Dealing with display bans: solutions and support

December 1, 2009

In the third part of Insight’s focus on the global tobacco category we explore the different solutions adopted by retailers in markets operating under a retail display ban, their impact on business and the industry support. Fiona Briggs reports.

Desperate times call for desperate measures and so it must seem in the tobacco category right now.

Around the world, convenience retailers are having to adapt and comply with new legislation on tobacco products including retail display bans, as governments actively seek to reduce youth smoking.

While several markets - Iceland, Thailand, Canada and Ireland - have already gone ‘dark’, others including Australia and the UK are getting to grips with the implications of display ban legislation, which will become effective in the next couple of years.

Looking at the experiences in different markets is always worthwhile and the tobacco category is no exception. Indeed, the industry has been quick to point to statistics from the early adopters of display bans, which have shown no reductions in youth smoking as a result of display restrictions.

But while comparisons are useful, the nature of the legislation varies considerably between countries and markets and especially in levels of stringency. As a result, each country or region is best advised to focus on finding the best solution to display ban legislation under its own rules and regulations.

Display solutions

Iceland was the first market to implement a display ban in August 2001 and tobacco products are typically kept in drawers or under the counter.

In Canada, where all 10 provinces and three territories have gone dark, the display options are wide-ranging.

In Ontario, for example, the rules require retailers to fit gravity-fed flaps that allow a display area of 1,800sq cm during transactions. A price list or binder can be used for a customer to select a product but the unit can only be opened to get a product once one has been chosen by the customer and only one customer can be served at any one time.

In New Brunswick the permitted display area during transactions is 3,600sq cm and in Nova Scotia display is banned completely, even during transactions.

In Ireland the display ban legislation, introduced on 1 July 2009, requires tobacco to be stored in a closed container but it can be displayed during transactions.

In the UK, the Association of Convenience Stores (ACS) commissioned research to understand the experience of retailers in implementing the display ban in the Republic of Ireland. The survey found 78% of respondents had fitted a solution to their existing gantry. A fifth (22%) had chosen to install a new unit with 16% installing a vending machine as a reaction to the ban.

Applegreen, the leading independent forecourt retailer, has fitted solutions (screens) to its existing gantries and has branded the units with its own label products. It has also included a ‘No ID no sale’ message to remind shoppers the stores still sell tobacco products.

Applegreen in Ireland has branded existing gantries with own label products

Esso has also covered existing gantries and incorporated ‘No ID no sale’ logos. It has also included suggestive signage such as ‘Can’t see what you want?’ and ‘Just ask a member of staff’ to prompt and assist customers.

Esso in Ireland features suggestive signage and prompts on its gantries along with ‘No ID no sale’ messaging

The draft regulations in the UK, which apply to England only, allow for a prescribed area of tobacco products - 1,500sq cm - to be temporarily shown to adult smokers on request. It will not be an offence for other customers to see the tobacco products if they are being shown to an adult smoker. Restocking will be able to take place during business hours as long as the products are not on display any longer than necessary. A tobacco product brand name, pack size and the price can be displayed on the closed unit to help staff identify the products and a price list will be allowed at each till point where tobacco products are sold. A picture price list can also be displayed when requested by an adult smoker (see Department of Health Consultation on Proposed tobacco control regulations for England (under the Health Bill 2009) pdf in reference library).

In Australia, where a display ban including a single point of sale for tobacco products will be introduced in New South Wales (NSW) on 1 January 2010, the Australian Association of Convenience Stores (AACS) is helping retailers take on board new guidance.

In July 2009 the AACS commissioned a report by Deloitte (see Deloitte report pdf in reference library) examining the cost impact of proposed display bans for convenience store operators in New South Wales, Victoria and Western Australia.

On 28 September 2009, New South Wales Health released a ‘Retailer fact sheet’ (see brief on retailers’ fact sheet pdf in reference library) to provide information to New South Wales tobacco retailers about the impending ban on the display of tobacco products, non-tobacco products and smoking accessories.

According to the AACS, the fact sheet outlines a far more prescriptive approach compared to its own original interpretation of the draft regulations and guidelines.

It adopts a stricter definition on ‘incidental exposure’ of tobacco, for example. No doors can be deployed to hide existing displays and inventory must be hidden from public view. The AACS claims this will further increase convenience retailers’ transaction time costs, re-stocking and staff training costs.

Multiplied over the 5,650 convenience stores in New South Wales, the new definition of incidental viewing represents an estimated $122m in operational costs for convenience store operators above business as usual, it says.

