At the 2020 State of the Industry Summit, Chuck Maggelet, chief adventure guide for Maverik Inc., described the cigarette category as a “bit of a melting ice cube” for the convenience industry.

While sales continue to decline, there is no danger of the category disappearing anytime soon. After all, it’s hard for a $52 billion ice cube (the amount of 2022 cigarette sales at c-stores) to melt all at once.

In fact, the cigarettes category may as well be an iceberg: There’s a lot going on beneath the surface. The changing cigarette consumer, the meteoric rise of other tobacco products (OTP) like vapes and electronic cigarettes and the growth of the poly-usage customer who consumes both cigarettes and OTP make cigarettes an interesting category to watch.

Nothing to Snuff At

Cigarette sales saw a year-over-year decline of 3.2%, but the category remains a crucial profit source for convenience retailers. In 2022, the convenience channel sold $51.8 billion worth of cigarettes and dominated U.S. cross channel sales—81.86% of cigarettes were sold in a convenience store. Convenience stores remain, by far, the consumer’s first choice when it comes to where to purchase cigarettes.

Data from the NACS CSX Benchmarking Database shows an average of $41,130 in sales between January and July of 2023—well below the 2022 average of $43,142. CSX data also reveals a slight seasonality to the category; people smoke all year round, but the sales show a rounded peak around summertime.

It is easy to see the decline in sales per store, per month. The peak of 2023, seen in May’s $45,222 in sales, did not come close to hitting the 2022 peak of $47,728.

For the past couple of years, foodservice sales have been creeping up on cigarette sales, and foodservice finally won the top spot among all in-store categories on a per store, per month basis, finishing as the number one sales and gross profit generating category of 2022.1

Cessation Nation

Declining cigarette sales have paralleled declining smoking rates in the U.S. The smoking rate was 11.5% in 2021, according to the Centers for Disease Control and Prevention, down significantly from 20.9% in 2005.

For those who do choose to smoke, cigarettes are an important part of their routine. According to a study by NACS Convenience Voices, shoppers who indicated that cigarettes were their most important purchase had the highest weekly visit frequency while also maintaining an above-average NPS.

Companies strive to keep these consumers engaged through convenient placement and—of course—the right price. Davien Anderson of Altria shared that “there are nearly 28 million adult tobacco consumers buying cigarettes with nearly 25 million tobacco transactions happening daily. For the cigarette category, it’s critical to have the right products displayed on the fixture at the correct price.”

While cigarette customers have historically been some of the most brand loyal, sometimes the necessity of a low price can override their ideal purchase of a certain brand.

Mike Wilson of Cubby’s Convenience Stores noticed that “our trends continue to tell us that price is the driving factor for many customers.” Cubby’s customers are looking for cigarettes that “provide value.”

Making sure the price is right is paramount, especially after inflation severely impacted many consumers’ wallets in 2022 and 2023. In times of economic downturns and stresses, consumers look to more “affordable cigarette brands,” noted Domingo from Reynolds.

Customers who are poly-users might be tempted to purchase something from the tobacco and the other tobacco products categories, meaning they might purchase a pack of cigarettes, but then supplement with an e-cigarette. This cross-pollination between the categories drives sales, making the poly-user increasingly important for convenience stores to understand and cater to, especially as cigarette sales alone start to decline.

The Future of the Cigarette Category

Suppliers and retailers are watching the category closely. Here’s what a few convenience industry leaders had to say:

Matt Domingo, senior director external relations, Reynolds: Our transformation mission and focus on tobacco harm reduction is paramount. The sustainability of the cigarette category is dependent upon consumer choice drivers. As those choices shift, we expect these consumers to choose from the array of new categories of potentially reduced-risk offerings over cigarettes (vapor and modern oral).

Davien Anderson, senior manager of communications, Altria: Adult tobacco consumers (21+) continue to tell and show us that they are interested in finding tobacco alternatives. Our goal is to continue to work hard to deliver a broad portfolio of choices for the adult tobacco consumer (21+). That’s why we are focused on Moving Beyond Smoking and offering a compelling portfolio of smoke-free products for adult smokers.

This is a category that will continue to shrink in units as more people quit or change over to vape delivery systems and other OTP products. Other reasons we believe it will continue to decline are the continued price increases from the tobacco companies and further government regulations regarding flavors.