Research Finds Australia's Plain Packaging Law Spurs Growth in Illicit Trade

SYDNEY -- It's been nine months since new regulations requiring plain packaging for tobacco products went into effect in Australia and a new report indicates convenience stores could be suffering from an increased illicit trade, increased labor and inventory management costs, as well as product handling errors.

The findings are included in The Impact of Plain Packaging on Australia Small Retailers study by international research company Roy Morgan, commissioned by Philip Morris. Australasian Association of Convenience Stores (AACS) CEO Jeff Rogut said the research confirmed what was always obvious to these small businesses.

"The research shows that Australian small retailers' awareness of illicit tobacco is high and has increased since the introduction of plain packaging. More than four in 10 retailers perceive illicit trade as having a negative impact on their business, and a third report having had customers enquire about purchasing illicit tobacco," Rogut said.

In addition, nearly nine in 10 small retailers expect that the upcoming 12.5-percent excise increase over each of the next four years will contribute to a negative impact of illicit trade on their business, he added.

The research, commissioned by Philip Morris and with AACS support, also reaffirmed that tobacco is still a vital -- and legal -- product category for convenience stores, with 95 percent of stores rating tobacco as important to their bottom line.

"Costs associated with increased transaction times, customer frustration, inventory management delays, as well as heavier staff workloads and training requirements have all been necessarily absorbed by convenience stores at their own expense, placing undue pressure on their bottom line," Rogut said. "However, aside from the absolute lack of consultation with retailers leading up to the introduction of plain packaging, perhaps the most frustrating aspect of this whole process is that, with all the pain retailers have gone through, tobacco sales in convenience stores remain largely unaffected, with some stores recording an increase in tobacco sales.

"Despite the triumphant exclamations form various health lobbyists, the fact remains that tobacco plain packaging has had a negative impact on small retailers for no improvement in reducing the incidence of smoking," he added.

Other key findings of the latest Roy Morgan research include:

• Two-thirds of small retailers claim plain packaging has negatively impacted their business.
   
• Seventy-eight percent experienced an increase in the time taken to serve adult smoker customers and 62 percent report additional time is spent communicating with these customers about tobacco products.
   
• Sixty-two percent of small retailers have faced increased frustration from adult smoker customers and 65 percent have seen an increase in the frequency of staff giving the wrong products to customers (primarily due to difficulty in recognizing/distinguishing between brands).
   
• Thirty-four percent of retailers have experienced increased frequency of attempted product returns predominantly due to customers being given a product they did not ask for.
   
• Forty-four percent of small retailers indicate that plain packaging has negatively affected the level of service they are able to provide to their non-tobacco customers.

"The only reasonable conclusions to be drawn from this latest independent research is that firstly, while plain packaging has clearly had a negative impact on margins for small retailers, tobacco remains an important product for convenience stores, and secondly, that despite all the fanfare and political pats on the back, tobacco sales remain largely unaffected and smokers continue to consume this legal product," Rogut said.

The full report can be found at www.aacs.org.au.