Multiple retailers are slashing the price of tobacco to such an extent that it’s cheaper for many independents to buy it from a supermarket than from wholesale.
A survey conducted by Retail Express found that 60% of convenience stores said they have a supermarket nearby that is selling for less than RRP.
One retailer said: “If I buy them from the Co-op I’d get an 11% profit margin, but if I buy from my wholesaler I get 4.7%.”
Retail Express received a copy of the Co-op’s Imperial Tobacco 20-pack price list, which confirmed the supermarket is undercutting the RRP on most lines. JPS is 54p below RRP, while L&B Silver and Windsor Blue are 15p and 11p below RRP, respectively.
Commenting on supermarket pricing at a NFRN meeting in April, Imperial’s head of field sales Andrew Miller said: “Supermarkets are more willing to lose out on margins on tobacco because they can make up for it on other products.” The Tobacco company’s most recent data shows that the approach is working. Supermarkets have taken 1.5% of tobacco market share from independents since last August.
Anita Nye who manages Premier Eldred Drive Stores in Orpington, Kent, called for the authorities to take action. “The Government should bring in a minimum price on tobacco to make it a fair playing field,” she said.
While half of independent retailers are following the manufacturer advice, the survey showed the rest are raising prices to an average of 17.5p above RRP per 20 pack.