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June,
2006

The State of Retailing:
Surviving in Hostile Territory

Can anyone but wonder what specialty tobacco retailing - and all tobacco sales in general - will be like five or ten years down the road? One only needs to look back an equal amount of time to see how the influences affecting our industry are a combination of known challenges - such as excise tax increases and smoking bans, albeit to unknown degrees - and curve balls that few expected or fully understood, such as the wildly complicated Master Settlement Agreement and its trickle-down effects on pricing, compliance, and brand stability, or Low Ignition Propensity (LIP) cigarettes, and their resulting effects on brand availability.

One trend is certain: tobacco is a hunted animal, attacked by a variety of special interests, all challenging its right to exist as a legal product and constricting the industryís ability to effectively sell and market it.

Evolution and adaptation is a key to survival in any hostile environment; in tobacco retailing, they could be considered essential. But so is a good dose of acceptance. For starters, tobacco is in fact not a legal product under an ever-growing set of circumstances. Of course, age-based sales restrictions are - and should be - a zero tolerance reality, just as they are for any other adult-oriented pursuit .

Age-sensitive marketing restrictions are much trickier; attempting to keep tobacco products out of the hands of minors is one thing, but sheltering them from all visual exposure to tobacco in a media-saturated world is another. But thatís not going to stop the anti-tobacco movement from trying. The industry has voluntarily accepted some of these restrictions, but not unanimously. Manufacturers of established major brands not only have less to lose by raising the barrier of entry for new products, but in fact can benefit.

Keeping adult-oriented messages out of view of minors is increasingly difficult as media technology evolves; in the case of tobacco it even runs counter to the broader social trends of mature, adult-oriented subjects being ever more accessible. Perhaps even more troubling are the difficulties such efforts could create at the retail level: laws requiring that all tobacco merchandise be hidden out of sight within a store have already been legislated in the Canadian provinces of Saskatchewan (2005) and Ontario (2008). Itís only a matter of time before such proposals begin to appear in the States.

Smoking bans continue to reduce the legality of tobacco use even among those of legal age to smoke, and the justification - the effects of second-hand smoke - have become a de-facto standard, despite selective use of statistical evidence. But the fact that some legislatures have refused to allow the use of tobacco even within tobacco shops or in tobacco lounges is evidence that the spirit of ďaccommodationĒ has withered in many quarters.

For tobacco retailers, operating an age-restricted venue where patrons are able to not only purchase tobacco products, but also smoke them, is a fundamental expectation that the industry must throw its weight behind in defending.

In most industries, news of sales increases are welcome. But in tobacco, it practically makes one nervous; itís virtually a red-flag for more legislation, more restrictions. Anti-tobacco forces wonít tolerate news of any growth in sales of any segment of the tobacco industry when the overriding goal is to reduce tobacco use through any means possible. To help shape the state of tobacco retailing in the future, the industry must be proactive today.

E. Edward Hoyt III