The New C-Store Nicotine Customer

Today’s nicotine customers are not the cigarette customers of a decade ago. Yes, they still smoke cigarettes, (in fact, cigarette sales reached almost $52 billion in 2022) but customers are also exploring other tobacco products.

The other tobacco products category does not just mean e-cigarettes. NACS Category Definitions list other tobacco products (OTP) and its subcategories as smokeless (dip, chew, snuff, snus, moist), cigars, smokeless tobacco alternatives (nicotine pouches, herbal or caffeine snus), vaping products, loose pipe and cigarette tobacco, and other tobacco/nicotine products like modern oral nicotine pouches.

Convenience stores are the first choice for customers looking to purchase OTP and cigarettes; the convenience channel sold over 80% of both categories in 2022, including 81.86% of cigarettes totaling $51.8 billion, and 83.40% of OTP to a total of $17.3 billion.

After a slight dip in 2020, the OTP category continues to grow. During last year’s NACS State of the Industry Summit, Annie Gauthier, CFO/co-CEO of St. Romain Oil Company and Y-Not Stop, delivered performance metrics for the top six in-store merchandise categories, including OTP.

Gauthier noted that OTP has two strong subcategories: smokeless and e-cigarettes. “Those two subcategories alone make up about three-quarters of the sales, and they’re both growing year over year,” she said.

NACS State of the Industry Report® of 2022 Data showed that smokeless accounted for 40.7% of OTP sales in 2022, with a gross profit margin of 22.65). Electronic cigarettes boasted a higher gross margin than smokeless (33.22%), and despite regulatory challenges, average sales per store, per month grew by 15.6% between 2021 and 2022.

Societal Shifts

Why today’s nicotine customers are more willing to try other types of smokeless products and brands can be attributed to a handful of factors: economic issues like inflation and price sensitivity, the regulatory environment, and societal pressures.

“Society has made it more difficult to smoke combustible products,” said NACS Magazine contributing writer Melissa VonderHaar on a recent Convenience Matters podcast, “Breaking Down Today’s Nicotine Customer.”

In addition, smokeless tobacco alternatives offer new ways for customers to consume nicotine products. “My thinking was that nicotine consumers are just more open to trying different products…it's not that they are more open—they have to be more open,” VonderHaar said.

Regulatory Challenges Continue

However, convenience stores need to watch the category for other reasons than promising sales opportunities. According to the Food and Drug Administration, many popular disposable flavored vaping products are illegal.

NACS Magazine’s Category Close-Up on OTP notes that retailers can only sell e-cigarettes that have been approved through FDA’s premarket tobacco application (PMTA) process, or that have submitted a PMTA that has been accepted by the FDA for review. However, many products are still on the market that the PMTA rejected, or were never submitted.

“The uncertainty of our current regulatory system presents immense challenges [because] retailers are not certain what can legally be sold,” said Matt Domingo, senior director of external relations for Reynolds American Inc.

What’s Next For OTP?

NACS CSX data through August 2023 showed OTP sales outpacing 2022 sales during the same period—an indicator that 2023 could show growth in the category.

OTP performance for 2023 and insights on 2024 and beyond will be revealed at the upcoming NACS State of the Industry Summit during the General Session on April 4.