NEW YORK - While the sale of tobacco products continues to be controversial, chain drug retailers say the category helps them remain competitive with other classes of trade. Last year tobacco products generated nearly $3.74 billion in revenue for drug chains, ranking seventh among the highest grossing product categories.
Retailers contend that consumers expect to find tobacco products in chain drug stores. Without them, they say, the estimated 25% of the population that smokes would be inclined to shop elsewhere.
Nearly 70% of sales generated by tobacco products comes from cigarettes. Cigars account for 12% of the business, and lighters and accessories 11.5%. Volume in each of those three segments was up between 2% and 3% at drug chains last year over 1995 levels. Sales in the smokeless tobacco arena, which includes such items as U.S. Tobacco Co.'s Skoal line, were flat but still accounted for 5.7% of category volume.
While results from 1996 indicate that tobacco continues to generate steady gains, there are a number of questions about the category's future. Representatives of the tobacco industry note that a new set of rules governing the sale of their products is likely to have a significant impact on the business.
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