Fumi-Gate

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Since the announcement last month about a raft of new proposals affecting the display and packaging of tobacco products as part of the Government’s Cancer Reform Strategy - particularly targeting teenage smokers - tobacco manufacturers and trade associations have been busy trying to rally

the troops to fight back. And the forecourt sector is one of the key market segments that should be rallying to the cause. A further assault on what has long been the biggest-selling category in the forecourt shop should send a shudder through their tills.

While a fair number of sites may now have fully-blown convenience stores which may be able to dilute any hit on the tobacco category, there are many smaller sites with a more traditional forecourt mix

of products, that could suffer considerably. This month’s Database column, for example, shows that tobacco sales still represent almost 33% of total shop sales - down only 3% since 1999.

The government’s proposals include: the restriction of tobacco product displays at the point of sale; the prohibition of packs of cigarettes of less than 20; the introduction of a retailer licensing scheme; and the prohibition of tobacco vending machines.

There will be a three-month consultation period of about three months, starting some time this month. While the tobacco industry has got used to the continual assault on its products, it is fast losing its patience when faced with these latest proposals. In particular, it is opposed to the potential ban on tobacco display - which is currently law in certain states of Canada, Iceland and Thailand.

Deirdre Healy, Imperial Tobacco’s corporate affairs manager, UK & Ireland, says: "What type of society do we want to live in if policy makers deny the rights of adult consumers to make an informed choice about FMCG products? Consumers could be denied the right to view products that are legally for sale before purchase.

"If retailers cannot display and consumers cannot view, that will have a significant implication for the current supplier/retailer business model.

"We want evidence to show that these proposals will be effective in reducing smoking among teenagers, and not just be a huge cost to legal businesses who pay their tax and rates, and put more tobacco business in the hands of the growing counterfeit trade.

"We manufacture a legal product, and we are entitled to sell it through the legal channels - and retailers are entitled to sell it."

Jeremy Blackburn, Gallaher’s trade communications manager, says the display ban could be one of the biggest issues to affect the industry in years, and urges retailers to lobby their local MPs.

Certain retailers are already on the case and are writing letters of complaint to their MPs.

Susie Hawkins of the Simon Smith Group, for example, has wasted no time in lobbying her MP and has received what she calls a ’standard’ response.

"Of course I realise the health implications of smoking. But it is the principle of the situation," she explains. "Tobacco products are not illegal, so why should we be restricted in displaying them? And where does it end? Will alcohol be next?

"I don’t know what the impact on sales is likely to be. If you said we couldn’t display Mars bars, for instance, sales would go through the floor. It’s not exactly the same with tobacco, because customers do ask for the products they want, but it’s bound to have an impact. It is a category with a large turnover and good cash margin.

"There is also a huge logistics implication. Shops for years have been designed to have that space behind the counter. It would incur considerable expense to sort it out. Also there is a security implication - what about when staff have to bend down, or leave the till to get the tobacco products out from wherever they are stored? They’re not policemen. Why should they be put in such a vulnerable position?

"I will continue to lobby my MP and would urge other people to do the same."

Paul Delves, managing director of Harry Tuffins, is also putting the finishing touches to a letter to his MP. "It’s another nail in the coffin for independent retailers," he says.

"It has the ring of ’nanny state’ about it, and you have to wonder what other products will be next - will it be alcohol? Also, a display ban will only help to drive more sales to the illegal side of the trade."

Ray Holloway, PRA director, agreed that the proposals were just another blow to the independent forecourt retailer.

"In our industry we have the highest tobacco sales as a percentage of shop turnover.

"There is a very good reason why the forecourt sector in particular should be proactive in defending their right to display tobacco products. It has serious implications for tobacco profitability, and for on-site security. A forecourt cashier cannot leave the till point - because of the security of the forecourt - so how are they going to manage going searching for tobacco products under the counter or in a store cupboard? Also stock losses are likely to rise. Apart from the business point of view, what about taking away the individual customer’s choice?

"We are working with the Tobacco Manufacturers’ Association and putting together a lobbying paper."

Other retailers, however - rather surprisingly, considering the impact it could have on their business - seem to have taken the view that the demise of the tobacco category is inevitable and it’s in everyone’s health interests to restrict this potentially lethally habit. But, whatever, the health implications, most believe there are principles at stake here, that have the whiff of the thin end of an unhealthy looking wedge.

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=== Tobacco: key issues for 2008 ===

Pictorial Health Warnings (PHWs):

? From October 1, 2008 all tobacco product packs manufactured in the UK are required to display PHWs

? Last date for retail sale of cigarettes with existing text warnings is September 30, 2009 and for other tobacco packs September 30, 2010

Taxation and trade (smuggling, counterfeit and cross-border):

? UK taxes amongst the highest in the world

? Cigarettes: Approx. 27% non-UK duty paid

? Counterfeit cigarettes: Approx. 70% of all large scale seizures

? Hand rolling tobacco: Approx. 68% non-UK duty paid

? Total revenue lost through non-UK duty paid: Approx. £4.5 billion

Point-of-sale restrictions: