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MELBOURNE, Australia — As has been widely reported on an international basis, Australia is the only country in which standardized or “plain” packaging of tobacco products has become law. This has had dramatic impacts on convenience stores in terms of their ability to compete with the larger supermarket chains.
Adding to the burden is the coordinated campaign of misinformation from health lobbyists that seeks to dismiss the genuine concerns of convenience stores, even accusing the industry of being lackeys for Big Tobacco, making the operating environment for small retailers even more challenging.
Almost on a daily basis, the Australian media is reporting the findings of some new survey purporting to “prove” that plain packaging is working; that the number of smokers is declining as a direct result of the legislation.
Actual sales as reported by retailers tell a different story, one the health lobby finds very inconvenient.
Since December 2012, legal tobacco products in Australia have been sold in plain packaging. In this time, the amount of tobacco sold has remained stable compared to before the introduction of plain packaging. We’ll get to the issue of illegal tobacco later.
It is interesting that those driving the plain packaging agenda are seeking to focus on the initiative’s apparent short-term success when the legislation was introduced in Australia as a “long-term solution." Nevertheless, the claim that smoking has declined in Australia as a result of plain packaging is totally unfounded.
A trend analysis of tobacco sales data since the introduction of plain packaging in Australia continues to demonstrate that price is now the leading factor in driving tobacco sales as products have become commoditized. There has been no overall decline in sales as a result of plain packaging, but a shift in the way consumers are buying products has occurred.
According to AZTEC, which gathers and measures data across channels and categories, the total value of tobacco sales in the convenience sector in Australia for the 12 months ended June 2014 showed strong growth at 7.3 percent. Driving this growth in tobacco consumption was the sub-value or “cheaper” segment, which grew in total sales by 61.7 percent over the course of the year. Total sales in the roll-your-own segment grew 29.1 percent in the same period.
Sales in the premium tobacco segment have declined considerably. With all packs now looking the same, price has become the key driver.
This is where the legislation has inadvertently given a free kick to the major supermarket chains. With their bulk buying power and ability to offset tighter margins against their many other product categories, supermarkets have picked up additional market share.