From May 2016, all Tobacco products will be sold in plain, non-branded packaging, featuring a consistent design across all brands with prominent health warnings. What will this change mean for retailers?

July 13, 2016
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Preparing for Plain Tobacco Packging

In March 2015, Parliament voted into the law the requirements for standardised packaging on all Tobacco products. From May 2016, all Tobacco products will be sold in plain, non-branded packaging, featuring a consistent design across all brands with prominent health warnings. The Retail Data Partnership (TRDP) have considered the decline in smoking rates and uncovered insights to help retailers copy with this substantial change.

There is no denying that smoking is bad for your health, which is why Parliament introduced standardised packaging to protect future generations from harm. Whether or not you support this, as a retailer you are probably more concerned with the effect it may have on Tobacco sales.

‘The cost of 20 cigarettes in 1993 was just £2.27. By 2013 that had increased by 351.1% to £7.98’ (BBC News).

Now you only make a small profit of 72 pence on every packet of 20 cigarettes that you sell.

‘on average, only 7 to 9% of the cost of tobacco products goes to retailers, compared to 20 to 30% for food and drink products’ (The Independent 2014).

John McLurey, an independent newsagent and councillor in Gateshead, said that he:

‘could make a similar profit from a pack of chewing gum as £6 pack of cigarettes’ (The Independent 2014).

Ann Milton MP, a former Shadow Health Minister has said:

‘we cannot ignore the fact that young people are recruited into smoking by colourful, eye-catching, cigarette displays. Most adult smokers started smoking as teenagers and we need to stop this trend.’

UK Tobacco companies are preparing to launch one of the biggest ever legal claims against the British Government for losses as a result of the introduction of plain packaging for cigarettes.

‘They are expected to begin lodging papers at the High Court seeking a multi-billion compensation pay-out for being stripped of the right to use instantly recognisable brands’ (The Telegraph, 2015).

Taxpayers could be forced to pay the Tobacco industry up to £11 billion for trademark losses.

This has ignited a debate between the UK Tobacco industry and the plain packaging lobby, who have pushed strongly for these changes to come into law.

‘Professor of Epidemiology John Britton asked, ‘why would the tobacco industry spend so much time and money lobbying against plain packaging if it didn’t work? Like all rhetorical questions, it is supposed to answer itself: Because they know that plain packs will deter people from smoking’ (The Telegraph, 2015).

Profit margins are bigger on premium brands, which is why the big cigarette companies are worth billions. Non-branded cigarettes would encourage smokers to buy cheaper brands which have tighter margins.

Data from TRDP indicates that in stores where Tobacco is sold, it makes up 26% of all sales, but with the historic decline in Tobacco sales and more recent competition from Vapes and e-Cigarettes, it’s worth trying to increase your profit in other categories.

Our data also indicates that from the day that display ban was introduced (April 6th 2015), sales have increased by over 3%. This suggests that plain packaging might not make that much difference to your Tobacco sales.

However we have some ideas to help maintain your profits.

‘Banning all branding on cigarette packets would lead to a drop in sales and a £500m boost to the economy, public health experts have said. Tobacco sales bring in meagre profits for retailers and it is estimated that if the money previously spent on cigarettes were instead used for food, drink and other items, local economies would benefit’ (The Independent 2014).

If you make 20 to 30% on food and drink products, why not stock more snack items, frozen food and soft drinks?

‘with convenience store shoppers being more impulsive with their purchases than they have been since the recession – 18% are looking to be inspired in store’, (CTP Him! 2015).
So why not consider cross selling more of your food and drink and have a variety of promotional offers available in store? Please re-visit the promotions story for more information.

Imaginative merchandising is also a great way to get your customers attention. According to Convenience Store Decisions,

‘having a creative store display will make connections with your customers. One that is long lasting and makes them more apt to make a purchase.’

To make sure your customers are coming into your store for items other than cigarettes, you need to make sure you’re promoting other categories effectively.

Why not sign up to our Local Loyalty Scheme for £12 a week – a loyalty card system that is customised to your shop and fully integrated with ShopMate? This will help to set up offers and rewards whilst also, allowing you to connect with your customers.

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