Vapes four times more profitable to convenience stores than tobacco

Small convenience stores are selling less tobacco, and the tobacco products they do sell are much less profitable to them than vaping products, according to new analysis from the University of Edinburgh.

Profit margins from vapes were far higher than those of tobacco products, with an average of 37.1% for vape products compared to 8.5% for tobacco products in September 2022. For comparison, profit margins were, on average, 21.0% across all product types.

Footfall from tobacco sales has decreased by nearly 40% in small retail outlets compared to less than a decade ago. In 2015, when Action on Smoking and Health (ASH) conducted a similar analysis, 21.0% of transactions included tobacco, in 2022 University of Edinburgh researchers found 12.8% included tobacco. This trend is likely to reflect policy measures, particularly minimum pack sizes – although smoking rates have also declined at the same time due to a range of regulatory changes such as strict marketing bans, standard packs and point of sale display bans. In 2016 16% of UK adults smoked, compared to 12% in 2023.[1]

Meanwhile, the average weekly number of transactions per store which included vapes rose sharply from 10 in 2019 to 93 in 2022 – a nine-fold increase in three years. Although there were considerably fewer transactions including vapes than tobacco, gross profits per store from vape sales were equivalent to 73.4% of the value of tobacco profits, as a consequence of vapes’ high profit margins. It is likely that sales from vapes have continued to grow for small retailers since 2022.

The analysis highlights the potential benefits to small retailers of existing smokers switching to vaping and shows that tobacco sales are becoming increasingly unimportant for business. The profitability of vapes underscores the need for a retail licensing scheme to crack down on irresponsible sellers and protect legitimate retailers.

Professor Jamie Pearce, Professor of Health Geography at the University of Edinburgh, said:
“Our analysis shows that convenience stores now make only 10% of their profits from tobacco and if their customers were buying products other than tobacco stores would benefit from this. Sometimes business and public health interests align – we would all be better off if fewer people bought tobacco.”

Hazel Cheeseman, Chief Executive of ASH, said:
“Tobacco is yesterday’s product. The reduction in sales benefits both the nation’s health and convenience stores who make dwindling profits from selling tobacco. At the same time vape sales have surged, and this is much more profitable for retailers.

“Responsible retailers who are already profiting from vapes should welcome regulations to improve the market, reduce appeal to children and drive out rogue traders.”

While vapes are a useful quitting aid for smokers and far less harmful than tobacco, they are not risk-free and there are concerns about vapes being sold to children. The new Tobacco and Vapes Bill will bring in strict new measures to protect children, including a retail licensing scheme and tough marketing restrictions.

In a separate study last year, ASH surveyed small convenience store owners to understand their views further regulations. The survey found that:[2]

• 51% support raising the age of sale one year every year (26% oppose).
• 71% support mandatory age verification (20% oppose).
• 65% support creating a smokefree generation (17% oppose).
• 79% support fixed penalty notices for breaches of age of sale regulations (13% oppose).

ENDS

Notes to the Editor

The University of Edinburgh analysed data from 1,503 convenience stores using data from electronic point of sale (EPOS) supplied by The Retail Data Partnership. The analysis focuses upon comparison of data from the weeks 7-13 September 2019 and 7-13 September 2022. This work was part-funded by the UK Prevention Research Partnership via the SPECTRUM research Consortium (grant ref: MR/S037519/1)

In the ASH survey, interviewers from NEMS market research conducted computer-assisted telephone interviews with a random sample of 904 managers or owners of independent shops selling tobacco in England and Wales.

Action on Smoking and Health (ASH) is a health charity working to eliminate the harm caused by tobacco use. For more information, visit ash.org.uk. ASH receives funding for its program of work from Cancer Research UK and the British Heart Foundation.

For interviews or more information, contact press@ash.org.uk

References

[1] Adult smoking habits in the UK: 2023. Office for National Statistics. Annual Population Survey (APS).

[2] Support for Stopping the Start: Local retailers and the public back smokefree generation laws. Action on Smoking and Health (ASH). April 2024.