Two thirds of the wholesalers who responded to our poll said sales had fallen by more than suppliers had forecast. Based on evidence from the Republic of Ireland and Scotland, where the bans came into force earlier than in England, Wales and Northern Ireland, suppliers predicted that an initial drop in sales of 10% would be followed by a recovery, with sales settling down at about 4% below pre-ban levels.
But wholesalers say the recovery has not been so successful. “The initial drop in sales was much greater and the trend is now steady at a lower level than we were told to expect,” said a senior executive at one of the country's biggest wholesalers. “We are only asking for a very small improvement in the margin, but so far suppliers are not offering any help. It is incredibly frustrating for smaller retailers in particular, as tobacco sales can represent up to 25% of their business.”
All the wholesalers we spoke to said they had asked the big suppliers for improved margin to cope with the slump in sales with little evidence of success. “Unfortunately, suppliers have not been helpful to date as they, too, are having to deal with their own cost increases,” said another wholesaler.
However, the MD of a leading buying group said he had asked for a better margin and was hopeful of a positive outcome. “Wait and see,” he said.
The response of suppliers towards their independent customers has divided opinion among wholesalers. Half said suppliers were doing enough to support the trade. “Both the big two (Imperial Tobacco and Gallaher) are being more proactive than ever to help wholesalers,” said one wholesaler. Another also singled out Gallaher for praise when it came to discussing problems facing wholesalers and independent retailers.
The difficulty for wholesalers facing diminishing returns from tobacco is that it is still a key footfall driver in cash & carries, in particular. Booker has made great strides in reducing its dependency on the category in the past three years. Some 80% of the wholesalers in the poll said they were not planning to change their stance on tobacco, because more than any other category it got retailers through the door.
“Rather, we need to work together with suppliers to address the issues,” one cash & carry operator said.
The questions we asked:
1) Have tobacco sales fallen by more than predicted?
Yes - 67%
No - 33%
2) Have you asked suppliers for better margins to offset the impact?
Yes - 100%
No - 0%
3) Are suppliers doing enough to support the trade on this issue?
Yes - 50%
No - 50%
4) Have you been able to become less reliant on the tobacco category?
Yes - 20%
No - 80%