When I began in this business many years ago, a typical convenience store was pretty simple — no matter what part of the country I was visiting. Whether it was a convenience store chain, like Total (remember them?) or an independent, the assortment was universal, particularly when it came to categories.
Every store was focused on cigarettes, cold packaged beverages like soft drinks or alcohol, candy bars, printed material like newspapers and maps along with lottery tickets. The big debates were whether to stock condoms or Playboy magazine. Stores cashed checks, and for the most part, — and maybe it was just me back then — I preferred to starve rather than eat food in a c-store. My, how times have changed!
If we fast forward to today’s current world of convenience, c-stores have become a trusted place to grab a meal, find a healthy snack to munch on and purchase a phone charger. The last time I drove back to Florida, I stopped in a Buc-ee’s outside of Macon, and the crowd around the hot sandwich self-serve counter was two-deep all the way around.
Cigarettes are still important, but they’ve become a lower priority for almost all operators while retailers spend much of their time discussing vapor sets and alternative nicotine delivery systems. One my oldest friends in the industry, Rich Mione, former head buyer for GPM and a 40-year industry vet who passed away recently, always told me, “If you don’t try new stuff and stay ahead of the curve, the other guys will get ahead of you — and I prefer they are always chasing me.”
CBD is probably the most interesting product in the c-store space over the past decade — for a multitude of reasons. Lots of energy has been spent on vapor products, craft beer and healthy snacks, but CBD created so much more deliberation across so many departments within our retail world. As CBD rolled out, confusion was rampant: Is it legal? Is it taxed? Who buys it? Is my state going to seize the products?
All of these are legitimate questions, and of course, the legality question is paramount, but what’s the risk-reward equation for delaying the sale of a new product?
When CBD was first launched only a few years ago, most major retailers hesitated to introduce the products due to uncertainty, and that’s a rationale that makes sense; however, this was a classic glass-half-full/half-empty argument. On the federal level, the product was not illegal, and there was plenty of momentum to specifically legalize it in the Farm Bill, which would clarify any state-level ambiguities. The retailers that dove into the CBD world made boatloads of profit, while others stood on the sidelines worrying that CBD “smelled like pot” or that the local Barney Fife would come in and write them a ticket.
Now the category is a legitimate, established assortment for most every c-store retailer in the country. Unfortunately, the market has been sliced up in a massive way, leaving the per-store sales column far smaller than when it started. I worked with one Midwestern chain and introduced them to CBD early on, and they sold over $1 million dollars in approximately eight months in their 52 stores because they launched early. Ben Rheinhart, VP of Merchandising at Smoker’s Host, a 19-store chain in Indiana, knows the potential: “We brought in CBD early on and have done great with it. Now we’ve migrated to other formats and more smoking accessories, which have grown our sales significantly. Convenience is positioned perfectly to cater to this consumer.”
So, now what?
The Hottest Products on the Market
Three of the hottest products on the market are delta 8, synthetic nicotine and smoking accessories. Delta 8 is a low-grade THC product that is federally legal and seems to be following the same path as CBD. Sales of these products are incredibly strong according to Mohammad Saad, senior tobacco buyer at Colonial Distributing in Tampa, Fla.
“We brought in Delta 8 about a year ago, and we figured we would give it a try,” he said. “I literally spent the next 10 months trying to buy enough product to satisfy our retailers demands. We service independents, so the chains do not have any of this product yet, which means our customers are getting all of the sales.”
Saad recently created an entire smoking and accessory section in his Payless Cash n Carry location dedicated only to these types of products.
Synthetic nicotine? The vast majority of retailers are focused on selling certain items like JUUL and Vuse, and as most know, the FDA recently rejected almost one million applications from other vape companies — including flavors — virtually ensuring a new oligopoly of companies controlling the vapor section the same way the cigarette section is controlled. Not so fast!
The Family Prevention and Smoking Act gave the FDA legal authority over tobacco products and tobacco-derived nicotine products, including liquid nicotine from tobacco. Products using synthetic nicotine are not regulated by the FDA, and no Pre-Market Tobacco Applications (PMTA) were required to be submitted on these products. Is this legal? You bet!
Martin Steinbrauer, CEO of Smood, has been ahead of the curve on this: “We clearly saw the risk factors of using tobacco-derived nicotine, as the FDA let it be known flavors were viewed negatively, and that ‘Big Tobacco’ was spending millions on lobbying efforts to protect their market from what I believe are better products, more puff counts, advantageous pricing and cool packaging,” he said. “We also found that synthetic nicotine, pioneered for pharmaceutical purposes, is free of some of the impurities found in normal tobacco-derived nicotine.”
The evolution of the category is not usually something your local rep will tell you about.
“Not only do we believe our Smood products taste better and provide better value,” Steinbrauer added, “but in most states, they are not taxed at all, as the vapor taxes were rolled into existing tobacco taxes. Consumers like the products, and sales keep growing even stronger than we anticipated.”
Smoking accessories have been around the longest in the market, and they’ve been saddled with the old taboos revolving around marijuana. Medicinal marijuana is legal in 40 states, and recreational marijuana is legal in over a dozen now. So why aren’t you selling accessories like glass pipes, grinders and pouches?
I often discuss marijuana with retailers who are frustrated they cannot sell “weed” in their stores. As of now, not one c-store can sell marijuana, and that won’t be changing anytime soon. But there is huge market for accessories that already exists, and the c-stores are in a great position to capitalize on not only the market aspect, but the convenience aspect of it because when someone needs a grinder, they oftentimes want it immediately.
As Saad told me, “Our retailers have really embraced accessories. I think we had one customer say he had a moral issue with selling pipes and grinders, but when I asked him if he really thought all the cones he was selling were being filled with tobacco, he gave us an order right on the spot.”