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Predictably, COVID caused an abrupt change in consumers’ buying behaviors, including fuel and toilet paper. It also caused significant supply chain disruptions that impacted every retailer’s ability to keep new fast-moving items in stock. But surprisingly, it also reversed the long decline in cigarette sales both in the US and Canada.

Since approximately 87% of cigarette sales scan out at c-stores, these tobacco retailers had to meet increased demand while adjusting to a disrupted supply chain, leaving many out of stocks in this category. The following discusses the past and current cigarette sales trends and how scan data can help the industry to meet consumer demand.

The 2020 cigarette sales trend reversal

In the US, the FTC reported a slight increase of 202.9 billion units in 2019 to 203.7 billion units in 2020 after years of decline, approximately 0.4%. In Canada, unit sales increased from 18.6 billion units in 2019 to 19.1 billion units in 2020, a 2.6% increase. Some have suggested COVID restrictions also decreased illegal cigarette sales, which may explain the difference.

Will this trend reverse itself in 2021?

So far, both in the US and Canada, 2021 is showing a reversal. Altria reports an industry-wide decrease of 4% for the first half of 2021. Statistics Canada reports, for the first 9 months of 2021, a reduction of 12.5% versus 2020.

Why Should C-Stores and Other Tobacco Retailers Care?

Industry statistics can help you keep track of trends at a higher or macro level. It helps you understand, in retrospect, what you had no control over and where you might have missed opportunities and where you may have left yourself vulnerable to risk. The keyword is “retrospect.” The ability to change the course of a business is found in its day-to-day operations and that’s where back-office and scan data can help the tobacco retailer.

How does back-office and scan data help you, suppliers and manufacturers?

Back-office and scan data apps help you, the manufacturer and the supplier, understand trends in this category in much shorter intervals. What once took months can now be reported on and reacted to weekly across the supply chain. It helps to adjust ordering, manufacturing, and distribution decisions far before industry reports are published.

Interested in scan data?

See how you can use Petrosoft’s Scan Data program to automatically store, access and send tobacco sales to the manufacturer for rebates.
I’m Interested

Our integration with Altria also allows you to set up error-free promotions easily. With Scan Data by Petrosoft:

  • Collect thousands of dollars in tobacco rebates (buydowns) each month with minimal effort
  • Get up and running quickly
  • Easily integrate Scan Data with your existing POS, with plug-and-play integration with all major c-store POS systems
  • Altria API promotions integration included for error-free price promotion (buydown) setup

References:

https://www.cspdailynews.com/csp-magazine/whos-challenging-c-stores-share-tobacco-market
https://www.ftc.gov/reports/federal-trade-commission-cigarette-report-2020-smokeless-tobacco-report-2020
https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1610004401
https://investor.altria.com/events-presentations/default.aspx

Earlier this year, the Federal Trade Commission (FTC) released its 2020 cigarette and smokeless tobacco reports. In late October, they released additional findings highlighting that the steady decline in cigarette sales reversed itself in 2020, increasing slightly from 202.9 billion units in 2019 to 203.7 billion units in 2020, approximately 0.4%. Smokeless tobacco also increased to 126.83 million pounds in 2020 from 125.98 million pounds in 2019, about 0.7%.

Here are some more statistics you should know. The cigarette and smokeless tobacco reports are a combination of data from:

  • Altria Group, Inc.
  • ITG Holdings USA Inc.
  • Reynolds American, Inc.
  • Vector Group Ltd.
  • North Atlantic Trading Company, Inc.
  • Swedish Match North America, Inc. and
  • Swisher International Group, Inc.

The below does not include heated, non-combustible cigarettes since only 1 company reported such data and the FTC will not report the data under those circumstances.

2020 Cigarette Sales, Advertising and Promotion Statistics

  1. Sales increased to 203.7 billion units in 2020 from 202.9 billion units in 2019 (0.4%)
  2. 37% were menthol and 63% were non-menthol cigarettes
  3. 63,000 cigarettes were given away in 2020
  4. Advertising and promotion spend increased to $7.84 billion in 2020 from $7.624 billion in 2019 (2.8% increase)
  5. 88.6% of all advertising and promotion spend was on retailer (77.4%) and wholesaler (11.2%) price discount programs (buydowns)
  6. $6.065 billion of all advertising and promotional spend was in the form of buydowns and other price discount programs paid to retailers, that’s $0.03 per unit or $15,960.53 per tobacco retail outlet*
  7. Buydowns of $917.4 million were paid to wholesalers
  8. Promotional allowances of $181.1 million were paid to retailers (stocking, shelving, display, volume rebates and incentive payments)
  9. $343.3 million was paid in promotional allowances to wholesalers
  10. Only 1 of the reporting companies advertised in newspapers in 2020
  11. Instore (POS) promotions were $47.1 million in 2020 versus $63 million in 2019
  12. Direct mail advertising also decreased to $12.3 million in 2020 versus 19.8 million in 2019
  13. Companies spent $4.3 million on magazine advertising, a decrease from $8.7 million in 2019
  14. $1.8 million in “outdoor” advertising was spent in 2020 versus $1.4 million in 2019

* For this calculation, we used the 380K estimate from CDC’s website. However, since most cigarettes are sold through convenience stores (approximately 87% of volume per Nielsen), the price discount reimbursements could be $35,379.17 or slightly more per store per year.

