(This article first appeared in the December issue of NACS Magazine.)
At the 2020 State of the Industry Summit, Chuck Maggelet, chief adventure guide for Maverik Inc., described the cigarette category as a “bit of a melting ice cube” for the convenience industry.
While sales continue to decline, there is no danger of the category disappearing anytime soon. After all, it’s hard for a $52 billion ice cube (the amount of 2022 cigarette sales at c-stores) to melt all at once.
In fact, the cigarettes category may as well be an iceberg: There’s a lot going on beneath the surface. The changing cigarette consumer, the meteoric rise of other tobacco products (OTP) like vapes and electronic cigarettes and the growth of the poly-usage customer who consumes both cigarettes and OTP make cigarettes an interesting category to watch.
Nothing to Snuff At
Cigarette sales saw a year-over-year decline of 3.2%, but the category remains a crucial profit source for convenience retailers. In 2022, the convenience channel sold $51.8 billion worth of cigarettes and dominated U.S. cross channel sales—81.86% of cigarettes were sold in a convenience store. Convenience stores remain, by far, the consumer’s first choice when it comes to where to purchase cigarettes.
Data from the NACS CSX Benchmarking Database shows an average of $41,130 in sales between January and July of 2023—well below the 2022 average of $43,142. CSX data also reveals a slight seasonality to the category; people smoke all year round, but the sales show a rounded peak around summertime.
It is easy to see the decline in sales per store, per month. The peak of 2023, seen in May’s $45,222 in sales, did not come close to hitting the 2022 peak of $47,728.
For the past couple of years, foodservice sales have been creeping up on cigarette sales, and foodservice finally won the top spot among all in-store categories on a per store, per month basis, finishing as the number one sales and gross profit generating category of 2022.
Declining cigarette sales have paralleled declining smoking rates in the U.S. The smoking rate was 11.5% in 2021, according to the Centers for Disease Control and Prevention, down significantly from 20.9% in 2005.
For those who do choose to smoke, cigarettes are an important part of their routine. According to a study by NACS Convenience Voices, shoppers who indicated that cigarettes were their most important purchase had the highest weekly visit frequency while also maintaining an above-average NPS.
To continue reading about cigarette sales, check out the December issue of NACS Magazine.