According to recent reports, the tobacco and nicotine industry in convenience stores is about to undergo significant changes. But what's driving this shift, and what will the market look like after these changes take place?

Increased Taxes on Tobacco Products

Facing revenue shortfalls, state officials across the country in 2025 turned to increasing their state’s cigarette tax, alongside several other tobacco hikes. For instance, in July of the same year, Indiana implemented a $2-per-pack cigarette tax increase, raising its rate from $0.995 to $2.99 per pack— an increase of just over 200%[1]. Illinois followed suit by passing its fiscal year 2026 budget on June 1[1]. Included within this budget was a critical change. Nicotine pouches, which were originally not taxed, are now taxed at 45% of wholesale[1]. The impact of these tax hikes is far-reaching. According to Rick Mistretta, president of Prairie State Energy, South Barrington, Illinois, the increases have encouraged many shoppers to cross state borders to save money, hurting retailers in high-tax jurisdictions[1].

Changing Consumer Preferences

In the meantime, customer preferences are evolving. Modern oral nicotine products, particularly pouches, continue to outpace traditional cigarettes[4]. Statistics show that modern oral nicotine volume rose by 56.5% in 2024, with a 20% quarterly increase in Q3 2025 expected to result in roughly 19% category growth in 2026[4]. Several brands, including Zyn, On Plus, and Velo Plus, have experienced double-digit gains (Zyn +35%, On Plus +15%, Velo Plus +44% in 2025) with an additional 33% rise projected for 2026[4]. Contrastingly, cigarette volumes are falling and now represent only approximately 30% of tobacco outlet sales[4]. Yet, tobacco still accounts for roughly 70% of convenience store tobacco revenue[4]. These shifting trends imply that consumer demand for discreet, smoke-free options is on the rise[4].

Implications of Increased Enforcement and Regulation

Another course of these changes is an increase in enforcement on the sale of illegal vape products and rising state taxes[4]. For instance, New York Gov. Hochul proposed a nicotine pouch tax[1], which is projected to yield an annual revenue of $57 million by 2030[4]. Regulatory bodies are also passing more stringent rules. The FDA's evolving signals could potentially reshape product approvals, triggering wider adoption of age-verification technology[4]. Age-verification technology is currently used in 58% of shopper encounters, with 79% of 21- to 22-year-olds being carded[4].

Evolution of Delivery Models

A consequence of these changes is the advent of new delivery models. Retailers and convenience stores are exploring innovative ways to adapt to the changing landscape. A recent trend is the rise of door-to-door nicotine-pouch services[4]. As the convenience store landscape continues to evolve, retailers will need to adapt to stay competitive.

The Implications for Convenience Store Retailers

These changes experiences by the tobacco and nicotine industry has direct implication for retailers as well. With the rapid decline of traditional cigarette sales, retailers are being forced to pivot towards smoke-free alternatives such as nicotine pouches, e-cigarettes, and other modern oral nicotine products[4]. However, the increasing enforcement against illegal vapes, rising state taxes on tobacco/nicotine products, and evolving FDA regulations further complicate this transition[4].

Frequently Asked Questions

How has the landscape of convenience store tobacco industry changed in recent years?

The landscape has changed significantly, with a rise in state taxes on tobacco products, a shift in consumer preferences towards oral nicotine products, and increased enforcement and regulations [1] [4].

How do increased taxes impact the convenience store tobacco industry?

Increased taxes have prompted many shoppers to cross state lines to find lower prices, negatively impacting retailers in high-tax jurisdictions[1].

What are modern oral nicotine products and how are they affecting the market?

Modern oral nicotine products, particularly pouches, are outpacing traditional cigarettes in sales[4]. Major brands have seen double-digit growth, signaling a shift in consumer preferences[4].

What role does regulation play in recent industry changes?

Regulation plays a key role in the evolving tobacco industry. Tighter control on illegal vape sales, changes in product approval by the FDA, and evolving age-verification requirements have reshaped the industry landscape[4]. From the perspective of a retailer, it's clear that the convenience store's tobacco landscape is changing, and quickly. Between increased taxes, changing consumer preferences, increased enforcement on illegal vapes, and evolving FDA regulations, convenience stores will need to adapt if they want to remain profitable in this new landscape. This article provides a clear, highly-relevant look into the changes impacting the tobacco and nicotine industry, offering readers insightful, data-backed predictions for what the future might hold for convenience stores navigating this rapidly changing landscape. 1]: [CSP Daily News 2]: [Top 202 Convenience Stores 2025 - CSP Daily News 3]: [Category Management Handbook 2024 - CSP Daily News 4]: [What’s next for tobacco and nicotine in convenience stores - CSP Daily News

Implications of Rising Taxes on Traditional Tobacco Products

As states grapple with revenue shortfalls, the increased taxation on traditional tobacco products is reshaping the convenience store landscape[1]. This shift is most apparent in Indiana, which saw a dramatic increase of just over 200% in its cigarette tax, raising the rate per pack from $0.995 to $2.99[1]. However, it's not just cigarettes being affected: Illinois introduced a 45% tax of wholesale price on nicotine pouches in the fiscal year 2026[1]. According to Rick Mistretta, president of Prairie State Energy, Illinois, such tax hikes are having significant consumer behavior[1]. More shoppers are crossing state borders to purchase their preferred tobacco products where they are cheaper[1]. This shift is impacting retailers in high-tax jurisdictions, as potential customers are willing to travel further in an effort to save money.

