NEW YORK -- While retailers expressed concern over the U.S. Food and Drug Administration’s (FDA's) recent proposals to ban menthol cigarettes and flavored cigars, as well as restrict e-cigarette sales in retail stores, a new survey revealed retailers are adopting a “wait and see” attitude, believing they have time before any real mandates come to pass, according to an industry analyst.
In its Tobacco Talk survey released Nov. 26, Bonnie Herzog, managing director of consumer equity research for Wells Fargo Securities, New York, said most respondents disapproved of the FDA’s proposed initiatives. Of the respondents who represent 55,000 convenience stores, 90% believed that if carried out, the proposals would negatively impact their businesses.
Responding retailers called the proposals “far too extreme,” an “overreach” of authority and “knee-jerk,” Herzog said.
Here are several insights from the survey ...
Retailers indicated their total cigarette volume was down 3.5% in October, which was the same percentage during that period a year ago.
Reasons for cigarette volume weakness include the following:
While the FDA’s pronouncements on banning menthol in cigarettes could ultimately be a huge negative for the industry, according to the majority of Herzog’s contacts, many recognize there are multiple steps and numerous years—possibly four or five years—before a menthol ban would occur, if ever.
“Bottom line: We are in the early innings of what we expect will be a long, divisive—and likely litigious—battle to arrive at an enforceable FDA strategy,” she said.
The FDA’s recent action to restrict e-cigarette flavors shouldn’t have a material impact on sales in stores given their relative size within the category and how most retailers are taking a “wait and see” approach before implementing any broad set of in-store changes, Herzog said.
However, retailers surveyed expressed concern. Here are several findings:
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