Emerging opportunities – Adult Consumer Products in Convenience and Gas

The Canadian Convenience Store News National Shopper Study recently found that 41 per cent of shoppers make special trips to the convenience store, outside of needing to purchase gas. While some convenience store staples will continue to drive sales, it’s time to tap into the changing landscape. Selling a broader range of adult consumer products is one way this can be achieved.

Why get to get into new categories?

The adult consumer product segment in convenience and gas stores has traditionally been dominated by tobacco products. Although tobacco sales still account for a large portion of sales, the segment is declining due to increased regulation, higher taxes and consumers becoming more health conscious. The Government of Canada aims to reduce smoking rates across the country to 5 per cent by 2035 and tobacco sales are expected to continue to decline.

Legalization of vaping and cannabis have made way for new adult consumer product categories to launch in the convenience and gas channel. Both the vaping and cannabis accessory categories have seen strong growth, with an estimated $500 million being spent on cannabis accessories by the end of 2020.

Cannabis Accessories in convenience and gas

Did you know, Canadians now spend as much money on cannabis as on wine? A recent survey by Statistics Canada showed that approximately 1 in 5 adult Canadians have consumed cannabis in the last 90 days. If your store is selling rolling papers, you may be selling to adult cannabis consumers already. Beyond rolling papers, consumers require and look for other products to consume, process and store their cannabis. These items include pipes, rolling trays, filter tips, grinders, water pipes and storage containers.

The picture here shows the type of assortment that retailers are taking on with this new category. They are high margin, high turning and don’t require a lot of space behind retailer flaps or counters. Wholesale companies like Recreation Marketing are helping retailers enter the category in a profitable and compliant way by curating a portfolio of products that turn for retailers and satisfy the needs of adult consumers. The products include and are not limited to rolling papers, grinders hand pipes etc. It is legal in all Provinces to sell cannabis accessories in convenience and gas. In many Provinces, the restrictions on advertising, display and sale that apply to cannabis accessories are the same or largely mirror the rules on vaping and tobacco which retailers are very familiar with already.

Here’s what you need to know:

  • Cannabis accessories cannot be displayed in a way that allows them to be seen by young people (this includes visibility from
    outside the store).
  • Display cases should be locked, prohibiting consumers from accessing (non self-serve).
  • cannabis accessories cannot be promoted/advertised in places where young people can enter, except by price signs that indicate only price and availability, similar to tobacco;
  • cannabis accessories generally cannot be discounted or be subject to inducements of any type (contests, giveaways, etc);
  • cannabis accessories cannot be sold to minors

How to take advantage of this growing category in your store?

By 2025 Canadians are expected to spend $11 billion on cannabis. With accessories accounting for approximately 10% of the total cannabis related sales, this would mean $1.1 billion in cannabis accessory sales by 2025. By offering your adult consumers more choice and the right products, you can increase basket size and maximize profits. Low priced (<$20), high margin and complementary products are best suited for convenience and best set you up for quick transactions and repeat purchases.

Vaping

Vaping was legalized in 2018 and experienced a surge in popularity and sales. With the growing popularity of vaping, Federal and Provincial governments have introduced stricter rules in 2020 changing how e-cigarettes can be sold, marketed, and even manufactured across Canada. These changes are intended to improve vaping safety and protect youth but had a significant impact on the day to day operations of store owners in convenience and gas. On a Provincial level, PEI has banned the sale of all vaping products in convenience and gas. In Nova Scotia and BC only tobacco flavoured vaping products with nicotine strength of 20 mg/ml (2 percent) or less can be sold in gas and convenience channels. In Nova Scotia a licence to sell vaping products is required. In Ontario only tobacco and mint/menthol flavours with 20 mg/ml or less nicotine can be sold in convenience and gas. Several Provinces have also introduced taxation on vaping devices, vaping liquids or both.

The Road Ahead:

The new Nova Scotia vaping laws are currently being challenged in Court on constitutional grounds. The outcome of the Nova Scotia case will be watched closely as a favourable ruling would help create support for legal challenges in the other Provinces and inform the next steps of lawmakers in jurisdictions that have not yet issued more restrictive measures. Despite the stricter rules that now apply to the category, the vaping segment is expected to continue to grow to an estimated 5.5 Million adult consumers by 2024. With these recent changes, it’s important to continue to offer tobacco alternatives to adult consumers and capture the growth and potential of the vaping category while staying up to date on changes in regulation and ensuring compliance.

About Us: ReCreation Marketing is a specialty marketing and distribution company with significant expertise in highly regulated industries. ReCreation Marketing is driven to find innovative ways to build lasting brands in the Canadian cannabis accessory and nicotine categories. We service dispensaries as well as convenience and gas stores across Canada and have dedicated sales people to help support choices in the categories. Any questions on the emerging categories? Need more information? Go to recmarketing.ca or contact us directly at sales@recreationmarketing.ca.

Disclaimer: NOT LEGAL ADVICE. Information made available for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this article.