Tobacco Category Trends: Swedish Match is Leading the Growth in Smokeless

Convenience retailers and brands continue their long track record of innovation to meet changing consumer needs. Today, we look briefly at payment methods and continue our recent deep dive in Tobacco to identify consumer purchase trends and manufacturers and brands that are capitalizing on market opportunity.

If you don’t have the time today to dive deeper, here’s a quick snapshot of the key takeaways:

  • Credit and debit growing payment share over cash
  • Swedish Match is leading the YOY sales/store growth in Smokeless
  • Oral Nicotine products are changing Smokeless

Credit and Debit Growing Share over Cash
For years, cash has been the predominant payment method for in-store purchases at c-stores. There are a few factors at work here – consumers find cash convenient for small transactions, retailer margins are increasingly squeezed by higher interchange fees on credit card transactions, and an increased coin shortage in retail. Finally, COVID-19 has caused consumers to place more emphasis on hygiene.  Given these factors, we decided to look at recent trends of cash usage vs. debit and credit. This view shows the percentage of total sales by payment method over time.  Comparing July 2019 to July 2020 we see cash losing 8% share, with the majority going to credit and the remaining going to debit. As contactless payment technology becomes more widespread, we expect to see this trend accelerate.

Swedish Match Leads Smokeless Sales Growth
In a previous post we highlighted Tobacco basket growth by category (check it out here) and identified above average growth in the Smokeless category. Today we measure Smokeless manufacturers on the basis of Sales/Store Growth vs. year-ago levels. Swedish Match, Swisher International and Turning Point Brands have been top performers here, booming in the first quarter with average growth rates of 36%, 40% and 33% respectively, then sustaining healthy growth throughout the pandemic. On the other hand, Republic Tobacco has been more mixed, declining in the past three months after a momentary sharp increase (22%) in April.

Oral Nicotine Products are Changing Smokeless
We also looked more deeply at Sales/Store Growth vs. year-ago levels for selected Smokeless brands. This category has traditionally grown a few percentage points a year but change is underway. Nicotine oral pouch products represent a growth segment as a result of both demand and promotion factors. Zyn (Swedish Match) has been growing at a dramatic rate throughout 2020 and On (Altria) and Velo (RJ Reynolds Tobacco) are each beginning to reach consumers as well.

We expect continued growth in the Smokeless subcategory over the remainder of 2020. Our team will continue to monitor Tobacco and broader in-store trends, share additional insights, and keep you informed over the near term.

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