Tobacco manufacturers have raised concerns about independents’ plans to raise tobacco prices in the face of growing financial and legislative pressures, which they claim could play into the hands of supermarkets.
Retailers told RN that factors including the National Living Wage and the potential removal of pricemarked packs under proposed plain packaging laws are leading them to reconsider their tobacco pricing strategies.
David Worsfold, owner of Farrants Newsagents in Cobham, Surrey, said he is looking to raise prices on his tobacco products to improve his margins.
“I’m adopting a cost price system and I’m looking to achieve 8% margin on cigarette sales,” he said.
“We’re halving our profit margin by taking pricemarked packs and I think if they go, retailers will have more flexibility to be choosier with their prices.”
Alkesh Pankhania, owner of Best-one Sunbury, added: “I do go above RRP on non-pricemarked packs and I look for margins of around 9% to 10%. I’ll be keeping this if pricemarked packs go.
“But we still want to remain competitive so I’ll be comparing my prices to other convenience stores in future.”
Ron Ridderbeekx, head of corporate and regulatory affairs at British American Tobacco, said while manufacturers could not dictate what prices retailers charge for tobacco, retailers should be cautious before considering any changes.
“In future, smokers will have to navigate the tobacco category on little more than price alone,” he said.
“They will become more price-savvy and if they can get tobacco cheaper in Sainsbury’s than in Londis, you can’t blame them for going there.”
A spokesman for Imperial Tobacco added: “Tobacco pricing plays a critical role in the independent trade and stores will need to conceive their own pricing strategies, which allow them to retain a loyal customer base while benefiting from the basket spend.”