Cigarette sales, while continually declining, still boost
the bottom line for retailers.
BY JERRY SOVERINSK Y
“Reports of my death have been greatly exagger- ated,” the great Mark Twain was quoted as say- ing, in response to erroneous
newspaper accounts that announced the author’s
passing in 1897.
Just as Twain endured well beyond his premature
obituary so too, does the cigarette category continue
to yield generous returns for convenience store retailers, despite ominous exhortations of its demise.
“Is this the beginning of the end for combustible
cigs?” wrote Bonnie Herzog, managing director for
Beverage, Tobacco & Convenience Store Research
at Wells Fargo Securities, in the company’s October
2013 Equity Research report, noting the rising popularity of electronic cigarettes.
Make no mistake, the category’s decline is inexorable, with increased retailer competition, rising taxes and the growth of electronic cigarettes all
combining to erode performance. But for now, the
category remains a strong in-store traffic driver and
By the Numbers
As a percentage of in-store sales, cigarettes generated 36.27% of revenue for convenience stores
in 2012, falling 1. 46 from 2011 ( 37.73%) according to the NACS State of the Industry Report.
Average annual sales per store were $622,248,
es have forced
pricing to lure
sulting in a drop in
gross margins: Gross
profit margin percent-
ages fell 0.26 points from
2011 ( 14.55%) to 14.29% in
2012, representing average
gross margin sales per store
of $88,908, off 2.72% from
Among all in-store categories, cigarettes represented
16.74% of total gross margin
contributions, number two
behind packaged beverages, which contributed 18.78%
of total gross margin dollars,
and well ahead of the third
place on-site foodservice,
which contributed 12.85%
(the entire foodservice category contributed 26.10% of
gross margin dollars).
While rising taxes have sent
cigarette prices over the $10
mark in some areas, consumers haven’t been trading down