Change Your Mind About Deep Discount
Within the convenience industry, the pain of growing inflationary constraints and lower discretionary income is being felt hard at the register as more shoppers are taking fewer trips to the store, making more deliberate purchase decisions, and downtrading to more affordable product options. The financial pressure from outside sources that consumers are currently being faced with has caused in-store pressure on retailers to address the growing demands of cash-strapped buyers and for those in the tobacco business, trade-down isn’t always straightforward.
As an increasing number of adult tobacco consumers are looking to make smart consumption choices in the face of high inflation, savvy retailers are adjusting their product mix with various pricing options on the shelf in order to offset current declines and meet consumers where they’re at today. Regardless of brand or value proposition, consumers want a quality product at a fair price and it’s imperative that stores are stocking their shelves with products that cater to the different value threshold of each buyer who walks through the door. That’s where the deep discount category comes in.
As consumers’ intent to spend has shifted to a focus on finding the most value for their buck, the sentiment, “there’s value in price-value” has never rung truer. As premium tobacco brand growth has slowed, discount brands have catapulted and a huge majority of that can be tied to the purchasing effort of the consumer. Take cigarettes, for example. While the overall category is on the decline, deep discount is currently the ONLY cigarette category showing growth at +5%!* Coupled with the fact that the price gap between premium and discount brands is at a whopping 41%, the highest it’s been since 2016, it’s clear that retailers need price-value inventory on hand if they want to meet market demand and capitalize on their tobacco revenue.
Today, more and more consumers are realizing that quality products can in fact come at a lower cost and retailers need to cater to their price-conscious customers who are looking to make the switch. Counting out the profits that come from price-value products can result in a loss of profitability altogether. More often than not, penny profit and margin can be at the same, or even a higher rate, for value brands when compared with premium brands. The opportunity to grow your tobacco revenue with deep discount brands is real and now is the time to dive in.
Source: MSA Retail Database – 52 Weeks Ending 3/18/23
