July 12, 2010 - More than a year removed from the largest federal levy in history, the state of tobacco is strong, albeit changed.
In the first of a three-part series, CSP (Convenience Store/Petroleum) examines the strength of the top-selling cigarettes.
Cigarettes, despite ongoing unit declines, continue to generate high rings and propel market basket purchases. At the same time, other tobacco products (OTP), from the strongholds of moist smokeless and cigars to the promising prospects of oral products, are rapidly transforming convenience stores from cigarette-center outposts to total-tobacco depots.
In the latest CSP-UBS Tobacco Survey, more than 50 retailers, from one-store shops to 5,000-site chains, addressed a number of issues, from supplier field execution and promotion value to new products.
Retailers were asked: "Among the Big Three premium brands, which one do you expect to gain the most market share in 2010?" The results: 56% of respondents said Marlboro, 24% said Newport and 20% gave the nod to Camel.
"Marlboro is regaining some share momentum after 2009's 'transition year'," UBS tobacco analyst Nik Modi said. "It looks like the company is executing better as an integrated total tobacco company (though we still believe there is room for further improvement)."
As for the other major brands, Modi offered this assessment: "Newport continues to be the most consistent performer among the Big Three premium brands and Camel seems to be losing some momentum it built last year, perhaps due to RJR's focus on Pall Mall—which continues to grow very strongly and from a very successful roll out of Camel Crush in 2009."
Retailer Response - survey respondents weighed in on their brand selections.
"To date," said an Iowa-based operator, "PM has launched more new Marlboro items than Camel. Not to say Camel will not follow suit, but Camel was in the driver's seat in 2009 with their new items so it may just be Marlboro's turn."
A Virginia retailer echoed his favor of Altria, noting, "Marlboro will do whatever it takes to maintain and even grow market share. They have the resources and financial capabilities to make sure of that."
The operator cited Altria's strong support of Marlboro 72's and Special Blends. "Plus, as more and more FDA guidelines go into effect and minimize the category and POS, then who gains? The No. 1 brand that everyone knows—Marlboro."
Camel and Newport also garnered positive feedback.
Several retailers cited Camel for superior price. Additionally, Camel won praise for building a total tobacco brand. "Camel is working hard to grow their Snus line," a Minnesota merchant said. "Also, [it is] easier to grow a small brand."
An Arkansas retailer casts his vote for Camel because of its, "heavy promotional activity."
Likewise, despite forays from major competitors, Newport continues to impress in the menthol arena. "Newport continues to gain strength in the menthols category. There is not another strong competitor," an Illinois merchant said.
A Georgia operator added, "[Newport] has continued to grow in the Georgia/South Carolina market for the past three years."
Reference: Marlboro to Lead Market Share Growth
CSP-UBS survey shows support too for Camel, Newport by Mitch Morrison, CSP Daily News, 7/12/2010.