C-store Retailers Discuss Implications of FET Increase on Tobacco Business

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C-store Retailers Discuss Implications of FET Increase on Tobacco Business

NEW ORLEANS -- The impact of the latest federal excise tax (FET) increase on tobacco retailing was one of the hot topics discussed during the annual Convenience Store News Tobacco Best Practices Roundtable, held here the day before the start of the Tobacco Plus Expo.

Guest speaker David Bishop, managing partner of Balvor LLC, a leading c-store consulting firm, presented the results of a new BalvorCSNews Tobacco Retailing Survey that polled convenience retailers on their expected reactions to the April 1, 61-cent FET increase to $1.01 a pack.

When adding in the mean average state excise tax of $1.20 per pack, cigarette consumers pay $1.44 more per pack in taxes compared to what they paid as of Jan. 1, 2001.

Near term (within the current calendar year) implications cited by Bishop included:
-- Retailers, especially smaller ones, will reduce tobacco inventory and focus on core brands;
-- There will be greater attention paid to value brands; and,
-- Shelf space will be reallocated.

For the longer term, Bishop said told retailers at the roundtable to expect shifts in market share as nontraditional tobacco retailers exit the category at an accelerated pace. There also will be further supply side consolidation, he predicted.

The other tobacco products segment (OTP) will continue to be the bright spot in the tobacco category despite increased government efforts to regulate and tax small cigars, loose tobacco and moist smokeless products, said CSNews Editor-in-Chief Don Longo, who presented topline data from CSNews’ annual Industry Report.

Retailers discussed best practices in merchandising, promoting and staying in stock. Retailer guests included representatives from BPampm, Certified Oil, Mac’s Convenience Stores, Mother Hubbard’s Cupboard, Plaid Pantries, Royal Buying Group, Smoker Friendly and Worsley / Scotchman Stores.

The 2009 Tobacco Best Practices Roundtable was sponsored by McLane Co.

Look for a full report of the major issues discussed at the roundtable to be published in an upcoming issue of Convenience Store News .

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