Tobacco companies are undermining "the viability of independent retailers" by steadily chipping away at their margins, a leading wholesaler has warned.
Figures seen by The Grocer show the trade margin shared between the wholesaler and retailer for the UK's best selling cigarette brand Imperial Tobacco's Lambert & Butler King Size has almost halved in the past 21 years from 11.02% in 1990 to 6.26% this March. That means retailers and wholesalers now share just 40p per pack instead of the 71p they would have had if margins were still at 1990 levels.
It is a similar story with Embassy No 1 king size, which has seen its margin fall from 12.2% to 7.7% over the same period, and Richmond KS, which now offers a margin of 5.8%, down from 6.5% in 2006.
"With the ever-increasing minimum wage and huge above-inflation rises in fuel costs, independent retailers are under so much pressure they need that help to survive," the wholesaler said. "Cigarettes are already distorting overall margin downward. A modicum of help to edge back to 7.5% would be valuable."
Imperial Tobacco's communications manager Iain Watkins said trade margins were competitive when considering that between 75% and 90% of the rsp of tobacco products goes to the government. "Continual, above-inflation tax increases have led to the UK having one of the highest tobacco excise rates in the world," he said. He added that the overall profit per pack had steadily increased since 1989.
But the wholesaler said it was margins that mattered. "That's the measure used by the industry in every category. Cigarette manufacturers talk about cash because it suits their case given the price of cigarettes has risen so much," he said.
Londis retailer Arjun Mehr said tobacco companies had dropped margins to keep prices competitive for smokers. "They should have maintained the margin we had before. Tobacco companies have got to be very careful they're not giving customers a better price point at our expense."
Figures seen by The Grocer show the trade margin shared between the wholesaler and retailer for the UK's best selling cigarette brand Imperial Tobacco's Lambert & Butler King Size has almost halved in the past 21 years from 11.02% in 1990 to 6.26% this March. That means retailers and wholesalers now share just 40p per pack instead of the 71p they would have had if margins were still at 1990 levels.
It is a similar story with Embassy No 1 king size, which has seen its margin fall from 12.2% to 7.7% over the same period, and Richmond KS, which now offers a margin of 5.8%, down from 6.5% in 2006.
"With the ever-increasing minimum wage and huge above-inflation rises in fuel costs, independent retailers are under so much pressure they need that help to survive," the wholesaler said. "Cigarettes are already distorting overall margin downward. A modicum of help to edge back to 7.5% would be valuable."
Imperial Tobacco's communications manager Iain Watkins said trade margins were competitive when considering that between 75% and 90% of the rsp of tobacco products goes to the government. "Continual, above-inflation tax increases have led to the UK having one of the highest tobacco excise rates in the world," he said. He added that the overall profit per pack had steadily increased since 1989.
But the wholesaler said it was margins that mattered. "That's the measure used by the industry in every category. Cigarette manufacturers talk about cash because it suits their case given the price of cigarettes has risen so much," he said.
Londis retailer Arjun Mehr said tobacco companies had dropped margins to keep prices competitive for smokers. "They should have maintained the margin we had before. Tobacco companies have got to be very careful they're not giving customers a better price point at our expense."
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