Stores seek ways to offset tobacco losses

With less than three months to go before new tobacco legislation is enforced across Europe, UK convenience retailers are starting to look for ways to offset the potential sales declines.

From 20 May 2016, tobacco manufacturers will no longer be able to produce tobacco in branded or pricemarked packs, or in small pack sizes. Currently, 92% of all rolling tobacco pouches sold in the UK are less than 30g, while 82% of cigarette packs sold are less than 20.

Retailers will have a further year, until May 2017, to sell through old products, but many fear that stocks of fast-selling lines and formats will run dry long before then.

Multi-site independent retailer Chaz Chahal said he was concerned about the impact on visit frequency. “I worry that it will hit sales as people who currently buy smaller packs won’t need to come in as often to top up once they buy the larger formats. Our rolling tobacco smokers will be hardest hit as 12.5g is our best-selling pouch size.”

Chaz is planning to install an under-the-counter solution in his Inkberrow store in Worcestershire, which will allow him to devote back-wall space to high-margin spirits. “I’ll keep that section under review to see if there are any other profit-making opportunities to explore, such as electronic cigarettes,” he said.

Londis retailer Mike Dorey in Eastcombe, Gloucestershire, has just invested in an energy-efficiency refit in a bid to help him offset any potential sales declines. “I am concerned as there is a big market for smaller packs, particularly in the past 18 months. We have some customers who come in every day to buy a pack of 10 in a bid to stick to daily budgets.

“It’s a serious worry, particularly as we are being hit by so many other rising costs. That’s why we’ve been focusing on ways to cut them, which will be key. In November we installed doors on all our chillers, and fitted LED lights throughout. The reduction in our energy bills has been staggering.”

Jatinder Sahota, of Londis Isle of Sheppey, Kent, said: “I’ve invested in giving shoppers more reasons to visit and hope that as a result I don’t see much of a negative impact. What does worry me is the loss of pricemarked packs as we sell lots of those.”

Bipin Haria, of Seaford News, East Sussex, said he may consider an overhead solution which would free up back-wall space for higher-margin categories. “I am already questioning tobacco’s place behind the counter,” he added.

The Tobacco Products Directive will come into force from 20 May 2016 for tobacco manufacturers. From this date they will no longer be able to make: cigarettes in packs of less than 20; rolling tobacco in pouches of less than 30g; slide packs or slim packs.