Fewer cigarettes are being sold, but the drop is not as sharp as initially thought, according to the latest Nielsen report.
According to the latest four-week data that ended July 13, Nielsen determined the number of cigarettes sold, cigarette volumes, fell by 6.9%. Nielsen primarily measured convenience store data.
Nielsen initially reported a 9.8% decline on July 24, but said it was revamping its survey methods and planned to release new data Aug. 20. The research group pushed up the new data report to Tuesday.
Wells Fargo Securities analyst Bonnie Herzog said British American Tobacco Plc — parent company of Reynolds American Inc. — and Imperial Brands Plc — parent company of ITG Brands — “have forcefully disputed Nielsen’s data, which Nielsen addressed in a June 10 statement in which it acknowledged flaws in its methodology.
Herzog said cigarette volumes could be down as much as 6%. BAT and Altria Group Inc., parent company of Philip Morris USA, has said the decline could be between 4% and 5%, while Imperial has said between 4.5% and 5%.
“Our retailer/wholesale contacts certainly agree there is more pressure on volumes, but not remotely close to what Nielsen data has so far suggested,” Herzog said.
Herzog cautioned that even with the new Nielsen methodology, “we still see plenty of room for improvement.”
“As such, we continue to regard Nielsen’s data with some skepticism due to the frequency of Nielsen’s data revisions and the magnitude by which Nielsen often underestimates volumes in many key categories.”
The volume decline is partially caused by a recent 11-cent per pack price increase and by electronic cigarettes being increasingly adopted as a viable nicotine alternative.
Part of the decline also can be attributed to wholesalers and retailers stocking up on inventory ahead of the price increase in February.
Those groups typically pass along list price increases to consumers.
“There is on-going debate about how accurate these numbers are, given the rapid (and possibly increasing) rate of decline in cigarette sales,” said David Sweanor, an adjunct law professor at the University of Ottawa and the author of several e-cigarette and health studies.
“There is a reluctance to accept that Nielsen data showing sales falling by around 10% could be correct, even when the rapid rise in the sale of vaping and other non-combustible alternatives lends credence to the idea that cigarette sales are, in the historic sense of the term, being decimated.”
In traditional cigarettes, Philip Morris held steady in first place at 54.1% market share, of which 47.4% is the top-selling Marlboro.
Reynolds held steady at 33.7%, led by 13.2% from Newport, 8.7% Camel, 6.4% Pall Mall and 3.5% Natural American Spirit.
ITG was at 7%, including 2% from Winston and 1.6% each from Kool and Maverick. ITG has said its market share is closer to 10%.