Increasing consumer demand for lower-priced traditional cigarettes continued to send overall category sales down in September, according to the latest Nielsen convenience store report out Wednesday.
What Goldman Sachs analyst Bonnie Herzog refers to as "downtrading" from many top brands has been occurring in recent months during the COVID-19 pandemic.
Overall sales volume for traditional cigarettes was down 2.6% for the four-week period that ended Sept. 19.
By comparison, the sales volume was down 0.8% in a four-week period in May.
"Given ongoing uncertainties around federal government stimulus, we are interested to see what the potential impact may be on the nicotine category," Herzog said.
"Downtrading remains the biggest potential risk, in our view, as those (price) pressures could increase."
Meanwhile, sales of electronic cigarettes — down 8.7% for the four-week period — have continued to slump nearly eight months after the Food and Drug Administration implemented its latest round of heightened regulations on the products.
Herzog said traditional cigarette manufacturers have been able to offset some of the declining sales by raising their list prices by 13 cents, effective Sept. 28. The list price is what wholesalers pay manufacturers for their products. The increase typically is passed on to customers at retail.
Nielsen reported Altria’s volumes were up 1.9% for the latest report, while Reynolds was up 1% and ITG up 1.6%.
"It seems the price increase may have led to some destocking of cigarettes," said David Sweanor, an adjunct law professor at the University of Ottawa and the author of several e-cigarette studies.
Philip Morris’ market share was at 52.9%, with top-selling Marlboro at 46.5%.
Reynolds was at 34%, with No. 2 Newport at 14.1%, No. 3 Camel at 8%, No. 4 Pall Mall at 6.1% and No. 5 Natural American Spirit at 3.8%.
ITG was listed at 7.3%. ITG has said its market share is closer to 10%. Its top brand, Winston, was at 1.9%.
"Overall, cigarette sales are down a bit more than recent trends and vaping sales are down somewhat less than recent trends," Sweanor said.
"Modern oral (snus, heat-not-burn cigarettes) continues to be a big success in the marketplace."
Herzog said Marlboro recently extended its test markets for its HeatSticks heated traditional cigarettes into the Charlotte area, along with Atlanta and Richmond.
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.
The latest FDA restrictions on the sector debuted Feb. 6. The FDA raised the legal smoking age from 18 to 21 on Dec. 20.
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.
The menthol and tobacco flavors still allowed for cartridge e-cigarette flavorings the same as those that are legal in traditional cigarettes.
Electronic-cigarette manufacturers had to submit by Sept. 9 their premarket tobacco applications in order to stay in the marketplace for at least another 12 months.
Juul’s four-week dollar sales have dropped from a 50.2% increase in the Aug. 10, 2019, report to a 22.6% decline for the latest report. By comparison, Reynolds’ Vuse was up 70.6% in the latest report and NJoy down 40.7%.
Juul has a 58.1% market share, essentially unchanged from the previous report.
Vuse is at 25.2%, up from 24.3%, while NJoy slipped from 5.3% to 5.2%, and Fontem Ventures’ blu eCigs from 2.7% to 2.6%
Herzog said that NJoy “refutes Nielsen’s data and methodology.”