Bestway Wholesale’s new managing director Martin Race is calling on retailers to maintain the RRP on cigarettes and RYO as plain packs start making their way into the trade.
Following research which suggests that only 20% of retailers are sticking to manufacturers’ RRP following the removal of price marking on tobacco packaging, Bestway’s Martin Race is calling on retailers to be sensible in their approach to pricing on tobacco products.
Findings from tobacco suppliers show that only one fifth of independents are remaining true to RRP and that the majority of retailers are putting on anything between 10p and 50p per pack to gain additional profit. Early market changes are showing that retailers who currently sell a high percentage of PMPs and use this short-term tactic will be damaging their business if they continue.
“There are a few cases where retailers can premium price tobacco using non PMP stock – rural locations, city centres, train stations, etc – without a loss of trade but even these have to price sensibly,” said Race. “However for the vast majority of retailers the emphasis has to be on offering value to the tobacco buyer. For those retailers who trade in a competitive environment and do over-price, this is a false economy which will only benefit retailers in the short term. If retailers really want to grow their business they have to offer value to smokers otherwise they will take their custom elsewhere meaning that in addition to lost tobacco sales, sales across other impulse and grocery categories will also be lost.”
Having worked in the wholesale channel all of his working life, Race has seen a great deal of change in independent retail – much of which independents have been powerless to combat – but he believes that maintaining RRP is the best way for customers to proactively protect their total business.
“Independents account for 50% of all tobacco sales in the UK and this has been driven by PMPs which have around 80% of the market and have proven popular with both retailers and shoppers. By premium pricing tobacco products, many retailers are only forcing smokers to go to the multiple retailers who are still charging at the RRP or below. Offering a compelling price on tobacco will keep customers coming through the door as it is the primary driver of footfall into c-stores. We do not need to give the multiples a hand-up when it comes to attracting customers. Instead retailers have to protect and develop their own businesses. I firmly believe that it’s ‘RRP or RIP’ for many independent stores as their businesses are at risk if reduced traffic comes through their doors.
“We have seen from Australia that retailers who price at RRP or below have had no adverse effect on their tobacco sales. This is critically important as the tobacco shopper visits c-stores more regularly than non-smokers and spends almost £1,500 per year more in store. As a customer group, these shoppers are vital to your business and for your continued success, you need to retain these shoppers rather than drive them to rivals.”