Home' Convenience and Impulse Retailing : CAI Feb-Mar 2018 Contents February/March 2018 | C&I | www.c -store.com.au
While it is true that tobacco saw 4.5% dollar growth through
convenience in 2016, a closer look at the data contained in the
latest Australasian Association of Convenience Stores (AACS)
State of the Industry Report confirms there is no reason for
complacency. In 2015, the dollar growth was 5.2% and, in 2014,
it was even stronger at 8.9%. And, in terms of volume, rather
than value, tobacco is in decline across all channels.
Nonetheless, British American Tobacco Australia (BATA) said
there was no evidence that excise hikes and plain packaging
legislation have resulted in any decreases in smoking rates
beyond the long-term trend.
BATA’s Senior Corporate and Government Affairs Manager Josh
Fett said: “The big shift in the market in recent years has been
that price sensitive smokers are looking for cheaper alternatives”.
“The nature of convenience shoppers has somewhat insulated the
channel and it has a better sales mix, but the low price segment
is growing quickly.”
For any retailers looking to get the most out of the tobacco
category then, it is important to focus on consistency in both
range and price. Stores should implement a core range of
products that balances value-oriented brands for price-conscious
consumers with premium brands for the more discerning smoker.
The tobacco industry as a whole also remains deeply concerned
that the large excise increases and plain packaging legislation
has fuelled the black market by making it even more lucrative
for organised criminals to smuggle illegal tobacco into Australia.
A pack of 20 cigarettes is up to eight times more expensive in
Australia than South Korea, for example and these high profit
margins can provide an attractive and valuable source of income
for organised crime.
The latest KPMG report on illicit tobacco in Australia was
released in May 2017 and showed illicit tobacco now represents
a 13.9% share of total consumption. This means that roughly
one in seven cigarettes is now illegal. Leading tobacco industry
players say convenience stores should ensure they always
buy their products direct from the tobacco industry or from
With price-conscious consumers continuing to trade down, sub-
value cigarette sales have been strong through all channels but
they have been particularly relevant in convenience where prices
are generally higher than supermarkets or tobacconists.
AT A GLANCE
• The proportion of
who compared prices with
their last purchase has
been steadily growing.
• Operators should avoid
discounts in favour of a
price that will encourage
repeat purchases from
shoppers as they become
accustomed to the
• Convenience store staff
should exceed shopper
category knowledge and
• Future channel success
in tobacco will be driven
by ensuring the right
products are ranged, on
shelf, and visible on the
Imperial Tobacco said this trend has led to incredible growth for
the JPS brand family over the past three years, and it says Peter
Stuyvesant 20s and 25s also overtrade in convenience.
For its part, BATA said its portfolio is well aligned to convenience
with brands such as Dunhill, Benson & Hedges and Winfield
selling well through the channel, with cheaper brands such as
Rothmans also growing quickly.
Philip Morris said its Marlboro, Peter Jackson and Bond Street
brands have been performing strongly in the channel and it has
also observed a shift to small pack counts, as well as one towards
cheaper brands. It says this means convenience can still gain
outcomes via brands like Bond Street which is well established at
this end of the market.
The rise in demand for lower price cigarettes has also seen other
companies such as tobacco wholesaler, Richland Express, and the
Tobacco Imports Company (TIC) – which is part of the Kollaras
Group – seek greater market share.
TIC says it aims to provide customers with competitive products
that offer above industry standard margins, and a significant
point of difference.
TIC marketing manager Georgia Kollaras said: “We have stayed
consistent with our pricing strategy – ‘everyday value offering’
and our King Street/Brooklyn and Cleveland brands have
continued to grow and do very well in the convenience channel”.
“Convenience store operators
have been historically frustrated
in their inability to compete and
maintain margins and we as a ‘low
cost operator’ saw an opportunity
to jump in and assist to ensure
everyone remains on a level
Despite the inroads being
made by some less established
companies, the AACS State of
the Industry report reveals that
most tobacco users are still
highly brand loyal, with research
showing 85% of all tobacco
smokers purchase their usual
brand when visiting a petrol and
Plain packaging legislation has the tobacco
industry concerned about the black market.
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