NEWARK WEATHER

Bombshell or slow burn | Big story: Tobacco and vape bans


In the words of shadow health minister Wes Streeting, the legislation is set to “consign smoking to the dustbins of history”. This generational ban, as it’s known, will also mark a major change for independent convenience stores, who have long relied on sales of tobacco products as a major source of revenue and footfall.

Significant impact
For these retailers, the decline in smoking levels over recent years has, of course, been cushioned by the rapid growth in vaping, but the new legislation also looks set have a significant impact here.

Disposables, which will be banned under the proposals, make up more than 80% of all vape sales and are especially popular in convenience. Despite the growth of other categories such as food-to-go, tobacco and vapes still account for 22% of sales in c-stores, according to figures from industry research group IGD. So, the question is, just how much of a blow will this new law be to independent store owners – and ultimately, will they be able to survive?

“Tobacco and vaping are a big part of the independent store sales mix, representing 30% or more in many cases – so it would be natural to assume this new legislation could surely undermine the commercial sustainability of numbers of stores,” says Patrick Mitchell-Fox, insight partner at the IGD. “It will certainly not make running an independent store easier.”

Future business
But assessing the actual damage this bill may wreak on the business model of independent retailing is far from easy. In fact, in the mid to short term, it may have far less of an impact than independent retailers might think, he says. “We should remember that in neither case does the impending legislation actually suggest the immediate elimination of either the tobacco or vaping categories.”

First, the generational ban on tobacco sales will only start to be implemented from 2027, Mitchell-Fox points out. After that, it will only apply progressively to one additional year-of-birth cohort each year.

“That will, in time, as intended, eliminate all tobacco sales in the UK, but of course the process will be gradual. Taking a 10-year view, a rough calculation suggests the legislation will reduce the market for tobacco products by some 750,000 people, meaning that come 2034 the UK could still have a smoking population of more than 5.5 million.

“That is a notably reduced number of smokers, and probably represents a rate of decline ahead of the current existing rate of decline. However, 5.5 million is still significant.

“Therefore, it seems a market for tobacco will survive at least into the late 2030s and in the meantime retailers will have plenty of opportunities to develop sales in other product areas to sustain future business, with a lesser dependence on tobacco.”

That view is shared by consultant John Heagney, a former head of the Nisa symbol group and now a partner at The C-Store Collective. He thinks the tobacco legislation will be a “slow burn” when it comes to its impact on the sales and profitability of retailers.

Finite impact
“In reality, with the fall in adult smokers, the finite impact will be relatively small on retail sales in overall terms, especially as the smoke-free generation policy will only come into force in 2027, when current 15-year-olds turn 18,” he says.

The ban on disposable vapes, however, could prove more of a shock to the system. Says Heagney: “The financial impact on the profitability of convenience retailers will be very substantial, with disposables taking roughly 85% of overall vape sales.

“Convenience retailing gets no easier and vape has been a good and very welcome addition for retailers and has substantially boosted gross profit at a time where many extra cost pressures have impacted on profitability.

“I share the concerns about the impact on convenience retailers, but the one absolute given is that convenience retailers will adapt and work tirelessly to fill the gap in gross profit as the impact is felt by developing other aspects of their overall retail sales.”

Mitchell-Fox believe the vape category itself is well placed to cope with the change. He says: “The ban on disposable vapes is only targeted at single-use vapes and will not affect reuseable product formats in the category. It seems likely that the ban on disposables may disrupt the vape market temporarily, but that vapers will adapt and the market opportunity will remain. As long as retailers can adapt to this new reality, they can continue to serve demand.”

Space allocation
Heagney, however, says independents should act fast. “Close analysis needs to be undertaken on the overall ranging of vape in their stores now, not in nine months’ time.

“The extensive space allocation given, especially to disposables, will substantially shrink. The bright disposable packaging that is especially attractive to young vapers will disappear and when…



Read More: Bombshell or slow burn | Big story: Tobacco and vape bans