The nicotine category of today looks different than it did 20 years ago, 10 years ago or even five years ago. Perhaps nobody knows that more than those working for companies founded in the 1800s.
Swisher, founded in 1861, witnessed the transition from cigars and pipe and chewing tobacco to cigarettes towards the end of the 19th century. It also saw the decline in cigarettes in the 1980s that led to a surge in smokeless tobacco and now the rise of e-cigarettes and other smoke-free alternatives.
“In the past five years or so, the tobacco industry started … an evolution to tobacco alternatives such as nicotine pouches and vaping devices,” said Greg Schmidt, Swisher’s vice president of business analytics.
Philip Morris International (PMI) is another example, having started in the tobacco business in 1847 and recently acquiring Swedish Match and its popular Zyn brand.
“There has been a shift in nicotine consumer behavior to move to better products, such as from loose leaf or moist snuff to oral nicotine pouches, for a host of reasons, including ritual, satisfaction, convenience and others,” said Sam Dashiell, regulatory communications senior specialist for PMI U.S.
Retailers and suppliers are serving very different nicotine shoppers than those of yesteryear, as discussed by Andrew Baill, Wawa’s senior manager of customer insights and strategy, during this year’s NACS State of the Industry (SOI) Summit.
“When you think about the transition we’re seeing from cigarettes to OTP, there’s also a shopper transition,” Baill said. “We’re seeing [it move] from older to younger; there’s a lot of change.”
In looking at the evolution of the nicotine shopper last year, experts agreed on a few things. Specifically, that today’s nicotine shopper is:
- Less likely to smoke cigarettes than the historic nicotine consumer
- Using multiple products based on occasion
- Less brand loyal and more price savvy
- Open to (and even demanding) innovation
- Still very important for convenience
Here are four ways in which retailers can evolve alongside their evolving customer.
1. Promote the Relationship Between Cigarettes and OTP
It’s no secret that today’s nicotine shopper is less likely to smoke cigarettes: The most recent NACS CSX Convenience Benchmarking data shows cigarettes went from 30.9% of in-store sales in 2015 to 18.8% in 2024. Bonnie Herzog, managing director and senior consumer analyst at Goldman Sachs, noted that cigarette declines accelerated at sequentially higher rates in Q1 2025, with volumes down 7% versus down 6.8% in Q4 of 2024.
On the other side of the backbar equation, OTP has experienced steady growth. That same NACS CSX Convenience Benchmarking data had OTP as contributing 7.6% of in-store sales in 2024 and accounting for 5.8% of in-store margins—very close to the 6.6% of margins from cigarettes.
“Technology has led to new, innovative nicotine products that are better choices than continuing to smoke or use other traditional tobacco products,” said Dashiell. “Nicotine consumers continue to move to these alternatives as demonstrated by smoking rates declining to all-time lows.”
But something else stood out in the benchmarking data presented at SOI.
“One of the most interesting things here is when you look at the basket of what people are buying when they buy OTP,” Baill said, noting that it wasn’t surprising that candy and packaged beverages were two of the three most-purchased categories with OTP. What was a surprise was the other most-purchased category with OTP: cigarettes. That result highlights “that the polyuser in these nicotine categories is really important. There’s a lot of folks who are buying [both] cigarettes and OTP, even in the same trip.”
To better reach those polyusers, it would be great to understand which OTP options are more frequently purchased with cigarettes—or each other. The problem, of course, is that no one tobacco shopper is exactly alike.
“Every consumer is different, so what might work for one may not work for another,” said Dashiell. “We see poly- and solo-usage change as consumers move from one category to another.”
“These consumers are seeking variety for various reasons, such as different use occasions, and/or price differentials across various product forms,” added Schmidt. “There are a variety of tobacco/nicotine segments being purchased within adult consumers’ product repertoire.”
Some examples Schmidt provided included cigarette consumers opting for e-cigarette or vapor products during certain social situations while moist smokeless consumers may prefer modern oral offerings.
Though newer offerings are showing tremendous growth—Nielsen data reflects double digit increases for the modern oral segment over the past five years—it’s important to remember the scale and whole of the backbar experience.
“While year-over-year growth suggests a bright future for these products, the sales are still dwarfed by cigarettes, which have more than 12 times the sales of smokeless tobacco alternatives,’ said Jason Zelinski, vice president of North American retail for NielsenIQ (NIQ).
“This is a really important consumer. Even though you could look and say, ‘Hey, cigarettes are declining,’ it’s important to think of these categories in concert together,” said Baill.
2. Call Out Value to Attract Economically Squeezed Shoppers
Historically, declining cigarette volumes have been offset by price increases. But the most recent Nicotine Nuggets tobacco retailer and wholesaler survey conducted by Goldman Sachs suggested that a combination of inflation and a continued economic squeeze on price-strapped consumers may mark a breaking point.
