Top-performing tobacco retailers allocate more shelf space to cigarettes and OTP products than other retailers. They increased their space for premium cigarettes, smokeless tobacco, and cigars over the last year, while reducing space for sub-generic cigarettes and pipe tobacco. These top retailers also carried more SKUs of cigarettes, smokeless tobacco, and cigars, had higher inventory levels, and set higher sales growth targets for 2011 compared to other retailers. The document concludes that lessons from top performers include managing space more aggressively, scrutinizing lower-volume SKUs more closely, balancing reduced inventory levels with availability of core SKUs, and keeping assortments fresh while maintaining focus on base products.

1. LEARNING FROM THE TOP-PERFORMERS IN
TOBACCO RETAIL
April 26, 2011
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2. What can we learn from top-performers?
Space
KPIs
Product Inventory
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3. Composition of Retailer Respondents
(Percent of Retailers – Grouped by Number of Stores Operated)
500+
201-500
Stores, 2%
Stores, 4%
51-200
Stores, 8%
Top-Line Characteristics
11-50
Stores, 9% # of retailers: 162
1 Store,
48%
# of store represented: 17,391
1-10 store operator share: 77%
Median cigarette CPW: 120
2-10 Survey: 1/18/11 – 1/31/11
Stores,
29%
Source: Balvor/CSN 2011 Tobacco Retailing Survey, Balvor LLC, February 2011.
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4. 2010 Cigarette Carton Sales
(Average per Store Week)
414
102
Top Quartile All Other
Note: Quartiles are based on average weekly cigarette volume per store.
Source: Balvor/CSN 2011 Tobacco Retailing Survey, Balvor LLC, February 2011.
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5. 2010 Dollar Sales Growth Index
(Top Quartile vs. All Other)
Index = (Top Quartile / All Other) x 100
Cigarettes 227
OTP 123
Source: Balvor/CSN 2011 Tobacco Retailing Survey, Balvor LLC, February 2011.
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6. Average Shelf Space per Store – vs. Year Ago
(Percent of Retailers)
Cigarettes OTP
47%
41%
Increased
9%
6%
Decreased
12%
15%
17%
21%
Top Quartile All Other Top Quartile All Other
Note: Percentages may not equal 100% as difference relates to those responding that space “remained the same.”
Source: Balvor/CSN 2011 Tobacco Retailing Survey, Balvor LLC, February 2011.
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7. Cigarette Space Allocations – vs. Year Ago
(Percent of Retailers)
Top Quartile All Other
Increased
38%
20% 21%
16% 16%
12% 13%
9%
10%
Decreased
17%
26% 27% 25% 25%
29% 31%
Premium Branded Sub-Generic Fourth Tier Premium Branded Sub-Generic Fourth Tier
Discount /Private Label Discount /Private Label
Note: Percentages may not equal 100% as difference relates to those responding that space “remained the same.”
Source: Balvor/CSN 2011 Tobacco Retailing Survey, Balvor LLC, February 2011.
Copyright © 2011 Balvor LLC. All Rights Reserved. 7

8. OTP Space Allocations – vs. Year Ago
(Percent of Retailers)
Top Quartile All Other
61%
51%
47% 48%
Increased
38%
18%
15%
11%
7% 7%
12% 14%
18%
22%
Decreased
25%
34%
Smokeless Cigars Papers Pipe/Cigarette Smokeless Cigars Papers Pipe/Cigarette
Tobacco Tobacco
Note: Percentages may not equal 100% as difference relates to those responding that space “remained the same.”
Source: Balvor/CSN 2011 Tobacco Retailing Survey, Balvor LLC, February 2011.
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9. In-Store Inventory Levels
(Percent Change vs. Year Ago)
Increased
2.4%
0.5% 0.6%
-0.2%
-1.9% -1.9%
Decreased
-2.2%
-2.7%
-4.1%
-4.9%
Cigarettes Smokeless Cigars Papers Pipe/Cigarette Tobacco
Top Quartile All Other
Source: Balvor/CSN 2011 Tobacco Retailing Survey, Balvor LLC, February 2011.
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10. # of SKUs Offered vs. Year Ago - Cigarettes
(Percent of Retailers)
Top Quartile All Other
Increased
38% 37%
24% 24% 24%
19% 19%
15%
18% 18%
Decreased
19%
24%
28%
31%
35%
42%
Premium Branded Sub-Generic Fourth Tier Premium Branded Sub-Generic Fourth Tier
Discount /Private Label Discount /Private Label
Note: Percentages may not equal 100% as difference relates to those responding that space “remained the same.”
Source: Balvor/CSN 2011 Tobacco Retailing Survey, Balvor LLC, February 2011.
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11. # of SKUs Offered vs. Year Ago - Smokeless
(Percent of Retailers)
Top Quartile All Other
67%
56% 54%
Increased
46%
41% 40%
26%
21%
17%
14%
0% 8%
7%
13% 12% 13%
Decreased
15%
22% 21% 23% 24%
28%
36%
39%
Note: Percentages may not equal 100% as difference relates to those responding that space “remained the same.”
Source: Balvor/CSN 2011 Tobacco Retailing Survey, Balvor LLC, February 2011.
Copyright © 2011 Balvor LLC. All Rights Reserved. 11

12. # of SKUs Offered vs. Year Ago - Cigars
(Percent of Retailers)
Top Quartile All Other
48%
Increased
44%
39%
28% 29%
23% 22% 21%
8%
Decreased
11%
15%
19%
25% 25% 24%
40%
Singles-Small Singles-Large Pack-Little Pack-Small Singles-Small Singles-Large Pack-Little Pack-Small
Note: Percentages may not equal 100% as difference relates to those responding that space “remained the same.”
Source: Balvor/CSN 2011 Tobacco Retailing Survey, Balvor LLC, February 2011.
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13. Current Availability of e-cigarettes
(Percent of Retailers)
53%
46%
26%
21% 21%
15%
13%
6%
Yes No, but we're planning to sell No and we're still evaluating No and we don't have any
them in 2011 this opportunity plans to add at this time
Top Quartile All Other
Source: Balvor/CSN 2011 Tobacco Retailing Survey, Balvor LLC, February 2011.
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14. 2011 Dollar Sales Targets
(Percent Change vs. Year Ago)
7.5%
6.8%
4.0%
3.7%
Cigarettes OTP
Top Quartile All Other
Source: Balvor/CSN 2011 Tobacco Retailing Survey, Balvor LLC, February 2011.
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15. What lessons did we learn from top-performers?
• Space - Manage it more aggressively
• SKUs - Scrutinize lower-volume ones more closely
• Inventory - Balance reduced levels with in-stock on core SKUs
• Assortment – Keep fresh with NPI, but don’t loose focus on base
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