Cigarettes Reporting Dynamics
Presented to National Convenience Store Advisory Group

Dallas, TX – March 31, 2001

The National Convenience Store Advisory Group (nee National Advisory Group) asked Dick Meyer, President of Meyer & Associates, to update their retailer members on the major dynamics impacting the cigarettes category.

At their semi-annual meeting in Dallas, Mr. Meyer provided a comprehensive analysis of the category including discussions on: market share; competitive formats; profitability; impact on non-cigarettes sales (including fuel); the impact of inflation on inventory costs, selling price and margins; and the necessity for employing meaningful category management techniques to assure c-stores don’t give smokers reasons to shop elsewhere.

For the first time, Mr. Meyer introduced the MVP concept to the industry and it hit the bulls-eye of every retailer attending. Meyer says the MVP is the Most Valuable Patron of c-stores. He/she is the brand-loyal pack smoker who visits the c-store 4-6 times a week, on average. They want their favorite brand and the c-store’s reward for carrying it is their continued patronage, not only for their cigarette business but for morning coffee, fuel and late-night purchases of beer, etc.

When Mr. Meyer showed 5 popular brands of 5 different tobacco manufacturers on the screen (Chesterfield, PM Commander, More, Old Gold and Tareyton), retailers recognized each of them immediately. However, when Meyer suggested that each of these would not survive the "cut" if a c-store employed the "80/20" rule of merchandising or stocking, the room went silent. His point dramatized that even if brands like these only sell one or two cartons per month, to forfeit a loyal MVP and their estimated annual sale and profit benefit ($2,000 and $360, respectively), because you don’t stock their brand, is risky business.

Additional details on Meyer’s presentation can be viewed at http://www.nag-net.com/upload/Dick_Meyer_Presentation_0501.htm

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