The fact sheet also stipulates retailers must explicitly choose between a price board or price ticket mechanic.

According to the AACS, the use of two price instruments was expected to cost $11m less than one price instrument through improved transactional efficiencies.

The fact sheet also explicitly states the option of installing covering public facing storage units with a single opening door/curtain is ‘non-compliant’.

The AACS says the cost of covering an existing display versus relocating the display to a concealed location is “vastly different”.

The Deloitte report estimates a higher level of refit across convenience stores in NSW would be $56m, double that of a lower cost option.

Ease of compliance

While the AACS and tobacco suppliers including British American Tobacco Australia (see keepingitbusinessasusual.com.au/home/ are helping retailers understand the legislative changes, retailers in Ireland claim to have chosen solutions based on cost and ease of fit.

The ACS’s survey of Irish retailers found cost of the solution and the ease and speed with which it could be fitted were the top considerations. However, a significant proportion - 36% - said they chose the solution because it was the only one available.

The ACS also highlights the pre-existing prominence of vending units in the chains and symbol group stores in Ireland. It says 65% of stores in Ireland have an electronic vending unit at the point of sale and the installation of vending units has been been taking place for a number of years, which has reduced the compliance burden.

Elizabeth Reitz at John Player & Sons, an Imperial Tobacco Group company, agrees: “Because of the larger number of electronic machines versus opening shelving units we had in Ireland before the ban, it took 10 minutes or less for the trade to become legally compliant - all they had to go was remove the outer planogram from their unit, and they were compliant.”

A higher prominence of vending machines in Ireland helped retailers become quickly compliant

While it was possible to adapt existing units in Ireland, Imperial Tobacco says retailers still had to find a solution for other tobacco products such as cigars and roll your own tobacco as vending units are only used for cigarette packs.

In UK, meanwhile, penetration of vending solutions is less than 1%.

But it is not just vending which differentiates the UK and Irish markets and their relative ease in complying to display bans.

The UK market is 10 times the size of the Irish market so the logistical and communications challenges are more significant, says the ACS.

Imperial Tobacco agrees: “Another big difference between the UK market and the Irish market is the number of stores that have to be be adapted,” it says. “In Ireland there are 5,500 outlets whereas the UK has approximately 55,000 outlets, which will be affected by the display ban.”

Cost of compliance

Costs of implementation vary widely too. In Ireland, the ACS survey found a wide disparity in costs due to the range of solutions adopted - from very low cost curtains and screens to more expensive vending and storage machines. The average reported was £300, it says.

Applegreen reports branding its new units cost in the region of €360 per site.

In the UK, Imperial Tobacco says there have been mixed views on how much the cost to retailers will be.

“The UK Government has suggested that the cost will be £500, although this figure was supplied by the anti-smoking group ASH who, it has been reported in the press came up with shop conversion cost figures without asking any British company to provide estimates,” it says.

“The Association of Convenience Stores believes it will cost retailers up to £2,500 to adapt their stores.”

Imperial Tobacco adds it is important when compiling estimated costs to not only include the cost of equipment but also the installation and ongoing costs for retailers such as increased transaction time for adult smokers to select a product and for the retailer to find the product within a closed unit.

The Australian Retailers Association, for instance, has estimated it will cost retailers in Victoria $182m in total economic costs in the first year www.retail.org.au/

Funding and support

As to where retailers find funding for new display solutions, it is a mixed bag once again.

Half of the Irish retailers in the ACS survey funded their own solution. However, this was disproportionately weighted to the smaller operations, it says. Three quarters of newsagents - 75% - received no financial assistance as well as more than half the forecourts (64%) and off licences (63%) in the survey.

Convenience stores, especially those in groups, were more likely to get assistance, it says. However, more than 40% of c-stores had to fund the change themselves. Ninety four per cent of those surveyed receive no financial support from tobacco companies on a ongoing basis, adds the report.

Applegreen reports cigarette companies did cover over the units where the cigarettes are stored and one company put on signage on one side of the unit but the retailer funded the branding on the fixture.

A tobacco company provided Applegreen with covers and signage on one side of the unit but the retailer funded the branding

From a supplier perspective, Imperial Tobacco says it looks at each world market and each tobacco outlet in isolation when considering the implications of tobacco legislation and its costs.

“It is dangerous for any government or retailer to assume that the tobacco industry will pay for tobacco retailers to comply with government legislation in any market – especially when there is no benefit to the industry in doing so,” it says.

Ongoing costs and operational issues

Display bans incur ongoing operational costs on top of the initial costs to make units compliant. Again, these will vary depending on the display solution involved.

