Cigarette volume deceleration persists while industry maintains firm pricing.

At the close of the recent quarter, the tobacco segments remained steady overall, despite deceleration in cigarette volume.

A new report from Wells Fargo has revealed the driver of growth in the multiple market divisions, and the report also indicates that some segments are doing better than others.

Cigarette Sales Dip

According to the data released by Wells Fargo, cigarette dollar sales in all channels declined 0.6% during the recent four-week period ending March 25, 2017, and rising slightly for the 12 week period. Wells Fargo’s Bonnie Herzog, managing director of beverage, tobacco & convenience store research, stated this was despite volume deceleration to -4.0% (versus -3.2% eq. unit volume for 12 weeks) despite “solid” 3.6% pricing.

“We expect total cigarette industry volumes to decline around -3.8% in fiscal year 2017 as the industry reverts to historical trends of down 3-4%,” Herzog said.

Altria Holds Its Own

The Wells Fargo report indicated Altria Group Inc. outpaced the industry in terms of total dollar sales, though cigarette sales for Reynolds declined 0.7%, driven by a 3.6% drop in Marlboro volume during the four weeks, ending March 25, 2017.
Comparably, sales from Reynolds American decline d 1.6% during the period, spurred by a 5.8% drop in volume. Newport sales increased 0.7%, drive by a 3.5% spike in pricing.
Reynolds American’s growth was supported by impressive pricing and volume increases in some of its other brands:

  • Natural American Spirit volume was up 4.4%, with steady pricing of 2.8% for the four weeks.
  • Camel dollar sales declined 2.1% on -5.7 unit volume.

Wells Fargo reported that Imperial Tobacco enjoyed dollar sales rose slightly by 0.2%, spurred by a 6.1% hike in pricing and continued share stability.

Smokeless Does Its Part

Wells Fargo reported that other tobacco products (OTP) performed as expected in some circles, and some carried more of the OTP load. Smokeless tobacco dollar sales grew +4.9% this period, (vs. +4.2% 12-wks), reflecting consumer acceptance of recent line extensions.

Reynolds’ sales of Grizzly rose 9.2%), slightly outpaced Altria’s Copenhagen (+9.0%) as the third quarter launch of Grizzly Dark gains traction.

E-Cig Sales Rise Sharply

All channel electronic cigarette dollar sales grew an impressive 35.5% led by VUSE and MarkTen XL.

RAI’s VUSE maintained strong pricing (+16.2%) and dollar share leadership (+37.0% vs. 14.1% for Blu, its nearest competitor). Altria’s MarkTen XL gained a sequential 70 basis points year-over-year increase, rising to 13.8% despite heightened promotional activity by competitors such as Blu and Logic.

Cigars Remain Healthy

Led By Altria’s Middleton – All channel cigar dollar sales grew a solid 9.5% in the recent period (+10.0% for 12 weeks) driven by continued strong 4-week performance by No.1 Middleton (+7.5% volume/+0.9% pricing) followed by No.2 Swisher (+5.6% volume/-0.1% pricing).