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Traditional cigarette volumes stay on downward track in latest Nielsen report
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Traditional cigarette volumes stay on downward track in latest Nielsen report

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Traditional cigarette sales remain on a steady decline, though how deep of a descent remains up for debate.

According to the latest four-week data from Nielsen that ended July 13, cigarette industry volume fell 9.8%.

However, Nielsen has said it plans to revamp its survey methods and release new data on Aug. 20.

Wells Fargo Securities analyst Bonnie Herzog said the Nielsen revamp “would address serious issues with its methodology, possibly resulting in a significant (up to 4%) upward revision in tobacco brand and category growth for future periods.”

Herzog said British American Tobacco Plc — parent company of Reynolds American Inc. — and Imperial Brands Plc — parent company of ITG Brands — “have forcefully disputed Nielsen’s data, which Nielsen addressed in a June 10 statement in which it acknowledged flaws in its methodology.

“Our retailer/wholesale contacts certainly agree there is more pressure on volumes, but not remotely close to what Nielsen data has so far suggested,” Herzog said.

Herzog said cigarette volumes could be down as much as 6%. BAT and Altria Group Inc., parent company of Philip Morris USA, has said the decline could be between 4% and 5%, while Imperial has said between 4.5% and 5%.

The volume decline is partially caused by a recent 11-cent per pack price increase and by electronic cigarettes being increasingly adopted as a viable nicotine alternative.

Part of the decline also can be attributed to wholesalers and retailers stocking up on inventory ahead of the pack price increase in February. Those groups typically pass along list price increases to consumers.

Meanwhile, e-cig industry volume was up 44.1% year over year even after Juul Labs Inc. removed in November its creme, cucumber, fruit and mango flavors from convenience stores to address Food and Drug Administration regulatory concerns.

“There is on-going debate about how accurate these numbers are, given the rapid (and possibly increasing) rate of decline in cigarette sales,” said David Sweanor, an adjunct law professor at the University of Ottawa and the author of several e-cigarette and health studies.

“There is a reluctance to accept that Nielsen data showing sales falling by around 10% could be correct, even when the rapid rise in the sale of vaping and other non-combustible alternatives lends credence to the idea that cigarette sales are, in the historic sense of the term, being decimated.”

In traditional cigarettes, Philip Morris held steady in first place at 54.1% market share, of which 47.4% is the top-selling Marlboro.

Reynolds held steady at 33.7%, led by 13.2% from Newport, 8.7% Camel, 6.4% Pall Mall and 3.5% Natural American Spirit.

ITG was at 7%, including 2% from Winston and 1.6% each from Kool and Maverick. ITG has said its market share is closer to 10%.

Juul holds a 73.4% market share, down 1 percentage point from the previous survey.

By comparison, the market share is 11.4% for No. 2 Vuse of R.J. Reynolds Vapor Co., down from 12.6% for the previous survey. Similar flavored e-cigs have not been pulled from retail by Reynolds Vapor.

Herzog has projected $9 billion in e-cig sales this year, up from $7 billion in 2018.

Herzog cautioned, however, that e-cigs are just the third largest tobacco product with 5% of retail sales, compared with 82% for traditional cigarettes and 8% for chewing and smokeless tobacco.

Njoy jumped from 6.2% to 8.9% and remained third. followed by Imperial Brands Plc’s Blu e-cig at 3.1%, down from 3.5%, and Japan Tobacco’s Logic was unchanged at 2.1%.

Those products likely gained sales from Altria Group Inc. choosing to stop production of e-cigs MarkTen XL and Green Smoke as part of its $12.8 billion investment in December for a 35% ownership stake in Juul.

rcraver@wsjournal.com 336-727-7376 @rcraverWSJ

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