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Traditional cigarettes continue to outperform electronic cigarettes in sales
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Traditional cigarettes continue to outperform electronic cigarettes in sales

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Traditional cigarette sales are slumping slightly, but still continuing to perform better than expected during the COVID-19 pandemic, according to the latest Nielsen convenience store report.

Overall sales volume for traditional cigarettes was down 2.1% for the four-week period that ended Aug. 22, according to the latest Nielsen survey of convenience stores.

By comparison, the sales volume was down 0.8% in a four-week period in May.

Meanwhile, sales of electronic cigarettes — down 17.4% for the four-week period — have continued to slump six 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 Nielsen data continues to show the decline in cigarette sales moderating to a pace that is only about a quarter of the rate of contraction in the second quarter of last year — before the much-enhanced attacks on vaping," said David Sweanor, an adjunct law professor at the University of Ottawa and the author of several e-cigarette studies.

"This is fascinating, as there is very strong evidence that current tobacco control policies are leading directly to higher rates of smoking than would have otherwise been the case.

"Yet, those pursuing those policies are doubling down rather than rethinking their strategies," Sweanor said. "By undermining the low risk alternatives to cigarettes they protected the cigarette business.”

The biggest factor in the July report was the list price hike by the Big Three tobacco manufacturers in June. Philip Morris USA raised its list price by 11 cents a pack for Marlboro, including Marlboro HeatSticks, and eight other brands. 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.

Goldman Sachs analyst Bonnie Herzog said Tuesday "we wouldn't be surprised if another price increase happens soon since our industry contacts have mentioned that wholesalers are loading inventory."

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 $60.27 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 $7.59 billion and 10%, while electronic cigarettes were at $3.72 billion and 5%, and cigars at $3.63 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 Aug. 22, Philip Morris USA had a 52.9% market share, while R.J. Reynolds Tobacco Co. was at 34.1%.

Marlboro’s top market share was 46.6%, up from 46.1% from the previous survey.

Reynolds’ Newport was second at 14.1%, up from 13.6%. Camel was third unchanged at 8%, Pall Mall fourth unchanged at 6%, and Natural American Spirit was fifth at 3.8%, up from 3.6%.

ITG Brands LLC’s Winston was seventh, unchanged at 1.9%.

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 32.9% decline for the latest report. By comparison, Reynolds’ Vuse was up 56.7% in the latest report and NJoy down 40.8%.

Juul has a 57.8% market share, unchanged from the previous report.

Vuse is at 23.6%, 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.”

336-727-7376

@rcraverWSJ

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