Scottish Government plans to implement plain packaging for tobacco could boost the black market and hit legitimate shops, according to a new warning from retailers in Australia.
The introduction of plain packaging in Australia has been accompanied by a record rise in sales of illicit tobacco and loss of business for retailers, as well as no overall change in smoking rates. According to the Australasian Association of Convenience Stores (AACS), 70% of retailers have been negatively affected by plain packaging, with 67% saying that the growth of the black market has had an impact on their business since plain packaging was introduced. During the same period, the sale of illegal branded cigarettes has increased by 154%, according to KPMG.
These findings, shared with the Scottish Grocers’ Federation, were part of a report entitled The Impact of Plain Packaging on Australian Small Retailers, which was conducted by leading international research company Roy Morgan. AACS CEO Jeff Rogut said: “We would urge Scotland not to make the same mistake as Australia by adopting plain packaging. The spike in costs to retailers from plain packaging, combined with a booming illegal trade is having a dramatic effect, with retailers being forced to absorb additional costs at the same time as losing customers to the black market.”
These findings come at a time when:
- Legitimate retailers are losing business to illegal ‘pop-up’ shops selling branded illicit packs at a fraction of the cost of legal plain packs;
- The surge in illicit trade has been so big that illegal brand 'Manchester' is now outselling legal brands such as Camel;
$1· The Australian Treasury lost AUS$1.1billion to the illicit trade in cigarettes last year.
Rogut continued: “Australians are still smoking as much as before the introduction of plain packaging, but more of them are turning to the black market where they can find illicit branded packs at a fraction of the cost.”
In light of Roy Morgan Research’s findings, Scottish Grocers’ Federation (SGF) Chief Executive John Drummond said: “Scottish retailers are already disproportionately affected by over-regulation and the last thing they need is to have the Australian experience of plain packaging replicated in Scotland, where the black market in cigarettes is already a huge problem.”
Official statistics from HMRC indicating that some £2.9 billion in duty is already being lost to illicit trade, a situation that would only be exacerbated by plain packaging.
Mr Drummond continued: “Evidence from Australia’s experiment with plain packaging shows that it has not reduced smoking rates and has instead led to an increase in crime, at the expense of law-abiding businesses. There are other proven means at the disposal of the Scottish Government that could help achieve their laudable aim of reducing youth smoking levels, which does not require encumbering retailers with yet more regulation. Policy alternatives would include enforcing the laws on proxy purchase and replicating the successful educational initiatives seen in Germany and the United States that address the issue of peer pressure.”
Key findings of the Roy Morgan Research include:
Standardised packaging is a waste of time and money
• 63% of retailers say the changeover to plain packaging has made the workload heavier for their staff
• 44% of retailers report incurring additional cost from training staff as a result of plain packaging changes
• Retailers overwhelmingly report it now takes longer to order, receive and process stock – and the order is frequently incorrect
Plain packaging continues to cause significant frustration at the Point of Sale
• Plain packaging has resulted in slower service. 78% of retailers report it is taking more time to serve customers purchasing cigarettes in their shop
• 69% say plain packaging has had a negative impact on their business in general
• Nearly half of retailers (44%) report a negative impact on their level of service to non-smoking customers
Plain packaging is fuelling the illicit tobacco trade in Australia and having a significantly negative effect on retail business
• Overall, a third of retailers surveyed reported customers had enquired about purchasing illicit tobacco (contraband, counterfeit, or ‘chop chop’) since the introduction of plain packaging (33%)
• 67% of retailers said they believe illicit trade has had an impact on their business after the implementation of plain packaging