After 43 years in the trade, the outgoing UK sales director of Imperial Tobacco is in reflective mood. Despite a high-profile career at the country’s biggest tobacco company, Geoff Couchman seems more keen to recall the early days when he would pound the streets of Soho trying to drum up business. Attracted by the glamour and kudos of the industry in the 1960s, Couchman joined Imperial as a sales rep at the age of 17.
“I used to drive a Bedford van with a big cigarette wobbling around on top,” he reminisces, leaning back in his chair at Imperial’s Bristol HQ. “The account I remember best was a coffee bar above a brothel in Soho. I used to go along early in the morning but there was never anyone to talk to apart from the cleaners. I would get some very peculiar looks when I emerged on to the street at 9am wearing my bowler hat.”
Couchman, now 60, climbed his way up the corporate ladder to become UK sales director of the company, which has a £5.4bn turnover (six months ending 31 March 2004) and owns the bestselling UK cigarette brand (Lambert & Butler). He was due to retire this month, but has been persuaded to stay on the payroll in a consulting role to the new West and Davidoff factory in Turkey, as well as reviewing operations in Germany.
He is modest about his image as one of the slickest operators in the trade. “After 43 years I think it’s time to move on, but I was not quite ready to retire and start playing golf,” he says.
Couchman has an insider view of the seismic changes which have rocked the trade over the past five decades, turning it into one of the most publicly reviled yet profitable industries. Grappling with an advertising ban and the looming threat of a ban on smoking in public places, it is an uncomfortable time for the trade. Particularly so for Imperial Tobacco, which this summer became the first company to be cautioned for breaking new legislation banning advertising for its Superkings cigarette cards promotion. Along with other tobacco companies, it is also the subject of an on-going OFT probe into price-fixing.
The health debate, advertising restrictions, a rise in smuggling and changes in the cigarette taxation system are highlighted by Couchman as major landmarks in the history of the trade. Despite this, he remains quietly optimistic, particularly in the industry’s ability to generate revenue for retailers. “When the health debate started, people said tobacco would disappear, but here we are 40 years later. Our job is to meet the demand as long as it’s there and tobacco remains a legitimate product. For the retail trade, tobacco is still very important and neglected at a high cost. It’s a footfall driver and helps build an overall business. I know there are pricing difficulties but apart from perhaps sandwiches there is not a product that will deliver the same kind of returns.”
The other issue he has the most vociferous views on is smuggling. He points to the fact 31% of the adult population smoke, a figure which has remained static in the past five years despite legitimate sales falling, to demonstrate a switch to smuggled and counterfeit products. “There’s a huge shortfall in the figures, which points to a big increase in smuggling,” says Couchman. “There’s no doubt that taxation causes massive demand for products from other countries. It’s a lucrative crime and the penalties are not that harsh.”
Despite accusations from MPs of collusion in smuggling by producers, Couchman insists Imperial wants an end to the illicit multi-million pound trade. “It has a real effect on the profits of the legitimate retail trade, and it means tobacco products can get into the hands of underage children.”
New legislation banning the promotion of tobacco and rising tax rates means a more static market dominated by key players such as Imperial, Gallaher, Philip Morris and Rothmans, Couchman predicts. New companies and brands will find it harder to enter the market and manufacturers will focus their efforts on stealing share from each other in established markets such as the UK and moving into new areas like Africa, South America and Australasia. Imperial has moved into Turkey, is eyeing Brazil and will hear by the end of the year if its bid for the Bulgar Tabac company in Eastern Europe has been successful.
“In the UK we are unlikely to see any substantial growth, but we hope to grow our share,” says Couchman, who gave up smoking during a bout of flu at Christmas. “Unless there are tax freezes, what we are looking at is a slow but sure reduction in the UK market.”
Manufacturers are finding their new product development being squeezed by the Tobacco Advertising and Promotions Act 2002, which restricts most advertising. It is becoming more difficult to launch premium products as consumers turn to economy lines. Nearly 60% of the market is now low to ultra low brands, while premiums have remained mainly static or declined.
Later this month, Imperial will join five other tobacco companies in challenging plans to limit PoS material in a High Court judicial review. The challenge is being mounted on the grounds the regulations prevent smokers receiving any information about products before buying. “It makes it more difficult for manufacturers to communicate with consumers. Tobacco is a legitimate product yet it’s not easy to get any sort of message across”, says Couchman.
After nearly half a century in the trade, Couchman has mixed feelings about moving on. He will not be replaced - perhaps testament to the general feeling he is a one-off in the industry - and instead his role will be split between two new positions. In typical understated manner, Couchman has banned his staff from throwing a farewell party but whether they will comply remains to be seen.