tobacco

Overcharging on tobacco has resulted in independent retailers losing out on 2% of sales to multiple stores, according to new Imperial Tobacco data.

The company’s head of field sales for UK and Ireland Andrew Miller presented the findings at the NFRN national council meeting on Tuesday, which showed 0.5% of the share was lost to multiple convenience and 1.5% to grocery stores in the six months following the regulation changes in August 2016.

“The share normally shifts between independents and supermarkets all the time but this is the longest length of time we’ve seen this kind of shift for a few years,” said Mr Miller.

“There are a few reasons why that could be, but one of them is probably that following the end of pricemarked packs, a lot of independents are charging more than supermarkets.

“Supermarkets are more willing to lose out on margins on tobacco because they can make up for on it other products.”

Mr Miller said retailers should charge the RRP or less in order to avoid losing out on sales.

“You can charge what you want and that is your right, but if you are charging £10 and there’s a Tesco down the road charging £9 and another independent nearby charging £9.90, then a tobacco consumer will not go to your store,” he said.

However, retailers say what they are losing in sales value they are making up in increased margin.

Edinburgh retailer Abdul Qadar said the end of pricemarked packs represented an opportunity for independents.

“With that and with packets of 20 being the minimum size we should actually be able to claim back a proper margin,” he said.

Mr Miller also announced Imperial will exchange all unsold stock that no longer meets legal requirements from independents after 20 May.

“We will not leave our retailers high and dry with stock. That is not in our interest or yours,” he said.

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Jennifer Hardwick
Jennifer is RN’s news and magazines reporter. Each week, Jennifer looks at the key issues affecting convenience retailers selling news and magazines and examines the latest data and trends to give guidance on how they can grow their sales. Jennifer can be found tweeting at @JenniferH_RN, on jennifer.hardwick@newtrade.co.uk or on 020 7689 3350.

COMMENT HERE

2 COMMENTS

  1. Dear Sir/Madam,
    Tobacco sales,
    You mentioned JTI are helping retailers, this is not so in our case.
    We have a now 50% under utilised JTI display unit. JTI via their off hand rep demanded that the stand be filled 75% with their brands or they would remove the stand. The redundant display area could not be used for any other more useful purpose nor would they consider an exchange to a smaller unit. With all packs losing the unique graphics we can only show a wall of meaningless black to customers – what use is that.
    With an almost total loss of brand loyalty now in evidence the sale of JTI products become less important, there is no reason for us to actively
    promote JTI in the future. We will now stock minimum quantities from this source. JTI’s marketing policy towards their main source of retail sales, ie small convenience stores should be of concern to them. I have since been informed that other stores have adopted the same approach.
    JTI have now confirmed the removal of the stand this week.
    Fortunately we have alternative storage facilities.
    Regards
    Eric Jordan

  2. Dear Jennifer,

    I have to strongly disagree with this article. Imperial tobacco have an incentive to find little to no evidence, to back their claim off market share loss from the Independent sector to the multiples. I can provide hard evidence, backed by sales data, that clearly shows that I have lost a third off my tobacco sales in the space off 3 months. I am a retailer based in a socially and economically deprived area and have always and continue to charge RRP for each product, yet have seen such devastating declines. After an investigation, I have come to learn that the likes of TESCO’s, Asda’s and Scotmids(next door), etc are selling cigarettes at considerably less than the RRP, the same cost it is to buy in the product for myself. At first I could not understand how this was possible but then I learned from an industry source that the big boys have a deal with the likes of Imperial Tobacco that if they shift a certain number off tobacco products per year they would get a rebate in the regions of hundreds of thousands off pounds. How can an independent compete with that? I am not surprised that a number off retailers having seen such declines in sales as well as footfall have resorted to premium price tobacco products.

    Ferhan

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