U.S. - Retailers may carry less inventory since the federal tax increase of April 1, 2009..

July 15, 2009 - This is the final story in a three-part series analyzing the effect this spring's federal excise tax (FET) hike has had on tobacco retailing thus far.

According to an exclusive tobacco survey of the convenience store channel conducted by Convenience Store / Petroleum (CSP) Daily News and UBS tobacco analyst Nik Modi—the first to solely focus on the c-store sector—many retailers are consciously carrying less inventory today than they were before the FET hike took effect on April 1, 2009.

Asked, "How many days of inventory are you holding and what is this down from prior years?" virtually every retailer nodded that he or she had slashed inventory to control merchandise costs. From the responses of more than 50 chains representing upwards of 20,000 c-stores, many retailers have shaved tobacco stock anywhere from two days to two weeks.

Among the comments: "Approximately 1.2 weeks per store...down from 1.5 weeks prior; " "15 days currently, down from 22 days; " "Holding 10-14 days when past practice was 30 days; " "14 days now; 21 days prior year." And then there was this continual drop from an operator: "We are down to 21 days from 28.

Efforts will continue to move the number to a goal of 14 days."

Modi isn't surprised by the inventory downturn. "A reduction in inventory was expected given the cost of buying cigarettes post the federal excise tax," he said. "The brands most likely to be impacted will be the slow-turners."

Not everyone has cut inventory levels, though. Some retailers said they continue to carry a 14-day supply, others maintain a week or so, and one retailer tries to hold a 38-day supply.

Modi said the balance of eliminating slow-movers and carrying a broad assortment will be decided on a chain-by-chain, store-by-store basis. "The time has never been more important for retailers to have a good handle on SKU (stockkeeping unit, sometimes spelled "Sku" is an identification, of a particular product that allows it to be tracked for inventory purposes) efficiency within their stores," he said. "The last thing you want to do is cut down on brands/SKUs that the consumer wants."

Reference: Exclusive Tobacco Analysis, Part 3:
Dropping Inventory
Spurred by the floor-stock tax, retailers keeping fewer SKUs, cartons on hand
, CSP Daily News, 7/15/2009.
Floor-stock tax..

Part 2 of 3-part series: Altria - did tweaking of Skoal and Copenhagen pricing help regain market share..

Part 1 of 3-part series: US - Effect of April 1st FET increase on tobacco retailing..