Fifty years ago, you wouldn’t have talked about the nicotine consumer or even the tobacco consumer—the category was pretty much about cigarettes and cigarettes alone.

Management Science Associates Inc. (MSA) has been tracking the nicotine category since the company started in the late 1960s. Said MSA’s senior vice president Don Burke, “Back in the ’60s and ’70s, almost all tobacco sales went to cigarettes.”

Those cigarette consumers were incredibly brand loyal, with few regulatory or tax incentives to change their behaviors. This made the category easy to track ... and easy for retailers to manage.

Bonnie Herzog, managing director and senior consumer analyst at Goldman Sachs, has covered nicotine since the late 1990s. Since then, she said, “a lot has changed.”

It’s possible that the consumption of nicotine is down only slightly or even close to being flat.”

There are smoking bans. Increasingly high cigarette excise taxes. Stigma around smoking. All of this has resulted in a decline in cigarette sales. In 2012, NACS State of the Industry Report® (SOI) data showed cigarettes accounted for 36.3% of in-store sales; by 2022, that dropped to 22.8%.

The good news? Today’s nicotine consumer is decisively not just a cigarette smoker, as evidenced by the growth in OTP. SOI data shows OTP’s percentage of in-store sales grew from 4.4% in 2012 to 7.5% in 2022.

The shift away from exclusive cigarette use has also resulted in different demographics for today’s nicotine consumers, especially those who purchase reduced-risk or non-combustible products. Goldman Sachs data suggests these consumers are younger than the historical demographics for cigarette smokers (Herzog estimates the 21-35 age range, pending tobacco purchase age rules) and skews more female than consumers of traditional moist smokeless products.

Herzog said of today’s nicotine consumers, “They are more open to trying some of these newer products than the older, traditional tobacco demographics.”

Today’s Nicotine Consumer Is … Less Likely to Smoke Cigarettes and Harder to Track

First, let’s be clear: There are still a lot of cigarette smokers. MSA estimates 60% of nicotine purchases today are cigarettes (based on consumer unit sales), and data from Altria shows that of the 47 million adult tobacco consumers in the United States, 28 million use cigarettes.

“Adult smokers remain a sizeable consumer audience in the United States,” said Davien Anderson, a spokesperson for Altria.

But sales are stagnant. Ten-year, same-firm NACS SOI data reported an average of $49,645 monthly cigarette sales per store in 2013; in 2019 that raised slightly to $50,593, due to price increases rather than volume, and 2022 saw a minor increase to $51,157.

“The volume decline [in cigarettes] is critical, but it’s not the whole story of the category,” Herzog said, pointing to the entrance and growing popularity of newer non-combustible products. “There’s a greater percentage of [nicotine consumers who] are using other nicotine products.”

“The category has really splintered,” Burke added. “It’s far harder to track and control.”

While Burke agreed that more consumers are using other nicotine products, he pointed to regulatory limitations such as taxes and flavor bans fueling the black market as a particular challenge to truly measuring or tracking the category.

A decade ago, MSA data showed OTP sales were largely offsetting cigarette volume declines and keeping total nicotine sales flat or slightly down, while today’s data suggests total nicotine sales are down four to five percentage points.

“I don’t believe that is the true story,” Burke said. “With many consumers today going to the black or gray market due to increasing levels of regulations on the sales of their nicotine product of choice, it’s possible that the consumption of nicotine is down only slightly or even close to being flat.”

Today’s Nicotine Consumer Is … Using Multiple Products Based on Occasion

The terms “dual-usage” and “poly-usage” are thrown around a lot when talking about today’s nicotine consumer. While using more than one kind of tobacco or nicotine product is hardly a new phenomenon, it’s become increasingly popular as non-combustible options have come onto the market.

“The introduction of these newer products or technologies did encourage consumers to try other nicotine products,” Herzog said.

So did regulations and stigmas around smoking.

“Today, many adult smokers experience social friction, which drives motivation and interest in smoke-free alternatives,” Anderson said.

About half of all adult smokers are interested in switching to smoke-free products.”

Burke described poly-usage less as a result of nicotine consumers being more interested in new nicotine product forms but instead it becoming “almost a necessity” for those who still use combustibles such as cigarettes or cigars. Gone are the smoking sections in restaurants and smoking lounges in airports. Today, smokers find themselves banned from smoking in even some outdoor spaces.

“Those consumers are almost forced into being a little bit more creative in what they purchase and where they use it,” Burke said.

The Covid lockdowns highlighted this phenomenon. When people were almost exclusively at home and could (mostly) smoke freely, cigarette declines not only decelerated, they grew for the first time in years. As people went back into the world, poly-usage increased again. That same smoker might still purchase a pack of cigarettes for the weekend—and also a vapor or oral tobacco product for when they’re at the office.

“It really is their circumstances that drive that poly-usage,” Burke said.

