Value Cigarettes Continue to See Growth

This interview is brought to you by Xcaliber International, a NACS Hunter Club member.

Sales of fourth-tier cigarettes grew slightly between 2024 and 2025, despite a softening of cigarette sales in general. What’s driving this growth?

Joe Nicolaus: Money. People have less of it. I could give you a longer answer, but that’s the engine under everything. A premium pack gets more expensive every year, and at some point, the smoker standing at the counter does the math.

What’s changed is what happens after they switch. People try a fourth-tier cigarette, they like it and they keep buying them. The quality caught up years ago. The perception is just now catching up to the quality.

NACS’s own State of the Industry data backs this up, too. Fourth tier grew sales in 2024 while most of the category shrank, and 2025 told the same story.

So far, 2026 is more of the same, only faster. First-quarter industry data has the discount segment at a record share of the U.S. market.

We’ve seen a rise in polyusage—how do fourth-tier cigarettes factor into an evolving backbar strategy? 

Nicolaus: The polyuser is splitting their nicotine budget, so the cigarette slice of that budget shrinks. Fourth-tier gives that customer a way to keep buying cigarettes at your store on the budget they actually have.

I’d also tell retailers to quit worrying about pouches stealing space from cigarettes. Let the pouches earn their margin and let fourth-tier protect the cigarette trip, because cigarettes still pull a lot of people through your door.

Xcaliber is celebrating its 25th anniversary this year. What lessons can the company share with convenience retailers? 

Nicolaus: Twenty-five years teaches you plenty, mostly the hard way. The big lesson is that value never goes out of style.

We sold cigarettes through the 2008 recession and through a pandemic. The value segment grew both times and it’s growing right now. Retailers who treat fourth-tier like a temporary guest in their backbar leave money on the counter. Every time.

Looking to the future, what should retailers expect from fourth-tier in the next few years? 

Nicolaus: Expect us to keep taking share. Every premium price increase is a billboard for our segment.

Continue reading “Value Never Goes Out of Style” in the September 2026 issue of NACS Magazine.