This article is brought to you by Kretek.

Tobacco products have historically been at the heart of c-store inside sales. Even after years of decline, they remain a leading sales driver. Excluding foodservice, the cigarette category still ranks first for in-store sales, generating $44,765 per store, per month according to preliminary numbers from the NACS State of the Industry Report® of 2023 Data.

However, cigarettes’ long-held reign will eventually go up in smoke. Tobacco usage is declining as fewer Americans smoke, while looming FDA bans on menthols and flavored cigars—though in April, the Biden Administration again delayed a decision on the ban until at least after the November election—could cut billions of dollars of sales out of the tobacco market in just a few years. Cigarette sales in c-stores were down 4.3% over the last year, according to the latest NACS CSX data, while cigar sales were down 2.4%, according to NIQ.

Smokeless tobacco was the only segment to have growth in the past year, increasing from 11% of tobacco sales two years ago to 14% over the last 52-week period, according to Kretek International, an importer and distributor of premium tobacco products. “There is a big shift in share of total tobacco dollars going from cigarettes to smokeless,” said Jorge Gonzalez, senior business intelligence specialist at Kretek.

If the FDA enacts its ban, it will further eliminate a huge chunk of already dwindling combustible product revenue. Menthol smokers make up 32.5% of all cigarette smokers, according to the CDC, and flavored cigars are 51% of the cigar segment, which includes cigars, cigarillos and filtered small cigars.

In dollars, it’s not small change. Eliminating these two products would cut almost $24 billion in sales from c-stores.

In the face of these two converging trends, retailers have a problem—how to optimize the backbar as tobacco usage evolves.

Kretek says retailers likely have three choices: 1) shrink the backbar to a smaller selection of higher velocity items; 2) expand the breadth of product choices to offer consumers a wider range of options; or 3) redesign the front of the store without the backbar.

“We aren’t saying we think one of these is necessarily the best way, but broadly, we foresee that one of these three options, or some hybrid of these three, will likely arise as the new standard going forward once the FDA puts policies into effect,” said Benjamin Winokur, brand manager of emerging brands at Kretek.

To continue reading, check out the June issue of NACS Magazine.