2020 Smokeless Tobacco Sales, Advertising and Promotion Statistics

  1. Sales increased to 126.83 million pounds in 2020 from 125.98 million pounds in 2019 (0.7%)
  2. 50.8% of pounds sold were menthol and 2.8% were fruit flavored tobacco
  3. Sales increased to $4.82 billion in 2020 from $4.52 billion 2019
  4. Advertising and promotion spend decreased to $567.3 million in 2020 from $576.1 million in 2019
  5. 67.4% of all advertising and promotion spend was on retailer (52.3%) and wholesaler (15.1%) price discount programs (buydowns)
  6. $296.6 million of all advertising and promotional spend was in the form of buydowns and other price discount programs paid to retailers
  7. Buydowns of $85.3 million were paid to wholesalers
  8. Promotional allowances of $21.9 million were paid to retailers (stocking, shelving, display, volume rebates and incentive payments)
  9. $43.6 million was paid in promotional allowances to wholesalers
  10. No company advertised in newspapers in 2020
  11. Instore (POS) promotions were $18.9 million in 2020
  12. Direct mail advertising also decreased to $2.7 million in 2020
  13. Companies spent $7.8 million on magazine advertising versus $6.1 million in 2019
  14. $0.186 million in “outdoor” advertising was spent in 2020 versus $0.483 million in 2019

How do back-office and scan data apps help you collect on your buydowns?

Back-office and scan data apps help you by setting up error-free promotions, pushing them out to your integrated POS system within a few clicks. It also compiles and sends your weekly reports to meet the periodic reporting requirements of buydown programs.

Use Petrosoft’s Scan Data program to automatically store, access and send tobacco sales to the manufacturer for rebates. Our integration with Altria also allows you to set up error-free promotions easily. With Scan Data by Petrosoft:

  • Collect thousands of dollars in tobacco rebates each month with minimal effort
  • Get up and running quickly
  • Easily integrate Scan Data with your existing POS, with plug-and-play integration with all major c-store POS systems
  • Altria API promotions integration included for error-free promotion setup

Interested in scan data?

See how you can use Petrosoft’s Scan Data program to automatically store, access and send tobacco sales to the manufacturer for rebates.
I’m Interested

References:

https://www.cspdailynews.com/csp-magazine/whos-challenging-c-stores-share-tobacco-market

https://www.ftc.gov/reports/federal-trade-commission-cigarette-report-2020-smokeless-tobacco-report-2020

https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1610004401

https://investor.altria.com/events-presentations/default.aspx

Running a c-store business can be complicated. Understanding tax, tobacco, liquor, lottery and fuel rules and regulations can be daunting. Legislation is bound to catch your attention at some point as you wait to see how new rules or laws will impact your business. One such ruling came about in 2020 in the state of Southern Carolina.

The Buydown 2020 Southern Carolina Tax Ruling

The state of Southern Carolina’s Department of Revenue issued SC Revenue Ruling #20-3. It determined that cigarette and tobacco buydowns were to be included in the gross proceeds of sales and subject to the sales tax effective January 1, 2021. Understandably, at a sales tax rate of 6%, this caused an uproar.

The department subsequently released SC Information Letter #20-35 to delay the effective date of SC Revenue Ruling #20-3 until July 1, 2021. Both were superseded after Code Section 12-36-90 was amended in April 2021 to state that buydown are not part of “gross proceeds of sales.”

If you are curious, you can view the document that supersedes the previous ruling, DOR SC information letter #21-12.


Code Section 12-36-90 defines the term “gross proceeds of sales” as the basis or measure upon which the sales tax is calculated. Effective April 16, 2021, the Legislature amended this code section to exclude amounts received from a “buydown” from gross proceeds of sales.

SC INFORMATION LETTER #21-12
“Buydown” – Excluded from Gross Proceeds of Sales (Sales Tax)


How can you track your buydowns?

Use Petrosoft’s Scan Data program to automatically store, access and send tobacco sales to the manufacturer for rebates. Our integration with Altria also allows you to set up error-free promotions easily. With Scan Data by Petrosoft:

  • Collect thousands of dollars in tobacco rebates each month with minimal effort
  • Get up and running quickly
  • Easily integrate Scan Data with your existing POS, with plug-and-play integration with all major c-store POS systems
  • Altria API promotions integration included for error-free promotion setup

Reference