Tobacco Cos. Win Inches with Dollars

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Tobacco Cos. Win Inches with Dollars

RICHMOND, Va. -- A battle for space is being waged at the back bars of convenience stores by tobacco companies' field sale force representatives, who are vying for every square inch of shelf space with promotional dollars, the Richmond Times Dispatch reported.

The Federal Trade Commission's latest report on cigarette sales, advertising and promotions, released last week, found major tobacco companies spent $9.2 billion on discounts to retailers and wholesalers in 2006, largely in return for shelf space, the report stated.

"It is amazing," Cigarettes Unlimited smoke shop owner Harold Price told the Dispatch on salespeople for tobacco companies. "They will argue over one pack on that rack: 'He's got one more pack than I do.'"

In an attempt to gain market share, the large tobacco companies are trying to introduce the same types of financial incentives on cigarettes as they do the smokeless tobacco and cigar brands that have been added to their product lines, Gary Poehlmann, vice president for sales at Chesterfield County-based Swedish Match North America, a producer of snuff, chewing tobacco and cigars, said in the report.

Altria Group, parent company to Philip Morris USA, John Middleton and UST, offers retailers a range of financial incentives to gain a variety of marketing advantages, spokesman Bill Phelps said in the report. Other big tobacco companies do as well, the report noted.

"We have to work where we are allowed as hard as possible," added Reynolds American spokeswoman Maura Payne.

"The major tobacco companies have really stepped up over the last 15 years or so and have become much more engaged in helping retailers grow their sales and profits in this category," Terry Kailey, 7-Eleven's category manager for tobacco products, told the Dispatch. "Topics of frequent discussions include promotional activities, new brand introductions, best-in-class merchandising techniques and important attributes of the products, such as freshness."

And Altria offers an online data system resource to retailers that tracks profits from the various products on their tobacco shelves, along with inventory management tools, the newspaper reported.

Swedish Match has a similar service, though its salespeople bring printed reports to the stores, rather than linking online, Poehlmann said, adding "It helps build a relationship."

The tobacco companies' incentives and resources help build bonds with both consumers and retailers, according to Dr. Alan Blum, director of the University of Alabama's Center for the Study of Tobacco and Society.

"They're building one-to-one relationships with customers and a much tighter one-to-one relationship with retailers," he told the newspaper.

The goal of these measures centers on customer service, retailers told the newspaper.

"They want people walking into your store to know the product they want is in stock, that it's fresh," Lou Sheetz, executive vice president of Sheetz Inc., said in the report. "If you adhere to their terms, about carding people, about the displays, then you get a discount on the wholesale price, which allows you to sell to customers for less."