Nicholson, Linda Evangalista and Christian Slater show up in magazines and on television sporting cigars, cigars are seen as a cool accessory.

"In our market, we are seeing a trend toward private parties where people pay for a steak and potato dinner, drink top-shelf liquor and smoke cigars, said one retailer.

To address that trend, the chain has added upscale $3 and $4 cigars to its mix. "We used to carry only 25 cent cigars; the Swisher Sweets Phillys and Garca-Vegas," he said. "We've tried to go upscale and are dabbling with Macanudo and Punch cigars at higher price points."

Mix is key

As with other departments, retailers are finding that hitting the proper mix is key to the category. CVS. for example, devotes 12 feet to its in-line non-cigarette tobacco and tobacco-related products section.

"You don't have to be that competitive on accessories, such as pipe-related merchandise," said one retailer. "It's a convenience category for consumers."

Lighters, a big part of the category, have gotten a bit more expensive since the U.S. Consumer Product Safety Commission required that all lighters on the market in 1996 must meet child-resistant standards. The new lighters retail for about five cents more than older lighters.

Manufacturers have been steadily adding fashion and improvements to the disposable lighter category. Bic, for example, has introduced its first electronic lighter, in 13 fashion colors.

Manufacturers are also packaging lighters in seasonal five-packs and are adding new designs to take advantage of seasonal sales.