Traditional cigarette sales remain on a steady decline, partially caused by an 11-cent per pack price increase and by electronic cigarettes being increasingly adopted as a viable nicotine alternative.
The latest Nielsen convenience-store data on tobacco products, released Tuesday, provide more evidence of traditional and electronic cigarettes sales going in opposite directions.
Traditional cigarette industry volume dropped by 11.2% in the latest four-week measuring period that ended May 18, as well as 9.5% over a 12-week period.
Part of the decline can be attributed to wholesalers and retailers stocking up on inventory ahead of the pack price increase in February. Those groups typically pass along list price increases to consumers.
However, Wells Fargo Securities analyst Bonnie Herzog said “sharp cigarette industry volume decline continues, broadly as we expected.”
Herzog projects higher cigarette volumes for the rest of the second quarter as wholesalers and retailers replenish their inventory.
Still, Herzog raised Tuesday her projection of volume decline for 2019 from 4.8% to 6%. Philip Morris USA, maker of top-selling Marlboro, has issued guidance of a 4% to 5% volume decline.
Meanwhile, e-cig industry volume was up 58.8% year over year even after Juul Labs Inc. removed in November its creme, cucumber, fruit and mango flavors from convenience stores to address Food and Drug Administration regulatory concerns.
Juul holds a 74.5% market share, compared with 13.2% from No. 2 Vuse of R.J. Reynolds Vapor Co. Similar flavored e-cigs have not been pulled from retail by Reynolds Vapor.
Herzog has projected $9 billion in e-cig sales this year, up from $7 billion in 2018.
Herzog cautioned, however, that e-cigs are just the third largest tobacco product with 5 percent of retail sales, compared with 82 percent for traditional cigarettes and 8 percent for chewing and smokeless tobacco.
Njoy was third at 4.4%, followed by Imperial Brands Plc’s Blu e-cig at 4.3% and Japan Tobacco’s Logic at 2.3%.
Those products likely gained sales from Altria Group Inc. opting to stop production of e-cigs MarkTen XL and Green Smoke as part of its $12.8 billion investment in December for a 35% ownership stake in Juul.
Juul entered the mainstream retail marketplace in 2015 and is sold in the form of a pen or a USB device.
That design makes it easy to hide, which former FDA Commissioner Dr. Scott Gottlieb said has contributed to “an epidemic” of teenage use, albeit based on a small sample size nationally.
Gottlieb recommended Nov. 15 banning or tightening regulations on the sale and marketing of traditional menthol cigarettes, as well as limiting e-cigs to traditional tobacco, mint and menthol.
In traditional cigarettes, Philip Morris held steady in first place at 54.1% market share, of which 47.3% is the top-selling Marlboro.
Reynolds held steady at 33.7%, led by 13% from Newport, 8.8% Camel, 6.5% Pall Mall and 3.5% Natural American Spirit.
ITG was at 7.2%, including 2.1% from Winston and 1.6% each from Kool and Maverick. ITG has said its market share is closer to 10%.
The latest Nielsen report “is yet more evidence of how significantly disruption has hit the tobacco/nicotine market,” said David Sweanor, an adjunct law professor at the University of Ottawa and the author of several e-cigs and health studies.
“The totality of data from ever more sources show that there is significant transitioning/substitution occurring.
“This, in turn, raises the question of just how much more rapidly the use of lethal cigarettes could decline if public awareness and public policy were to facilitate, rather than obstruct, such a transition,” Sweanor said.