If you’re in grocery retail, you’ll be very much aware of the new EU rules concerning how tobacco products are made, produced and sold.
The Tobacco Products Directive legislation has banned packs of 10s, 19s, 18 1/2s, all flavoured cigarettes except menthol and nonstandard style packaging. As we report in this feature, tobacco company Philip Morris Limited has developed an online educational and interactive website for UK tobacco retailers, with modules that clarify the do’s and don’ts of plain packaging. Other manufacturers are carrying out similar activity.
E-cigarettes are also subject to tough new regulations. Advertising ‘vapes’ is now almost totally banned and ecigarettes with a nicotine concentration over 20mg/ml must be licensed as medicine and are subject to the same regulations as over-the-counter drugs.
Meanwhile the tobacco accessories category, worth over £253 million, remains buoyant, and Republic Technologies and Clipper are driving the growth with busy NPD programmes. Unlike cigarettes retailers are still free to merchandise these products in store.
Under the law, all cigarette boxes must be one uniform colour, a dull green, and the same size and shape. All fonts are standardised, and so is the colour, size, case and alignment of any text. Logos are banned. Packs must also have much larger health warnings than before and graphic pictures and text on the front and the back.
The burden on retailers is tough. No branded signage is allowed. Notices stating “It is illegal to sell tobacco products to anyone under the age of 18” must be displayed by law. Tobacco products must be covered up during transport around the store. Unbranded generic signs, such as ‘Tobacco sold here’ are still allowed.
So what effect will all this have on tobacco sales? In 2013 Oxford Economics surveyed 2,000 UK tobacco consumers. This showed that nearly 70% of purchasers regularly used convenience stores, while over 80% regularly bought their tobacco in supermarkets. On the basis of convenience stores losing between 10% and 30% of incidental sales and supermarkets 2% to 10% of their incidental sales, the projected loss of turnover to the retail sector would be anywhere from £100 million to £370 million. It will be a while before the actual figures are known, but the October 2016 figures from Public Health England showed the number of smokers in England had fallen to its lowest level, with just one in six adults now lighting up.
As well as the impact of TPD, the OECD research body has predicted that when Brexit happens, it could drive up the price of cigarettes by almost a third, further affecting cigarette sales. The body forecast that leaving the EU would mean tariffs of at least 70 per cent on tobacco under World Trade Organisation rules, potentially raising the price of a pack of 20 from around £9.60 to £12.74.
Meanwhile Leave campaigners insist tariffs would only rise to 70 per cent if the Chancellor allows it.