1. espite being one of the biggest
revenue-generating categories
for stores, the combined share
of market of total cigarettes, RYO and
pipe tobacco has continued to decline
in volume in both the grocery organised
channel and independent channel whereas
the tobacconist channel is continuing to
grow year on year and now contributes
31.4 per cent to the share of market of
total cigarettes/RYO and pipe tobacco*.
“Tobacconists continue to be price
competitive versus grocers, and their
customer service levels with regards to
product quality knowledge and speed to
serve, plus the convenience factor, drive
consumers into those stores,” British
American Tobacco Australia (BATA) Trade
Engagement Manager Ralf Bzdega told
Convenience World.
Mr Bzdega said the increased cost
to stock tobacco combined with the
additional cost burdens of additional
staff training and increased inventory
management procedures, which will lead
inevitably to SKU rationalisation, is one
‘watch out’ for the category.
“BATA as the category leader continues to
work with our retail partners to find the right
mix of SKUs that cater to the smart shopper
and the value-seeking shopper, as well as
meeting joint KPIs such as value share,
volume and margin objectives,” he said. “We
are lucky to have most of the large tobacco
brands in our portfolio, with favourites
such as Winfield, B&H, Rothmans and many
more.”
Last year, BATA invested significantly in
many of its brands to add value back to its
customers and consumers. In the quarter
to December 2014, BATA new product
introductions contributed to 90 per cent
of the new product introduction volume
(Aztec total defined market, December
2014, supplied by BATA). This included the
relaunch of Rothmans, which achieved a
volume share of 8.2 per cent of market in
the last quarter for 2014 – overtaking brands
such as Horizon, Choice and Bond Street.
To maximise sales of the tobacco
category in-store, Mr Bzdega suggests that
retailers adhere to simple rules:
• Let customers know that you sell
tobacco, where legislation permits.
• Keep the cigarette cabinet and storage
area fully stocked, following the first in,
first out principle.
• Stock the best sellers and new product
introductions with big potential, and
make them easy for staff to find.
• Inform and educate staff about what
is on and off promotion, in addition to
product benefits.
“Work with your trusted category experts
at BATA to equip adult tobacco staff with
the knowledge and confidence to respond
to consumer questions such as ‘What is the
cheapest?’” Mr Bzdega said.
Regrettably, the illicit tobacco trade in
Australia has escalated to unprecedented
levels since the introduction of plain
packaging on December 1, 2012.
It is estimated that illicit tobacco costs
federal government $1.2 billion in lost
revenue per year (2014 KPMG report).
Manufactured cigarettes not legally
available in Australia, known as illicit
whites, have emerged as a major form of
contraband. BATA is continuing to work
closely with law enforcement agencies to
combat the trend towards illicit tobacco.
“BATA may reward retailers for any
information leading to a successful
prosecution of illegal tobacco traders,” Mr
Bzdega said.
BATA encourages retailers to call the
BATA hotline on 1800 643 562 for more
information.
Continued excise increases are expected
to flame the illicit trade as the market is
faced with heightened regulations and the
introduction of two more excise increases
of 12.5 per cent each in the next two years,
which leads to price increases of legal
tobacco products, ultimately making the
habit unaffordable for some adult smokers.
“As the price of tobacco continues to
increase, retailers need to realise there are
smarter ways to maximise the opportunity,”
Mr Bzdega said.
*Aztec Volume share of AU Total Define Market, Dec 2014,
supplied by BATA.
Better value tobacco
in high demand
Faced with ongoing challenges, the tobacco category continues to decline in volume.
As the price of cigarettes continues to rise, adult smokers are increasingly seeking
better-value propositions, which is seeing a rise in sales of illicit tobacco.
D
Counterfeit plain packs hit the streets
n February, BATA revealed that one of
its well-known brands has been illegally
counterfeited in the olive green plain
packaging format and sold in Australia for
the first time.
The packs were purchased by covert
operatives in Sydney and Wollongong
working for BATA, following a tip-off from
a retailer. The company undertakes more
than 3,000 of these operations a year
across the country.
It is believed that the counterfeit packs
were manufactured in China and smuggled
into Australia by criminals as a test run
to gauge interest in the product from the
market.
The counterfeit packs were sold for $10
to $12, with some hidden among legal
brands in an effort to conceal them. In
comparison, the actual brand that has
been copied is legally sold for $25 to $30.
BATA spokesman Scott McIntyre said the
first illegal olive green packs bought had
been sent to British American Tobacco’s
testing laboratory in Southampton, England,
with forensic analysis showing that the
counterfeits were made by hand, not a
cigarette-packing machine.
“Counterfeit packs in Asia are often
made by hand in small underground
manufacturing bunkers, which can produce
huge amounts of custom illegal cigarette
packs,” he said.
“Apart from being smuggled into the
country by an organised crime group
to avoid paying tax to the Australian
government, there are many issues with the
counterfeit packs which don’t make them
compliant with plain packaging laws.
“The olive green pack colour is a much
darker shade than allowable, the font
I
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