NEW RESEARCH VALIDATES RETAILERS’ FEARS OF ILLICIT TRADE AND OTHER NEGATIVE IMPACTS OF PLAIN PACKAGING

October 1, 2013

New independent research released nine months after the introduction of tobacco plain packaging has validated the concerns of convenience store owners: that their businesses would suffer as a result of illicit trade, increased labour and inventory management costs, and product handling errors.

Commenting on the release of The Impact of Plain Packaging on Australia Small Retailers by leading international research company Roy Morgan, commissioned by Philip Morris, Australasian Association of Convenience Stores (AACS) CEO Jeff Rogut said the research confirmed what was always obvious to these small businesses.

“The research shows that Australian small retailers’ awareness of illicit tobacco is high, and has increased since the introduction of plain packaging. More than four in ten retailers perceive illicit trade is having a negative impact on their business, and a third report having had customers enquire about purchasing illicit tobacco,” Mr Rogut said.

To make matters worse, nearly nine in ten small retailers expect the upcoming 12.5% excise increase each of the next four years will contribute to a negative impact of illicit trade on their business.

“It was clear that plain packaging was going to have serious financial ramifications for convenience store owners and the latest research confirms this,” Mr Rogut said.

“Costs associated with increased transaction times, customer frustration, inventory management delays, as well as heavier staff workloads and training requirements have all been necessarily absorbed by convenience stores at their own expense, placing undue pressure on their bottom line.

“However, aside from the absolute lack of consultation with retailers leading up to the introduction of plain packaging, perhaps the most frustrating aspect of this whole process is that, with all the pain retailers have gone through, tobacco sales in convenience stores remain largely unaffected, with some stores recording an increase in tobacco sales.

“Despite the triumphant exclamations form various health lobbyists, the fact remains that tobacco plain packaging has had a negative impact on small retailers for no improvement in reducing the incidence of smoking.

“This research again highlights the need for Government to invest in education if improving health outcomes in society is the goal. Kneejerk reactions like plain packaging that harm one sector of the economy for no apparent benefit have again been exposed as a failure of policy,” Mr Rogut said.

The research, commissioned by Philip Morris and with AACS support, also reaffirmed that tobacco is still a vital – and legal – product category for convenience stores, with 95% of stores rating tobacco as important to their bottom line.

“The only reasonable conclusions to be drawn from this latest independent research is that firstly, while plain packaging has clearly had a negative impact on margins for small retailers, tobacco remains an important product for convenience stores, and secondly, that despite all the fanfare and political pats on the back, tobacco sales remain largely unaffected and smokers continue to consume this legal product,” Mr Rogut said.

“We would again plead with Government at all levels to consult with retailers, those at the very coal face of legislative changes such as plain packaging, before introducing ill-conceived regulations aimed at securing favourable headlines instead of genuine improved health outcomes.

“Small retailers would relish working with Government to develop and implement better solutions. What we don’t appreciate is being completely ignored before having to bear the financial brunt,” he said.

Key findings of the latest Roy Morgan research available at www.aacs.org.au include:

• Two-thirds of small retailers claim plain packaging has negatively impacted their business.
• 78% experienced an increase in the time taken to serve adult smoker customers and 62% report additional time is spent communicating with these customers about tobacco products.
• 62% of small retailers have faced increased frustration from adult smoker customers and 65% have seen an increase in the frequency of staff giving the wrong products to customers (primarily due to difficulty in recognising/distinguishing between brands).
• 34% of retailers have experienced increased frequency of attempted product returns predominantly due to customers being given a product they did not ask for.
• 44% of small retailers consider that plain packaging has negatively affected the level of service they are able to provide to their non-tobacco customers.
• 75% of small retailers find it takes more time to order stock. 45% claim it takes much more time.
• The accuracy of the ordering process has also been impacted, with 46% of small retailers facing an increase in the frequency of incorrect orders placed.
• 58% of small retailers noted an increase in the time taken to receipt stock while the courier is on site (also resulting in courier frustration), and 83% now take longer to process stock once the courier has left, including 57% reporting it now takes much more time.
• While 28% of small retailers overall had increased the number of staffing hours, 63% reported their staff now have a heavier workload since the introduction of plain packaging.
• Around a third of small retailers indicated being concerned about store or staff safety issues as a result of staff members facing the storefront less since the introduction of plain packaging.
• 66% of small retailers have spent additional time training part-time, casual or transient staff as a result of the changeover to plain packaging, while 44% have faced additional costs from training staff members as a result of the changeover.
• 65% do not perceive that the government considers the needs of small businesses at all in its tobacco legislation.
• 65% of retailers reported that their feelings towards the government are less favourable as a result of the plain packaging legislation.
• 83% perceive that the government has negatively affected the ability of small retailers to compete with larger chains.
• 43% of retailers perceive illicit trade to have a moderate or major impact on their business.
• 33% of small retailers reported having had customers enquire about purchasing illicit tobacco since the introduction of plain packaging.
• 87% of retailers expect the upcoming 12.5% excise tax increase each year for the next four years will contribute to a negative impact of illicit trade on their business.