Tobacco companies 'exaggerating need for small retailers to sell cigarettes'

10:30 EDT 19 Oct 2016 | Cancer Research UK

News report

Tobacco companies are exaggerating the need for small retailers to sell cigarettes and the impact it has on footfall and profits, according to Action on Smoking and Health (Ash).

"Contrary to tobacco industry claims, small retailers do not make large profits from selling cigarettes" - Alyssa Best, Cancer Research UK

A new study found corner shops made an average profit of just £242 a week on tobacco products compared with £2,611 from everything else they sell - or less than 10 per cent of their total weekly profits.

Retailers' average profit margins were just 6.6 per cent for tobacco products compared with 24.1 per cent for all other products, the Ash and National Addiction Centre at King's College London study found.

The report said falling tobacco sales meant that 79 per cent of all small retailer transactions did not include the purchase of tobacco products.

A survey of 591 local newsagents included in the report found that 69 per cent "acknowledged that they do not make much profit from cigarettes compared to other products".

Newcastle-based small retailer John McClurey, who has been a member of the Ash Advisory Council for the past four years, said: "I have little choice to sell tobacco as many of my customers still smoke. But tobacco makes me very little money while tying up plenty of cash in stock. Tobacco is a burden to me.

"The decline in the market, the disappearance of cigarettes behind gantry doors and the shift to plain packaging have made the traditional approach to selling tobacco out-dated. A better alternative for retailers is to reduce stock, shift the gantry and free up space for products that actually turn a decent profit."

Ash chief executive, Deborah Arnott, said that tobacco companies rely on the sales from corner shops.

"Nearly half (45 per cent) of smokers buy cigarettes from corner shops, so for the tobacco industry it is essential that it puts a lot of effort into persuading retailers to maintain the profile of tobacco sales in those stores,” she said.

"Tobacco is a high-cost, low-profit product and money spent on tobacco is money not available for other more profitable purchases.

"Our report invites retailers to see the long-term decline in smoking as an opportunity, not a threat."

Alyssa Best, Cancer Research UK’s tobacco policy advisor, said the report offered reassurance to shop owners that were worried about the effects falling tobacco sales may have on their profits.

“Contrary to tobacco industry claims, small retailers do not make large profits from selling cigarettes,” she said. 

“The billions in profit are made by the large multinational companies who produce these lethal products. 

“Shop owners can feel confident that their businesses will not suffer from measures to help people quit smoking, like the ban on Point of Sale displays of tobacco, and they can use this space to sell alternative products that will earn them more profit.”

MP Bob Blackman, of the All-Party Parliamentary Group on smoking and health, said that the report questioned “the core messages promoted by tobacco manufacturers that tobacco is essential to retailers' success".

"I hope that the findings will support and encourage small retailers to consider whether the traditional approach to selling tobacco in small shops remains in their best interests," he added.

"A new approach to selling tobacco will benefit our corner shops, and ensure their continued place at the heart of our local communities."

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