Traditional cigarette sales continue to perform better than expected during the COVID-19 pandemic, according to two tobacco industry analysts.
Overall sales volume for traditional cigarettes was down just 0.2% for the four-week period that ended July 11, according to the latest Nielsen survey of convenience stores.
By comparison, the sales volume was down 7.2% in the four-week period that ended in Aug. 10, 2019.
Meanwhile, sales of electronic cigarettes — down 13.2% for the four-week period — have continued to slump five months after the Food and Drug Administration implemented its latest round of heightened regulations on the products.
The FDA regulations have depressed the demand for closed-pod cartridges that provide the nicotine, with No. 2-selling Vuse of R.J. Reynolds Vapor Co. being the lone exception.
The ability of traditional cigarette to flatten its sales decline year-over-year represents “a very dramatic change in the market and coincides with the concerted attacks on vaping over the past year,” said David Sweanor, an adjunct law professor at the University of Ottawa and the author of several e-cigarette studies.
“It is deeply ironic that the credit for the recovery of the cigarette business from a near-death experience a little over a year ago can be credited to the Centers for Disease Control and Prevention, Michael Bloomberg and the others who pushed an abstinence-only agenda on nicotine.”
“By undermining the low risk alternatives to cigarettes they protected the cigarette business.”
The biggest factor in the most recent report was the list price hike by the Big Three tobacco manufacturers in June.
Goldman Sachs analyst Bonnie Herzog reported that Philip Morris USA raised its list price by 11 cents a pack for Marlboro, including Marlboro HeatSticks, and eight other brands. It is typical that R.J. Reynolds Tobacco Co. and ITG Brands LLC raise their prices by a similar amount.
The list price is what wholesalers pay manufacturers for their products. The increase typically is passed on to customers at retail.
The manufacturers also raised by 8 cents a pack the list prices of their traditional cigarettes on Feb. 23.
During 2019, the manufacturers raised their prices by 9 cents to 11 cents a pack in April, 6 cents in June and 8 cents in October.
Traditional cigarettes had $60.05 billion in sales at convenience stores over the past 52 weeks, representing 80% of all U.S. tobacco sales, according to the Nielsen report.
Moist snuff and chewing tobacco were at $7.51 billion and 10%, while electronic cigarettes were at $3.8 billion and 5%, and cigars at $3.59 billion and 5%.
When the first round of stay-at-home orders were issued by numerous governors in mid-March, including North Carolina Gov. Roy Cooper, to slow the spread of the COVID-19 virus, the sales volume of traditional cigarettes rose 1.1% for the week that ended March 22.
Those sales were generated primarily by consumers stocking up.
That uptick had some anti-tobacco and anti-smoking advocates concerned that the coronavirus outbreak could reverse years’ worth of consumption decline during the social-distancing phase.
After about two weeks of stockpiling, manufacturers experienced a 9.3% drop-off in sales volume by mid-to-late April before the volumes began to rise again in June.
As of July 11, Philip Morris USA had a 52.6% market share, while R.J. Reynolds Tobacco Co. was at 34.4%.
Marlboro’s top market share was 46.1%, down from 47.1% from the previous survey.
Reynolds’ Newport was second at 13.6%, down from 14.1%. Camel was third at 8.7% (up from 8.8%), Pall Mall fourth at 6.2% (down from (6.3%), and Natural American Spirit was sixth, unchanged at 3.6%.
ITG Brands LLC’s Winston was seventh at 1.9%, down from 2%.
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 are the same as those that are legal in traditional cigarettes.
Juul’s four-week dollar sales have dropped from a 50.2% increase in the Aug. 10, 2019, report to a 31.7% decline for the latest report. By comparison, Reynolds’ Vuse was up 62.9% in the latest report and NJoy down 14.2%.
Juul has a 57.6% market share, down from 58.9% in the previous report.
Vuse is at 22%, up from 20.4%, while NJoy at 5%, down from 11.3%, and Fontem Ventures’ blu eCigs at 2.7%, down from 3%.
Herzog said that NJoy “refutes Nielsen’s data and methodology.”