Plain Packaging: NZ Must Consider Negative Impacts on Australian Retailers

With the announcement that in early 2014 New Zealand Parliament will consider legislation requiring all tobacco products to be sold in plain packaging, despite no evidence it has any impact on the incidence of smoking, the Australasian Association of Convenience Stores (AACS) has reinforced opposition to the policy, in light of the significant negative impacts the legislation has had on Australian retailers in the 12 months since it became law.

According to AACS members in Australia, the actual volume of tobacco sold by convenience stores in Australia remains stable, with some reporting an increase in tobacco sales since plain packaging was introduced.

However AACS CEO Jeff Rogut explained that it is the additional costs that small retailers in Australia have been forced to absorb that has seriously impacted their bottom line over the past 12 months.

“The spike in costs to retailers because of plain packaging has been dramatic and in some cases crippling. Additional costs associated with staff training, labour, product handling errors, increased inventory management procedures and customer frustration have had a real impact for which small
businesses have received no compensation,” Mr Rogut said.

“In terms of the volume of tobacco sold, plain packaging has had no impact. Instead, it has simply encouraged the illicit trade of tobacco, with numerous high profile busts in recent times in Australia clearly indicating the extent of the black market trade of tobacco across the country.

“Retailers that responsibly sell legal tobacco products have simply missed out on sales as a result of flawed, short sighted policy. Small businesses in particular are the one who have suffered.”

Mr Rogut said the whole plain packaging exercise has shined the spotlight again, predictably, on education as the most important and effective way to reduce the incidence of smoking.

Recent updated research from leading international research company Roy Morgan entitled The Impact of Plain Packaging on Australian Small Retailers, commissioned by Philip Morris, shows that awareness among small retailers of illicit tobacco is high and has dramatically increased since the
introduction of plain packaging.

According to the research, more than four in ten retailers perceive illicit trade to be having a negative impact on their business, and a third report having had customers enquire about purchasing illicit tobacco.

“The huge growth in illicit tobacco sales is concerning not only to retailers but for everyone. It is now easier than ever to buy non-compliant, illegal tobacco in Australia,” Mr Rogut said.

“This impacts the honest retailers who sell tobacco responsibly and legally as well as the Government, which experiences a significant loss of revenue because the sale of illicit tobacco circumvents the tax otherwise payable on legal tobacco products.”

Tobacco’s importance as a product category for convenience stores was reaffirmed in the Roy Morgan research, with 95% of stores rating tobacco as important to their bottom line.

“In plain packaging we have a policy which encourages black market trade while undermining the financial stability of small businesses which responsibly sell a legal product,” Mr Rogut said.

“It is also a policy which, in the context of a free and democratic society, fails to treat adults who choose to smoke a legal product with dignity.

“It has become the norm for those with an agenda to demonise smokers as second class citizens. The convenience industry is committed and proud to treat every customer we serve with respect,” he said.

Key findings of the Roy Morgan research into the impact of plain packaging on small retailers in Australia 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 Australian 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.

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