Barrington, Ill. – A new study out this week shows that sales products related to e-cigarettes were up last month in the convenience channel. The latest Balvor Retailer Composite (BRC) shows that dollar sales of Electronic Nicotine Devices (END) were up 7.1% last month in the c-store channel, while retail units sold grew by more than a quarter (26.4%).

“It’s critical to have a deeper knowledge of the business as there are many factors causing fluctuations in the category’s performance,” according to Balvor Managing Partner David Bishop. 

The March sales growth rate of 7% is dramatically lower than the prior Q4 of 2014 analysis, which showed that December sales grew more than 25% year over year. The slowdown can be explained by several factors, according to Bishop: More than 90% of retailers surveyed now sell refillables (also known as open systems), up from 50% last March. This means consumers have more options today in terms of where to buy these products, affecting same-store sales numbers. Secondly, according to Bishop, the VUSE system is expanding nationally with approximately 70% of the retailers reporting sales during March, but with possible negative impact on retailers who aren’t selling the brand.
Other BRC findings include:

• Disposable units continue to decline from 2014, both in sale dollars and units sold. Disposables now represent less than a third of the category’s dollar sales versus more than half last year.
• Rechargeable units are experiencing strong sales and unit growth year-over-year due to significant product innovation and promotional support from manufacturers. The units now account for over half of the dollar sales, up from one-third last year.
• Refillable units are experiencing mixed results with sales down but units up, as sales shift toward the e-liquid segment, which has lower price points. Despite lower sales, the dollar share for refillables is up this year almost 6 percentage points to nearly 16%, driven by greater availability at retail.

“Understanding profits is vital to growing the business more effectively and we now have that missing piece,” Bishop mentioned.  The BRC reveals that weighted average gross margin for the category is 40.4% during March, down around 60 basis points from 12 months ago.  “Although no one likes margin compression, there aren’t many, if any tobacco segments where retailers are able to generate on average more than $3.50 per unit sold,” Bishop highlighted.