The new tobacco packaging law will hit wholesalers hard, says Tom Gockelen-Kozlowski.
If madness is doing the same thing over and over again and expecting different results, what is it called when someone does many different things at the same time, when they only want to achieve one aim?
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Plain facts about plain packaging
- Wholesale tobacco profits are set to decrease by £92m on average over the next decade.
- Every convenience retailer is in line to lose an average of £55,000 in revenue each year.
- Suppliers must stop producing branded packaging by May 20, 2016.
- A one-year transition period will allow retailers and wholesalers to sell existing branded stock.
- 113 MPs, mostly Conservatives, voted against the measure, fuelling rumours of a government split.
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It’s something for the health lobby to consider after plain tobacco packaging was pushed through Parliament last month. It came as the display ban was still weeks from being implemented in small shops.
The case against plain packaging is well worn, but the criticisms of its journey through Parliament deserve a brief restatement: with no full debate in the House of Commons, there was no opportunity to voice legitimate concerns that this law is more about sending a signal than having any actual effect on youth smoking.
Better Wholesaling’s sister title Retail Newsagent reported that the government’s own impact assessment expected the average convenience retailer’s tobacco revenue to be hit by more than £55,000 each year for a decade. For wholesalers, the same impact assessment also makes grim reading, with collective profits due to be down by a total of £92m over a decade. None of these figures includes the boost to the illicit trade, the decline in footfall or the other myriad effects the measure will have.
Initially, there was confidence that the awkwardness of managing plain packaging in depots could be avoided, at least, as outers would remain branded. But with duty-free stores and other retailers often selling outers’ worths of cigarettes directly to consumers, there is now less certainty.
The FWD has said it’s currently working with the Department of Health to ensure ‘wholesalers and retailers are able to identify and distinguish between brands with clearly-marked packaging that is not passed on to the public’. Many wholesalers are also engaged in this process individually.
“The devil is in the detail and we have teams looking into it,” says Palmer and Harvey’s managing director Martyn Ward. The company’s main promotion to retailers has long been based on tobacco margins.
Ward believes that although there is a chance that order errors could increase under plain packaging, there are two mitigating factors.
“We’ve got voice picking systems and, in one depot, automated picking. With those, the risk goes away,” he says.
The Tobacco Products Directive, which bans the sale of 16s, 18s, 19s, and smaller pouches of rolling tobacco, could also ease the burden on pickers, retailers and the management of the category in depots generally.
“There’ll be far fewer SKUs and price-marked packs will also disappear,” Ward adds.
More than anything else, offering the right service and support to retailers will be vital when the plain packaging legislation comes into effect, he believes.
Like the rest of the industry in the weeks after the vote, Palmer and Harvey is “still getting its head round” the likely effects of the changes on operations, service and profits. Yet, with an implementation date of May 20 2016, there are only another 13 months to prepare strategies, technology and staff.
With the general election just weeks away, all this may call into question the pro-business, pro-growth economic credentials of a Conservative Party relying on voters working in small and medium-sized businesses to return it to power.
It’s time for suppliers, wholesalers and retailers to start to prepare for arguably the biggest upheaval in what for many is the most important convenience category there is.
