Convenience stores have always relied on Tobacco, with the category representing over 20% of total sales on average. The introduction of the EU Tobacco Products Directive in May 2017 brought significant changes to the way in which retailers display and sell Tobacco.
The aim of this change was to reduce the number of smokers and encourage a smoke-free population.
It has been estimated that on an annual basis, smoking rates declined more than twice as fast between 2012 and 2016 than between 1993 and 2011 but have recent Tobacco changes further accelerated this decline and what impact has that had on retailers?
We conducted research into the Tobacco sales trends of over 2,500 convenience stores to assess changing consumption trends and impact on turnover.
Is Tobacco Consumption Falling?
Using volume sales as an indicator of consumption, we found that in November of this year, each store sold on average 23% less Tobacco than in May 2017. This drop has been fuelled by significant falls of 28% and 21% in Northern Ireland and the North East respectively while volume sales also are down in almost every other region. Interestingly however, retailers on the Channel Islands have bucked the trend, increasing their sales by 12% over the same period.
There are a variety of reasons for these falls including:
- Social attitudes to smoking
- Declines in underage smoking
- Greater support to quit smoking
- Lack of 10 packs
- Lack of smaller RYO pouches
- Reduced affordability, thanks to ever increasing prices
Are retailers feeling the squeeze?
Considering volume sales reductions of 23%, it is fair to assume that retailers are making less money than ever from their Tobacco gantry.
This is not the case however, with value sales remaining roughly static, falling by just 0.07% across the same period. The question is: “How are retailers weathering the storm?”