The recent increase of more workers returning to the office kept traditional cigarettes on a significant year-over-year decline in the latest Nielsen survey of convenience stores released Tuesday.
The report covers the four-week period ending July 17.
Industry analysts said the 11% volume decline for traditional cigarettes reflects the impact on the industry of the COVID-19 pandemic and the later economic reopening.
A key 2020 industry development was smokers’ increasing their purchases in the early months of the pandemic in response to statewide stay-at-home orders, including in North Carolina.
This year has seen a return to more typical shopping conditions.
The report lists total nicotine volumes down 9.2% for the same period.
Tobacco manufacturers have been able to offset some of the recent volume declines through a series of per-pack list-price increases in recent months.
The list price is what wholesalers pay manufacturers for their traditional cigarette products. The increase typically is passed on to customers at retail.
For example, R.J. Reynolds Tobacco Co. increased July 5 the list price of certain brands by 14 cents a pack. The increase affects Camel, Lucky Strike, Newport, Pall Mall and certain lines of Natural American Spirit.
It’s a pricing strategy that has become at least a semiannual occurrence for manufacturers since 2014.
Reynolds also raised its list price by 14 cents a pack on April 5 and by 13 cents on Jan 28.
“Cigarette manufacturers are pricing stronger and more frequently,” Goldman Sachs analyst Bonnie Herzog said.
However, another industry analyst said the price increases likely led to decreased sales.
“U.S. cigarette sales are not falling as fast as many believe,” said David Sweanor, an adjunct law professor at the University of Ottawa and the author of several e-cigarette and health studies.
“Much of the decline is due to the large price increases by the manufacturers.
Sweanor said “there is a clear correlation between the how dependent a company is on cigarettes and how much the market has beat up the share price.”
“The market still clearly sees disruptive technology as a threat to Big Tobacco.”
Philip Morris USA traditional cigarette volumes were down 4.7% year over year, while Reynolds had an overall 3.4% decrease and ITG Brands LLC was down 3.1%.
As of July 17, Philip Morris’ top market share was at 52% with top-selling Marlboro at 46%.
Reynolds was at 34.8%. Newport, the No. 2-selling traditional cigarette, was at 14.2%, while No. 3 Camel was at 8.7%, No. 4 Pall Mall at 5.5% and No. 5 Natural American Spirit at 4%.
ITG was at 7.4%, although ITG has said its market share is closer to 10%. Winston was No. 7 at 1.9%, while Kool is No. 8 at 1.7% and Maverick is No. 9 at 1.5%.
E-cigarette sales up
Meanwhile, sales of electronic cigarettes were up 2.7% for the four-week period.
Overall e-cigarette sales-volume growth has declined steadily since Nielsen’s Aug. 10, 2019, report, when it was up 60.2% year over year.
Sales overall have slumped since February 2020, when the Food and Drug Administration implemented its latest round of heightened regulations on the products.
Those restrictions foremost required manufacturers of cartridge-based e-cigarettes, such as Juul Labs Inc., R.J. Reynolds Vapor Co., NJoy and Fontem Ventures, to stop making, distributing and selling “unauthorized flavorings” by Feb. 6, or risk enforcement actions.
Electronic-cigarette manufacturers had to submit by Sept. 9, 2020, their premarket tobacco applications in order to stay in the marketplace for at least another 12 months.
Top-selling Juul’s four-week dollar sales have dropped from a 50.2% increase in the Aug. 10, 2019, report to a 9.6% drop in the latest report.
By comparison, Reynolds’ Vuse was up 87.9% in the latest report, while No. 3 NJoy was down 7.7% and No. 4 Fontem Ventures’ blu eCigs down 6.6%.
Juul’s market share is at 44.4%, while Vuse’s market share is at 31.7%, NJoy at 4% and Blu eCigs at 2.8%.
Herzog said that NJoy “refutes Nielsen’s data and methodology.”
Overall, traditional cigarettes represent 79%, or $61.34 billion, of the industry’s retail sales over the past 52 weeks, followed by smokeless and oral nicotine at 10%, or $8.02 billion, e-cigarettes at 6%, or $4.34 billion, and cigars at 5%, or $3.92 billion.