Reviewing margins

Cash & carry operator ?

After the ban came in, the initial falls were as predicted. However, suppliers had also predicted a relatively quick recovery, which has not yet materialised. As such, we have asked suppliers to review the shared margin for wholesalers and independent retailers. There is also a discussion to be had concerning price-marked packs. While we are generally in favour of price-marking, we don't feel there is sufficient shared margin in the tobacco market. Many retailers are premium-pricing tobacco by at least 4% above the rsp. This makes the imposition of the straitjacket of price-marking on the independent sector ever more unacceptable. There was some recognition in the latest manufacturer price increases that this needs to be addressed. We must continue to encourage progress.

Focus is driving profit

Delivered wholesaler ?

We are constantly asking suppliers for greater margin, but we haven't had any luck so far. They can't advertise or do anything with their brands, so it is hard for them to do anything that will give wholesalers or retailers a better margin. Some independents and wholesalers use the category as a loss leader, but fortunately we are still able to get some margin out of the sector. While we can't expect any great help from the suppliers, we encourage our retail customers to premium-price the category. They won't be able to compete with the multiples on price, so they should try to drive as much profit as possible. Because we can still get a margin out, we have not shifted our focus away from tobacco just yet. Indeed, we are actually selling more than before the ban came in. However, it is something we are monitoring closely.

Still creating footfall

Cash & carry operator ?Y

ear-on-year volume sales are down, value is almost the same, but we are not experiencing the kind of growth we were before June last year. We have been trying to get better margins and having the same debate with suppliers for years. The problem, however, is that suppliers are more concerned about losing their share of the category than our profit. Even if at times suppliers do something to help, its effect is diminished due to the size of margin being offered and a lack of consistency across various wholesalers. We have not tried to become less reliant on tobacco yet, because this category still creates a greater amount of footfall than any other. Our business is more dependent on customers who make several visits a week, rather than those who just come occasionally. As such, we have no plans to switch our focus from tobacco, as at this stage it remains a crucial part of our offer, even if it is not a profitable part.