In Australia, for instance, the AACS says retailers in New South Wales will face significantly increased transaction times as a result of having to store tobacco products in a concealed location rather than behind doors on existing displays.

In addition, staff will be required to have a more extensive knowledge of the stock carried within a store, which will increase training costs, according to the AACS.

Concealing tobacco behind a screen, as in Canada, places an operational burden on retailers too, according to Imperial Tobacco.

In Canada tobacco is concealed behind screens, which increases transaction times

In Canada tobacco is sold frequently sold in small shops and moving screens to access products increases transaction times, it says. The retailer is also unable to monitor the rest of the store when retrieving products.

Retailers in Ireland have found the display ban has slowed service too, according to the ACS’s study.

“You have to keep opening and closing the shutters, it’s just a pointless operation really and a total mess and muddle,” said one forecourt retailer.

Imperial Tobacco believes similar operational issues will occur under the display ban as proposed in the UK. Draft regulations suggest retailers can use small flaps to reveal a certain area of the unit at a time, which will have a greater impact on transaction times as retailers search under numerous flaps - unless they have memorised the entire unit.

Customer frustration is another likely unintended consequence of a display ban, it says.

When products are openly on display, an adult smoker can scan the unit while approaching the till point to check their product is in stock and select an alternative, if necessary.

This will not be able to happen with a display ban. An adult smoker will have to wait until they get to the till to find out their particular brand is out of stock. Time will then be needed to look at the price list and decide on a product. This puts both the retailer and the adult smoker under pressure, says the company.

Iain Watkins, UK public relations manager at Imperial Tobacco says: “Anecdotal evidence from retailers in the Republic of Ireland suggests that, since the display ban was implemented on 1 July 2009, individual sales transaction times have significantly increased and there is considerable confusion amongst customers as to whether stores actually sell tobacco.

“Impatience from non-tobacco customers in queues, due to this increase in transaction times, has also had to be tolerated whilst many tourists and non-regular customers have been confused as to whether stores sell tobacco or not – many simply assume not and walk out.”

With tobacco products having to be kept in a closed container, the products are not on show and a retailer will not be able to monitor any out of stock situations, it adds.

Applegreen says it has not yet been affected by the ban. Customers know it still sells cigarettes, it says. However, ensuring availability and keeping a full range on offer is key so that consumers can be confident their brand is on sale, it adds.

On the downside, the company reports restocking has to take place when the sites are closed so that customers cannot see the products.

Aesthetics and best practice

In Ireland the ACS study found the display ban has had no impact on sales for 80% of retailers and 65% of customers have not noticed a difference.

Retailers are concerned about the aesthetics of the display solutions, however.

“It doesn’t look very appealing, it just looks like a big blank wall. It does need to be dress up a little with maybe different advertising on it for maybe drinks or something,” said one symbol group retailer.

Applegreen, which is featuring its own brand products on the gantry doors and top section of the units, says regular changeover of graphics on the door panels is essential to improving the in-store appeal.

Spar has chosen a similar approach, featuring its own brand food-to-go lines on the units.

Spar in Ireland is promoting its own label food-to-go range on the display units

Whatever the solution, it is clear from all markets that retailers need information in order to comply with display bans.

Experience in Ireland shows retailers remain confused about aspects of the display ban.

“There are still some things I am not sure about like whether the ban refers to lighters, matches and pipes,” said one CTN operator. “I think there would have been no harm in having someone come around and explain everything.”

In markets gearing up to go dark, trade associations and suppliers including BAT and Imperial Tobacco, are doing their part to help retailers understand and comply with the new rules.

In Australia, for example, BAT’s ‘Keeping it business as usual’ portal aims to answer retailers’ questions about the new tobacco laws in NSW.

In the UK, Imperial Tobacco says it will continue to work closely with convenience stores to help them ensure their businesses remain compliant with all legislation all the time.

“It is our top priority to help our retail customer base operate within the law and we are committed to providing levels of assistance commensurate with our market position,” it says.

Nothing desperate here but a calm and hopeful response to the latest tobacco measures.

Reference library: Pdfs

Department of Health Consultation on Proposed tobacco control regulations for England (under the Health Bill 2009) [pdf document]

Deloitte report for the Australian Association of Convenience Stores: Indicative regulatory cost analysis of proposed tobacco retail display ban for convenience store operators in New South Wales, Victoria and Western Australia [pdf document]

Deloitte/AACS: Brief on retailers’ fact sheet about the retail display ban [pdf document]