December 2003

By Luc Martial

Retailing tobacco in North American has become hard over the years - and it’s about to become even harder.

Partly to blame is an unyielding Canadian anti-tobacco lobby and its American counterpart which have long played off each other in a strategic and dangerous international game of regulatory leap-frog. Through their skillful, if not expert manipulation of government agendas, the media, and the public trust, they’ve succeeded over the years in making tobacco a very ugly commodity and forcing its retailers to navigate an increasingly unforgiving regulatory minefield.

Perhaps the greatest threat to the tobacco industry has been the advent of industry denormalization. Over the course of the past eight years, anti-tobacco/ industry groups have toiled meticulously towards crafting their most tactical victory to date. They have actually succeeded in convincing governments that this legal industry should not be treated legally. In support of this agenda, they continue to receive exclusive government funding (your tax dollars) to aggressively attack industry stakeholders. Internal documentation retrieved under access-to-information legislation has since confirmed that the anti-tobacco lobby’s goal is to “strip the industry of its legitimacy.”

For retailers, the objective is even clearer - convincing governments, the media, and the general public that it is “morally wrong” to sell tobacco. And their strategy seems to be working. In meetings I have had with government officials over the years, retailers have often (and casually) been referred to as “drug pushers.” As one example, with regard to industrysponsored retailer education programs (youth access issues), the anti-tobacco lobby provides the following publicly-paid criticism: “Attempting to deal with youth smoking solely through PR initiatives like Operation ID (Canadian program) is like relying solely on the arrest of small-time drug pushers to curb the cocaine trade.”

When it comes to tobacco retailers, the anti-tobacco lobby’s agenda is quite simple:

• Make it socially unacceptable (shameful) and less profitable for you to sell tobacco;
• Make it difficult (if not impossible) for you to comply with the legislation;
• Silence your voice in government;
• Eventually expropriate your business altogether;

Adding to this subversive attack on your business is a long list of emerging and direct regulatory initiatives which are leveraged from within and outside of governments. Over the next few years, tobacco retailers should expect:

• Tremendous scrutiny - An increased and exaggerated focus on enforcement and compliance at retail, to include significant increases in fines and penalties for retailers unwilling (although more likely unable) to comply with legislation. There will also likely be discussion pertaining to additional and time-consuming reporting requirements for retailers.
• Promotion restrictions - New proposals to regulate promotions, which will eventually call for a ban on tobacco displays at point-of-sale locations (inclusive of tobacconists). Canada has been exploring the issue of banning tobacco displays and/or display allowances to retailers over the last three years. Despite some minor setbacks, several Canadian provinces continue to advance on this issue with the support of the federal government.
• Labeling/packaging requirements - Canada is currently developing its next generation of health warnings which will likely prove more technically challenging and costly. In terms of content, the warnings will undoubtedly become more shocking and shameful - setting the new standard for what tobacco warnings should be. When this happens, the pressure will be on for the U.S. to follow suit. Governments are also likely to re-visit the issue of cigarette descriptors - to include a ban on terms like “light” and “mild”, as well as any other form of descriptors (colors, logos, numbers, etc.) which the anti-tobacco lobby feels is deceptive.
• Taking aim at cigars - Cigars are also slated to become the next obvious target for governments - as this industry has largely avoided the wrath placed upon cigarettes over the last decade. Specifically, a push for higher taxes, more prominent and product-specific warnings and federally mandated in-store signage will be the order of the day.
• Across-the-board tobacco tax increases - Governments continue to unjustifiably tax tobacco to dizzying heights - with little to no understanding or concern for those taxes’ impact on health, smuggling, retail theft, retail violence, loss of employment and overall economic viability for retailers.
• Cigarette design issues - New York State has already committed to requiring “fire-safe” cigarettes by the summer of 2004. Canada has also moved forward on this initiative and is expected to introduce nation-wide legislation sometime over the next 18 months. For retailers, the impact will largely be felt through an increase in prices (if manufacturers pass the buck) and a death blow to many specialty/imported tobacco products (whose limited markets simply do not justify the additional testing and manufacturing investments).

But these emerging issues are only a taste of things to come - the tip of the iceberg. Tobacco retailers should continue to expect an unyielding and merciless attack on all aspects of the tobacco trade over the coming years.

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