Australian research reveals negative impact of plain packaging

The Government’s decision last week to abandon – at least for the moment – plain packaging on tobacco may have caused controversy in many quarters, but will come as a relief to much of the convenience channel, which had feared an increase in red tape, employee workloads as well as an increase in the illicit trade.

The Government’s decision came shortly after the publication of a report from international research house Roy Morgan into the effects on plain packaging in Australia –  introduced in December last year – which indicated that plain packaging was taking a bite out of retailers’ bottom line. Increased administrative and labour costs, combined with negative impact on the ability of stores to serve non-tobacco customers were largely blame, said researchers.

The Impact of Plain Packaging on Small Retailers research report was commissioned by tobacco giant Philip Morris with support from the Australasian Association of Convenience Stores (AACS), and is the first major comprehensive review of the impacts of tobacco plain packaging across 450 retail outlets [In Australia, tobacco accounts for around 30% of a typical c-store’s sales].  

“Since the introduction of plain packaging, customers are down trading into the value segments, which in turn places pressure on retailer’s margins and profitability,” said Jeff Rogut, CEO of the AACS. “Deliveries are taking over 30 minutes longer to check due to the difficulty in identifying particular brands, placing added pressure or store staff and couriers who deliver the stock to stores.”

Rogut added that there was evidence that the illicit trade had increased since the introduction of plain packaging, mostly in the form of bootleg, counterfeit or smuggled products from the Far East.

No wholesalers contacted by this magazine were prepared to comment publicly on the issue, but the general feeling was that the UK government decision was a good thing for the trade. “There would have been a considerable increase in the complexity of inventory management in depots and in our customers’ stores, not to mention the training involved and the mix-ups,” said one. “To be honest it’s a relief.”

“We’re happy with the decision, but the issue will keep on coming back,” said another. “In the end, plain packaging will come in… it’s just a matter of time.”

The reasons for the government’s decision remain unclear, although some anti-smoking campaigners blamed lobbying by the big tobacco companies.

Some of the findings of the AACS report included:

  • 90% of small retailers experienced increases in time taken to serve tobacco customers and 75% reported additional time spent communicating with customers about tobacco products;
  • 73% faced increased “frustration” from customers and 59% saw an increase in the frequency of staff supplying the wrong products primarily due to difficulty in recognising and distinguishing between brands;
  • Nearly half of small retailers said plain packaging had negatively affected the level of service they are able to provide their non-tobacco customers;
  • The large majority of small retailers found it took more time to order stock and 80% experienced an increase in the occurrence of out of stocks since the transition;
  • Almost two-thirds of small retailers spent additional time training staff as a result of the changeover with 40% having to spend more money on training;
  • Two-thirds of small retailers do not perceive that Government considers the needs of small businesses at all in its tobacco legislation while the same amount report their feelings towards the Government are now less favourable as a result of the plain packaging legislation.
  • 77% of  independent retailers said plain packaging was having a negative impact on their business overall.

[Source: Roy Morgan/AACS April 2013]

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