Although e-cigarette category dollar sales started 2014 with slight deceleration, growth is expected to keep “robust” in the years ahead, in accordance with Wells Fargo Securities.
The convenience store channel saw $45.2 million in sales within the a month ended Jan. 18, 2014, plus e-cigs accounted for another $12.4 million in national, cross-outlet markets. “This implies about $750 million in annual sales in Nielsen-tracked channels and we believe e-cig sales in non-Nielsen tracked channels (such as vapor shops and boutiques) plus online sales ($500-625 million) suggest the category has become about a $1.85 billion category,” said Bonnie Herzog, managing director of beverage, tobacco and convenience store research for Wells Fargo Securities.
Furthermore, Herzog said, her research shows that the tank-style vaporizers are underrepresented in the Nielsen data and continue to cultivate faster compared to the category. “We continue to believe that e-cig consumption could surpass traditional cigs and the combined operating profit pool could generate an annual growth rate in excess of 7% over the following decade,” she said.
Wells Fargo Securities reported that Lorillard's blu stood out while the e-cig category leader in the c–store channel, with 40.6% dollar share, accompanied by NJOY with 26.5% share and Logic at 15.7% share for the 52 weeks ended Jan. 18, 2014.
“E-cigarette dollar sales growth decelerated slightly to 45% in the period ended Jan. 18, 2014, driven by accelerated unit growth of 54.8%. This was partially offset by lower net pricing, that was down 6.3%—the category's first negative pricing,” Herzog said.
The common price per unit was $6.34, for the exact same 52 weeks. “Though we don't like to see negative pricing, we believe this might be due to increased penetration of kits, which offer a cheap per cartomizer,” Herzog said.
The cartomizer cost should continue steadily to trend down over time as a result of volume shift to multipacks as leading brands, including blu, NJOY and Vuse (set to roll out nationally in 2014), are coming out with starter kits at attractive prices.
Retailer Excitement
Rockland, Mass.-based Tedeschi Food Shops, which provides the three top selling e-cigarette brands Blu, NJOY and Logic disposables and rechargables, noticed the deceleration.
“Sales had leveled off in the fourth quarter of 2013, nevertheless the momentum seems to be in 2014,” said Steve Monaco, director of buying for Tedeschi, which operates 191 c-stores in Massachusetts and New Hampshire.
Inspite of the upswing, however, 2014 is pushing legislative challenges. New York City and Chicago made headlines while they extended their public smoking bans to include e-cigarettes, a pattern Monaco expects to see continue.
“Unfortunately, due to the not enough education on the section of our politicians, they think it really may seem like the proper action to take,” he said. “And it certainly isn't.”
Matthew Paduano, vice president of category management for Nice N Easy Grocery Shoppes Inc. in Canastota, N.Y., noted that inspite of the regulations in nearby New York City, he doesn't anticipate that restrictions will hit upstate New York anytime soon.
“My big concern is their state will attempt to tax e-cigs like they do all tobacco products. When this occurs, we could expect a decline in sales depending on what far their state goes with taxation,” Paduano said.
For the balance of 2014, Paduano said he expects sales of e-cigs to continue to cultivate double digits, especially with increased e-cigarette offerings across all Nice N Easy stores. The chain is in the act of expanding its offering to include more brands and additional varieties.
“We do carry products from blu, Logic, NJOY, Metro, Mistic, Swisher, Criss Cross, Krave, V2 and FIN. We've also invested in custom fixtures that we are still rolling out to your stores,” Paduano said. “We also rely on our wholesaler, Pine State Trading, who's very proactive in this segment. You have to have the brands your visitors want.”
One note of caution that's Paduano, and others, concerned, is the potential that you will see brand attrition while the big tobacco companies jump to the segment and the Food and Drug Administration announces its long-awaited e-cigarette deeming regulations, that have been still not offered at presstime.
“While I do believe sales will continue to cultivate in this category, I anticipate a ‘thinning of the herd'once the FDA arrives having its mandates,” he said. “I expect Altria and RJ Reynolds to roll out their offerings, but I also expect you'll see some margin erosion when this happens, since I anticipate requirements for more aggressive retails from them.”
No comments:
Post a Comment