The Shift Towards Oral Nicotine Products

Parallel to the rising state taxes, convenience-store tobacco and nicotine sales are witnessing a rapid shift towards oral nicotine products. Particularly, nicotine pouches have experienced a steady increase in popularity, with their volume up by a staggering 56.5% in 2024[1]. Furthermore, a 20% quarterly increase in Q3 2025 propelled the overall category growth to around 19% in 2026[1]. Several brands like Zyn, On Plus, and Velo Plus are posting substantial gains, revealing a pattern of double-digit growth[1]. In contrast, cigarette volumes have been constantly falling, now representing just about 30% of tobacco outlet sales[1]. However, despite this downturn, tobacco still holds strong in the c-store revenue charts, accounting for approximately 70%[1].

Effects of Regulation on Consumer Behavior

As state and local governments introduce tighter regulatory measures on illegal vapes and increase taxation, convenience stores are adapting. Retailers are adopting broader usage of age-verification technology, which is used in 58% of shopper encounters[1]. Interestingly, this has led to 79% of 21- to 22-year olds being carded[1]. This reflects the broader commitment towards ensuring sales to only legal-aged consumers, upholding corporate social responsibility while maintaining compliance with the law. The shifting landscape also points towards new models of product delivery. There's an increased preference for door-to-door nicotine-pouch services[1]. With the freedom to choose from a variety of discreet, smoke-free options, consumers can now have their preferred nicotine products delivered right to their doorstep[1].

What Lies Ahead for Tobacco and Nicotine in Convenience Stores?

Despite significant changes and strict regulations, the trend towards modern nicotine products shows no signs of slowing down[1]. The strong consumer demand for oral nicotine products, alongside increasing state and local taxes on traditional cigarettes, suggests that oral nicotine will dominate the tobacco aisle in the foreseeable future[1]. However, convenience stores will have to navigate through complex regulatory landscapes and shifting consumer preferences[1]. The enforcement against illegal vapes, evolving FDA signals, and the proposed nicotine-pouch levy by New York — expected to generate $57 million annually by 2030 — may further reshape the tobacco and nicotine category[1].

Conclusion

The future for tobacco and nicotine in convenience stores is set to be an interesting one. With rising state taxes, emerging category leaders, strict regulation, and evolving consumer preferences, the landscape is quickly changing[1]. The profiling need of today's tobacco retailers is to keep reinventing and aligning strategies with these emerging trends[1]. However, one thing is for sure — the continued surge in popularity for modern nicotine products, like Zyn, On Plus, and Velo Plus, shows us that consumers are open to change[1]. As legislation, public opinion, and industry innovation continue to evolve, the convenience stores that adapt the fastest will be the ones who come out on top.

Can Increased Taxes on Tobacco Products Change Consumer Behavior?

The sphere of convenience store tobacco and nicotine sales is rapidly changing, with popular nicotine pouch brands like Zyn, On Plus, and Velo Plus posting considerable gains[1]. These modern oral nicotine products have seen a volume rise by 56.5% in 2024 in a steady quarterly surge of 20% in Q3 2025, expected to culminate in approximately 19% category growth in 2026[1]. An integral player in this shift is the response to increasing tax rates on traditional tobacco products in several states. In 2025, facing revenue shortfalls, states implemented tax hikes on cigarettes[1]. For instance, Indiana saw a substantial $2-per-pack cigarette tax increase, raising the rate from $0.995 to $2.99 per pack[1]. Similarly, Illinois' fiscal year 2026 budget introduced a tax of 45% of wholesale on nicotine pouches, previously untaxed[1]. Rick Mistretta, president of Prairie State Energy in Illinois, observed that these tax hikes have led consumers to seek cheaper options out of state, adversely affecting retailers in high-tax jurisdictions[1].

Are Nicotine Pouches the Future of Tobacco Consumption?

It would seem that nicotine pouches are the new trend in tobacco consumption, fuelled by the increasing taxes on traditional products like cigarettes. Reports have been showing that the volume of modern oral nicotine, particularly nicotine pouches, is up by 56.5% in 2024[1], suggesting a growing preference for these alternatives. Brands like Zyn, On Plus, and Velo Plus have been instrumental in this growth, posting double-digit gains in 2025 (Zyn +35%, On Plus +15%, Velo Plus +44%) and projecting a further 33% rise in 2026[1].

The Challenges Lying in Store for Convenience Products Retailers

The shifting landscape of tobacco and nicotine in convenience stores is not without its challenges for retailers. They need to account for an array of considerations, including toughened enforcement on illegal vape sales[1], increasing state and local taxes[1], and shifting FDA signals that may reshape product approvals[1]. For instance, New York is considering implementing a nicotine pouch levy, with forecasts estimating this could generate $57 million annually by 2030[1].

The Rise of New Technologies in Tobacco Sale Compliance

With tighter regulations looming, retailers are turning more frequently to technology to ensure compliance. Age verification technology, for instance, has been incorporated into 58% of shopper encounters, auditing 79% of 21- to 22-year-olds^[1^]. These technological adjustments are expected to become increasingly common in the sector, changing the way purchases happen in convenience retail. Moreover, increasing regulations and taxes may give rise to new delivery models, such as door-to-door nicotine pouch services.