With new flavors, brand extension and increased promotional activity, MST will continue to post strong sales growth in stores.
The smokeless tobacco category remains strong, and not just because lawmakers have pursued consumers away from cigarettes. New products and flavors, combined with competitive pricing, increased promotional activity and effective merchandising are attracting new and veteran tobacco customers alike.
“In principle, this category is growing,” said Bonnie Herzog, managing director of Wells Fargo Securities. “This is good. She was a very strong generation of growth.”
The smokeless category continues to grow with a variety of products and flavor extensions, keeping it fresh in the eyes of consumers. “We have different varieties of smokeless as chewing, hitting the market. And then the leading brands, Copenhagen and Skoal were going out with different flavors and line extensions,” Duke said.
The bottom line is, Herzog concluded a win-win. “I think that all positive. For the retailers, this is a category that they have to give the shelf to counter space, when possible, given that there is faster growth than the cigarette category, which is declining.”
Herzog sees strong similarities between the tobacco category and another product category she covers for Wells Fargo: beverages. “I characterize the smokeless category sort of like the noncarbonated drinks in the beverage category. When you think about the beverage category, you’ve got carbonated soft drinks which are large, but declining, like the cigarette category. But then you’ve got smokeless, which is smaller but growing faster, like noncarbonated.”
At retail, promotions are helping to push the needle forward “Smoke is rising fast, depending on the SKU”, said Matt Hieb, category manager for Jacksonville, Florida-based Gate Petroleum, which operates 225 convenience stores in six southeastern states.
“Grizzly is on fire right now, and we could not be more happy to see the success. It seems that our core Copenhagen brands continue to narrow in scope, primarily because of the lack of advertising activity and the high state of the ad valor excise tax (a percentage of the wholesale price.) We recently allocated more space to the category in the hope that it will fuel exponential growth, and our timing was perfect. “
“Generally speaking, the demographics of young men,” she said. “Over the past few years, there are more women who consume, but they are probably more attracted to products such as chewing tobacco and electronic cigarettes, which, of course, not smokeless, but I think it is not related to cigarettes. Snus is a product where you do not have to spit. “
Analysts also see more of what they call a dual use for the last year or two. As Duke explained, “Now that we have had so many smoking bans take effect more difficult to smoke, so people will consume both. When they can not light up, they would be likely to dip.”
It also appears that fewer Americans are being embarrassed by warnings of health threats. “I think there is a broad, general understanding of the fact that tobacco is harmful, all the tobacco especially smokeless tobacco,” Herzog admitted. “There is a relative risk factor, it is important that consumers understand. I think the perception is that the smoke-free or non-combustible products are less harmful, and therefore the relative risk is less.”
As for those who believe the same legislative ax that fell on cigarettes will inevitably cut into smokeless, Herzog believes that view may not be entirely accurate. “I would say that the experts continue to study and understand the relative risks better.”
Reaching consumers with the right actions and value proposition can be tricky. But now, Duke said, Grizzly is firing on all cylinders. “I think it resonates well with consumers. Price point was very attractive as a cheap brand,” she says. “It’s quite an interesting statistic: the brand is only about 10 years. Can you imagine what it appeared on the market just over 10 years ago, and now is the largest brand? Think of Copenhagen, which I think is 125 years old, if I do not mistake. This product with the right taste that has resonated with its customers, and I think a lot of it had to do with the price / quality of proposals. “
As two competing brands, retailers could be in line to see even more advertising. As Wells Fargo said in its second quarter of 2012, U.S. Tobacco Retail Review, “about 89% of our contacts noted category growth during Q2 driven by continued promotional activity. Grizzly remains the driver of growth in the smokeless category. Nevertheless, we remain concerned about the increase in downward trend, particularly with the launch of the cost of expensive line extensions Copenhagen and Skoal. Brands There are another battle brewing? “
When it comes to in-store merchandising, Hieb explained, things get pretty basic. “The only thing at this point that is fueling growth is fresh product, space and visibility.”
The lack of advertising support for other major brands, he added, gave Grizzly and other opportunities to get a much better price to the consumer. “These customers want to see your product and what they will pay for it.”
Using two-and three-actions can also stimulate the growth of some of the categories, but it should be monitored closely. “Seller prices contributed to the product may become a liability if it is not controlled by law, primarily because of the amount that producers deliver to« Hieb said. “Too many promotions on certain items mean that they stop order open stock, resulting from stock “.
One of the biggest keys to the success of the gate and the subsequent increase in this category was to give some of the stores owned by categories. “But”, Hieb advised: “We believe the managers have the tools and understanding of what it takes to keep the offers fresh and in stock.”
Gate is now in the process of creating that Hieb described as “some tweaks” to the category. “USST is taking an approach similar to cigarettes pangram, blocking brands off and in some cases adding a large sign featuring the price of their, and in some cases, adding a large sign showing the price of their new brands. Only problem with this approach is you take a visually stimulated clients and concealing their product.”
However, Hieb would prefer less familiar and more visible products, so that customers can see the cans and displays. “We are expanding in large sets, where we can,” he said. “There is too much potential for growth out there right now.”
The results reset gate was extremely positive and will have a positive trickle down to all manufacturers.
“The more we do smokeless category, the more resources we will receive from the manufacturers to grow it, and ultimately grow our overall store sales” Hieb said. “We have seen great results of the latest mix Copenhagen South launch and expect this brand Nestle and the family brand Copenhagen.”
“So I think South mixture great vehicle for that.”
The future of the smokeless category, Hieb concluded, is bright. “If we allocate enough space to smokeless, properly train our people to manage the category and get creative with promotions, we need to see success in growing this business.