Complying with Cigarette Sales Restrictions

cigarettes

As the noose tightens on menthol products, convenience store retailers are learning to accept the latest limitations placed on tobacco products.

By: John Lofstock, Editor.

Cigarettes will soon carry new warning labels as the question for retailers becomes how to market a product whose package basically urges consumers not to buy it.

Federal legislation handed the Food and Drug Administration (FDA) the authority to regulate the warnings on cigarette cartons and advertisements beginning in June. Labels that show corpses, a mother blowing smoke into her child’s face and an empty crib—which will cover half a pack and 20% of an advertisement—are designed to make people quit cigarettes, not buy them. Phrases like “lights” and “ultra lights” have already been outlawed, along with flavored cigarettes.

At presstime, the FDA’s Tobacco Products Scientific Advisory Committee (TPSAC) recommended the “removal of menthol cigarettes from the marketplace.”

However, Dr. Lawrence Deyton, director of the FDA’s Center for Tobacco Products (CTP), has been adamant that the recommendation “is simply that—a committee recommendation based on its review of current, prevailing science on the topic of menthol as an ingredient in cigarettes.”

In an exclusive meeting with Convenience Store Decisions at CTP headquarters in Rockville, Md., Deyton stressed that no decision has been made on menthol cigarettes. He said the FDA wants “open and transparent communications with convenience store retailers to ensure they are selling tobacco responsibly to adult consumers. It is a legal product.”

Retail Challenges
The FDA has already conducted hundreds of compliance checks, with only a handful of retailers receiving warnings for their product location and assortment. When pressed on whether or not compliance checks would be conducted at Native American smoke shops, which have long benefited from selling tax-free tobacco products, Deyton said the issue “is still being studied.”
Robert Perkins, vice president of marketing for Rutter’s Farm Stores in York, Pa., said that with all regulations and litigation surrounding the category right now it’s hard to know for sure which way to go. He conceded, however, that FDA oversight will likely pose a “very difficult” challenge to retailers without transparency of the regulations.

That said, Perkins was quick to add that the c-store channel is capturing more and more of the market share of combustible tobacco, even as tobacco as a whole continues to decline. “That means we’re really looking at the ‘other tobacco’ categories, which continue to grow and, in fact, have some very good growth right now,” he said. “That’s where we’re putting a lot of our efforts.”

When it comes to formulating a strategy involving product displays, Perkins cited what happened in Canada more than a decade ago when stores were prohibited from displaying tobacco products altogether. “That was even that much more of a challenge,” he said. “The consumer knew you had it, but that was the extent of it.”

Retailers should continue engaging consumers about cigarettes. “Right now we still have exterior signs, we have the window signs, and point-of-purchase signs right there at the transaction counter, and that is a benefit for us,” Perkins said. “Other retail channels are eliminating that billboard effect. That’s where, quite honestly, most of our share continues to grow from. But I think you’re going to have to come up with some innovative ways to display products.”

Same Struggles
Other chains are far more optimistic. “I do not see an impact due to these changes,” said Amer Hawatmeh, president and CEO of St. George Oil, which operates Coast to Coast convenience stores in Tampa, Fla. “Price is the biggest challenge, and waiting on buy downs that are getting better due to time and direct deposit.”

Hawatmeh firmly believes that the restrictions will actually help ameliorate the effects among consumers. “These are things that are going to happen across the entire industry. We have absolutely no control over it. Ultimately, the consumer is going to have to get used to it. A smoker is a smoker, and they know where to get their products,” Hawatmeh said. “So the packaging looks different. What are you going to do? As long as the packaging in every store looks different the consumer is just going to have to adapt. I think it’s going to be a short learning period, but once they’re there, they’re OK.”

Waiting to see what course of action the cigarette makers themselves take is not a strategy retailers prefer, but that is a reality they have to accept. “At this point, I don’t know that there is a good option to pursue. We are in a wait-and-see holding pattern,” Perkins said. “I think we’re all going to have to be reactive as opposed to being proactive. It’s not ideal, but at least we’re all in the same boat.”

Hawatmeh said his colleagues throughout the c-store industry should change nothing about the way they merchandise cigarettes, at least for the time being. “As it is now, the word ‘light’ is gone. It’s been changed to ‘gold.’ Yet, customers still come in and say, ‘Give me a pack of Marlboro Lights.’ So again, I think it’s just the nature of the beast—the evolution of the game.”

At some point in the future—Hawatmeh suggested two years as a workable time frame—cigarette smokers will begin to say, “Give me a Gold.” “Until then, the disruption to the business should be minimal,” he said.  “I just don’t think it’s going to affect us on the level that everybody wants to fear. When you’re looking at an industry change, you can always blame it on the government. Everything else is their fault. But I think the smart move for c-stores is to let the category change and focus more on doing things that are outside the box, like testing new foodservice programs that really have a strong upside.”

FDA Compliance: What You Need to Know

On June 22, 2010, federal regulations went into effect restricting the sale, distribution and marketing of cigarettes and smokeless tobacco, including youth tobacco access and advertising. Enforcement of these regulations is being carried out by the FDA, primarily through state enforcement contracts. Retailers are prohibited from:
• Selling cigarettes or smokeless tobacco to people younger than 18.
• Failing to request and verify proper identification from individuals up to the age of 27.
• Selling prohibited flavored cigarettes or individual cigarettes.
• Distributing free samples of cigarettes or smokeless tobacco.
• Featuring self-service displays, including vending machines that can be accessed by minors.
• Providing non-tobacco gifts with tobacco product purchases.
• Advertising tobacco products without required warning statements.
The FDA’s Center for Tobacco Products (CTP) is hosting a series of one-hour Webinars on federal tobacco regulations. An interactive Q&A session during each Webinar gives participants the chance to get answers to individual questions. Dates for the 2011 Webinars are April 26, May 18, June 28, July 26 and Sept. 20. Retailers can register for email updates on new topics added and get reminders about upcoming and archived Webinars at www.fda.gov/tobaccoproducts.

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