Today’s Nicotine Consumer Is … Less Brand Loyal, More Price Savvy

Historically, cigarette smokers have been one of the most predictable shoppers due to their extreme brand loyalty. A study published by the Journal of Drug Delivery and Therapeutics in 2019 estimated that fewer than 10% of global cigarette smokers switch from one product to another. The authors described brand loyalty for cigarettes as “the highest among all existing consumer products.”

But that brand loyalty has been tested as inflation and economic uncertainties have pressured today’s nicotine consumer.

Goldman Sachs’ quarterly “Nicotine Nuggets” survey of retailers has found that downtrading is getting more and more prevalent as consumers seek out cheaper alternatives in the form of both fourth-tier or deep-discount cigarettes and lower-priced alternatives such as e-vapor. Burke noted that, specifically in cigarettes and smokeless, only the deep-discount segments are growing.

Herzog said price is “absolutely critical” to purchasing decisions, adding that “this consumer is pretty stretched.”

It’s not just that the consumer is stretched. Herzog said the difference between the price of premium cigarettes and the lowest-priced, deep-discount cigarettes has widened substantially.

“No question that in this environment, the pricing power [for manufacturers] is there but not as strong as it was a year or two ago,” she said.

Price sensitivity is being seen across the entire nicotine category. However, newer alternative nicotine products are offering a lot of promotions to attract that price-stretched shopper.

“It’s no different than any other new consumer product,” Herzog said. “To draw trial, [manufacturers] sometimes use pricing and sophisticated promos as levers.”

“In general, we’re seeing that the tobacco consumer today is a lot savvier about what they use and how they use it,” Burke said. Additionally, “they’re becoming far more price conscious.”

Today’s Nicotine Consumer Is … Open to Innovation

Besides pricing, new innovations and new nicotine delivery systems are driving trials for today’s nicotine consumer.

“We know that about half of all adult smokers are interested in switching to smoke-free products,” Anderson said. “Their motivations to switch have increased over time.”

The e-cigarette/e-vapor category clearly demonstrates this interest in innovation. In 2012, the NACS research team estimated e-cigarettes accounted for 2.6% of OTP sales. By 2022, it was the second-largest contributor at 32.5%. That happened despite the FDA effectively banning flavors and severely restricting category growth.

The diversity of today’s nicotine category has undoubtedly made it more difficult to manage.

Herzog was so certain about the demand for nicotine innovation that she once predicted consumption of reduced-risk products could outpace cigarette consumption as early as 2023. “I’m not quite right yet,” she said, “but I think I will be.”

Burke pointed to the success of the modern oral tobacco segment as proof that today’s nicotine consumers are willing to do more than just try a new product—they’ll actually change their consumption patterns when the right product comes along. MSA data shows that even though modern oral products have achieved near-100% distribution for the convenience channel, same-store sales are still growing by double digits.

“This not only suggests that there were new consumers who want to try modern oral products, but that many of those consumers are becoming repeat purchasers,” Burke said.

Herzog cautioned that the nicotine consumer’s interest in innovation can only succeed if regulatory agencies allow innovation to continue. The current cost, high rejection rate and slow turnaround time for the FDA’s premarket tobacco product application (PMTA) process—the only legal way to get a new tobacco or nicotine product on the market—could be slowing down that ability to innovate.

“I do think it’s critical that there’s an opportunity for more reduced-risk products to be on the market legally,” she said. “The FDA plays an important role in this.”

Today’s Nicotine Consumer Is … Still Very Important for Convenience Retailers

Just as the convenience channel is no longer limited to just “gas, Cokes and smokes,” the nicotine shopper is no longer just looking for “smokes.” But they remain an invaluable shopper to the channel.

Data from the Technomic Q3 2023 C-store Consumer Market Brief showed that 100% of c-store tobacco/nicotine consumers visit stores at least once a month and that 86% came in once a week or more.

“What’s more, they have the highest incidence of visiting daily,” said Donna Hood Crecca, a principle at Technomic. “About 35% of nicotine consumers are daily c-store visitors, versus 15% for consumers overall.”

The diversity of today’s nicotine category has undoubtedly made it more difficult to manage—but has also made it more profitable for a retailer’s bottom line. As of 2022, same-firm, 10-year NACS SOI data showed OTP products averaged a 29.44% gross profit margin (nearly twice that of cigarettes, at 13.97%).

“Cigarettes are still the No. 1 driver of inside sales, but not in profitability—so retailers are allocating more space to what’s growing faster with higher margins,” Herzog said, pointing to oral tobacco, e-vapor and other OTP segments. “The retailer does earn more on these products.”

The value of today’s nicotine consumer doesn’t just lie with the category products they purchase but also the other profitable items in their baskets.

“Tobacco users are more likely to enter the c-store when they visit for fuel and are more likely to purchase prepared foods and prepared beverages than consumers overall,” Hood Crecca said. “The nicotine consumer is a very valuable customer for convenience.”

And that is something that hasn’t changed—and probably won’t any time soon.