E-cigarettes, tobacco-free products offer smokers alternatives

When it comes to tobacco sales, it is all about the angle you are looking from.

For those who remain optimistic about the category, they can point to individual unit sales of nearly $250 billion annually and price points that can hover around $10 a pack. They also can say that while the number of users is down dramatically over the last 20 years, the most loyal cigarette smokers continue to purchase the product at a steady rate and, surveys find, will continue to do so for years to come.

Finally, they also note the dramatic growth of e-cigarettes and the smaller, but still significant, growth of smokeless tobacco products. It is enough for one retailer to say, “we do not care where the sales are coming from as long as they keep coming in. We make money off of this category.”

Of course, the tobacco category is tainted by years of bad press and health studies that show that smoking is a leading cause of a number of different illnesses, including lung cancer, heart disease and other lung and circulatory diseases. They note that fewer consumers want tobacco products for these and other health reasons and for the significant increase in price points, due mainly to increased federal and state taxes on cigarettes.

The bottom line, some note, is that smoking traditional cigarettes is not cool anymore, and some shoppers are so vehemently against tobacco they will not shop at stores that carry these items.

So what is a retailer to do?

CVS, for one, made a well-publicized decision to end all tobacco sales in its stores a few years back. Other retailers have cut down on the size of their tobacco sections, and it is pretty difficult to find a mass retailer that publicizes the fact that they are still in the business of selling tobacco products. Some merchants that have stayed in the business have placed their tobacco departments safely behind a service counter, allaying the fears that minors can buy them and pretty much stopping any consumer pilferage.

Enter the hoopla over e-cigarettes. The booming category is producing solid double-digit dollar sales growth, despite concerns from some health groups that it is no safer than traditional cigarettes. But, many e-cigarette manufacturers counter by saying their products are a healthier alternative to tobacco-based products and can serve as a transition for someone looking to quit the category completely.

Regardless, the category is extremely hot. Some industry figures estimate that nearly 4 million Americans are daily e-cigarette users, and that figure could double within five years.

“What makes this category so interesting is that it has really fragmented and segmented over the years,” said Dave Savoca, president of Sandy Hook, Conn.-based Smokey Mountain Chew. “There are a lot of new products out there, and consumers have a much better opportunity to move from one to another to see what they like best.”

Industry officials stress that retailers need to pay close attention to the consumer demographics as they set up a tobacco category. Defining the shopper profile can help merchants determine the type of products to stock in the category, as well as what price points to highlight. They said that consumers are picking products for two reasons: price and usage.

“Some consumers are totally at ease with paying top dollar for tobacco products, while others want the best price out there,” said a director of marketing at a major tobacco company. “Plus more consumers want a choice, and we have to see exactly what they are looking for.”