De-normalisation of tobacco should not mean demonisation of retailers
Vincent Jennings highlighted that “denormalisation” of tobacco products should not mean demonisation of retailers. There are many unintended consequences of Public Health policies that the industry should be wary of.
Print15 November 2013
The second speaker in our ‘Revenue and Retail’ session was Vincent Jennings, CEO of the Convenience Stores and Newsagents Association. Vincent Jennings addressed four key issues.
- The effect of tobacco control legislation on retailers
- The impact of illicit trade to retailers
- How high prices push consumers towards black, grey and non-green markets
- What retailers could do to help reduce smoking.
Dangerous and undemocratic
He highlighted that "denormalisation" of tobacco products should not mean demonisation of retailers. There are many unintended consequences of Public Health policies that the industry should be wary of. Tobacco controls should not be allowed to be constraints on competition. Tobacco is still a legitimate product. Jennings pointed out that the lack of consultation by the Department of Health with retailing stakeholders is both dangerous and undemocratic.With the advent of an on-the-spot fine regime, it is vital that retailers make themselves aware that compliance with PHTA goes far beyond the prevention of sale to minors.
Black, grey and non-green markets
Jennings went on to say that the marketplace for tobacco is completely different than any other FMCG product, therefore the impacts are equally disproportionate in terms of negative effect. Each "lost" transaction affects the retailer through the loss of ancillary purchases especially in the smaller outlets. Tobacco sales are declining due to reduced demand, this decline is being artificially exaggerated due to the illicit trade. Retailers in socially disadvantaged areas experience enormous fluctuations in sales of tobacco due to presence or absence of competing illicit product.
Jennings commented on how high prices push consumers into the "black", "grey" and "non-green" markets. Ireland is a small market on the periphery of Europe; the only reason that smugglers elect to pass hundreds of millions of continental European smokers is due to the existing public health policy of high excises. This policy creates a selling price (which is traditionally half the "legal trade") for the illicit trade that provides a return on investment worth the risk of importation to this island. This phenomena is not unique to Ireland; the illicit trade in tobacco would never be worthwhile if the "savings" to the consumer were not substantial. The "grey" market is the growth of the "tax paid in another jurisdiction category" which is solely as a result of savings for same or similar brands. Many of these products are sold on to friends and work colleagues in contravention of customs’ laws. This has led to a new "tobacco tourist" label. Finally, "non-green" is where the people that are electing to purchase their own (or for their immediate family) tobacco and alcohol requirements due to the high prices in Ireland.
Lost sales and taxes
In 2012, a Tobacco Consumption Report commissioned by Revenue and the Office of Tobacco Control stated that 440 million cigarettes were imported legally in this manner. This was 8% of total consumption and represented tax foregone to the Irish Exchequer of more than €250m.
Jennings finsihed by talking about what retailers could do to help reduce smoking. He recommended removing the prohibition on nicotine replacement therapy (NRT) products being sold in non-pharmacy outlets. Ensuring that all other tobacco harm reduction products are made available in retail outlets registered or licenced to sell tobacco products. He also outlined that preventing the access of tobacco to minors is not only a legal duty, but retailers moral and societal responsibility. Jennings final recommendation was to consider the introduction of extending the minimum age from 18 to 21 years over a three year period.
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