“Overwhelmingly, retailers continued to suggest that manufacturers are nearing a ‘wall’ on the price increases as evident in price gaps,” Herzog wrote in a research note. Herzog added that price gaps between premium cigarettes and the lowest tier cigarettes have hit 49% (compared to a historical average of 30%), which is driving downtrading to less-costly options.
Even with all the evolution, the nicotine shopper continues to skew towards lower income brackets. NIQ pegs 56.1% of cigarette shoppers as earning under $50,000 a year and the other segments don’t fare much better: 44.9% of smokeless shoppers (including modern oral) earn less than $50,000 annually, followed by 54.7% of vapor shoppers and 62.4% of cigar shoppers. And every segment over-indexes in shoppers earning under $10,000 a year.
Retailers are seeing this play out in their stores.
“One retailer noted that the consumer is feeling the financial pressure, and this is particularly true at the low end,” Herzog wrote. She further highlighted that the major tobacco companies continue to take price increases to balance out the loss of unit volume.
This is where other product types—not just deep discount cigarettes—are standing out, whether because of lower tax rates, promotional activity or even just perceived value.
“We have witnessed adult consumers becoming more dialed in on product variety, driven in part by pricing dynamics, as well as the breadth of tobacco alternatives available in the marketplace,” Schmidt said.
The Nicotine Nuggets survey reported that retailers are seeing alternative products benefit most from downtrading: 28% reported shoppers switching to pouches because of costs (up from 19% in Q4 2024) and 26% reported volumes going to e-cigs (down slightly from Q4 2024).
“Several retailers highlighted that consumers are moving to nicotine pouches, which is becoming the best value on the back wall,” Herzog added.
By calling out a promotion, a price or even a perceived value like nicotine strength or puff count, retailers can better communicate value to a consumer who is demanding it.
3. With Trips Declining, Focus on Building Baskets
Trips are down and it’s not getting better. The Nicotine Nuggets survey had 73% of its respondents reporting convenience trips for tobacco or nicotine products were lower in Q1 2025 vs. Q4 2024, including 8% who said trips were “much lower.” By comparison, 58% of respondents said trips were down in the Q4 2024 survey.
“Basket size (was) modestly up, buoyed by inflation, but trips (are) down—a key concern for retailers,” wrote Herzog. “Our survey respondents have grown significantly more cautious about the health of the adult tobacco/nicotine consumer, with 53% indicating a more negative outlook, up sharply from our Q4 survey when only 26% indicated a weaker view.”
While trips being down is not unique to the tobacco category, what is unique is a potential reason: that people have exited the category entirely. That makes the data a little different than what we’re seeing across all of convenience.
“Even as the number of buyers declines, the remaining buyers are increasing or maintaining the number of purchases each year,” said Zelinski of NIQ, adding that some categories are also seeing an increase. “In our most recent data, we have been tracking frequency of purchase increasing in vape.”
Anecdotally, retailers have also reported that while trips are down, the amount spent per trip is up—especially in certain categories.
“One retailer noted that customers who purchase vapor products have shifted to higher puff counts, increasing per transaction size while reducing overall trips,” Herzog wrote. “Another retailer noted he’s seeing less traffic overall but slightly more spend per trip.”
Though data from NACS Convenience Voices presented at SOI shows that both the cigarette and OTP shopper are still more likely to shop daily (or more than once a day) than shoppers in other categories, a focus on basket size over trip frequency will help protect retailers should the declining trips phenomenon continue.
4. Reflect Today’s Nicotine Shopper With Your Backbar Mix
Between economic pressures, regulations, social pressures and innovation, there are lots of reasons the nicotine shopper has evolved.
“There’s no question that regulations, flavor bans and economic pressures have indeed driven a shift in the tobacco/nicotine landscape,” Schmidt said. “However, innovation in OTP products and blend varieties appeal to adult consumers who can tailor their product choice to a particular preference or use occasion.”
“Smoke-free products are a fast-growing part of the marketplace as more and more consumers of cigarettes and traditional tobacco products are switching to these better alternatives,” agreed Dashiell from PMI. “Retailers should meet and encourage this behavioral change.”
And, according to the Goldman Sachs survey, many retailers are: Herzog wrote that, when it comes to space allocation, “Oral nicotine is expected to be the biggest beneficiary in 2025.”
But it’s not just a matter of highlighting the newest and most exciting products. Success means keeping that polyuser, the still massive size of the cigarette category and the price-sensitivity of this particular shopper in mind and striking the right balance for today’s consumer.
“Convenience continues to play a vital role for today’s tobacco and nicotine category since it fits quite nicely with our busy, on-the-go lives,” said Schmidt. “C-stores enable adult consumers to cross off a few items in one fell swoop, such as filling up their gas tanks, grabbing a cup of coffee, purchasing their nicotine products and other categories. Stores that embrace a well-positioned backbar offering of the latest products set themselves up for continued success.”