March 8, 2009
NEW YORK -- While the regulations surrounding the April 1 increase of the federal excise tax (FET) on tobacco are unknown as of press time, the impact it will have on the tobacco industry is clear to many convenience store retailers and advocates, who indicated this law -- on top of the crumbling economy and slumped consumer spending -- could spell the end for those retailers already struggling due to the recession or those dependent on tobacco as traffic and profit drivers.
"This is certainly going to affect tobacco sales volume. April and May will really tell the story, and it will be tough going into the summer months when tobacco consumption
increases," said Mary Szarmach, vice president of trade marketing for Smoker Friendly, who anticipated an 8 to 10 percent decline in consumption as a result of the new FET rates.
The consumption decline estimated by the Congressional Budget Office and the U.S. Treasury is similar, with at least a 10 percent decline in sales of cigarettes and tobacco products, according to Thomas Briant, executive director of the National Association of Tobacco Outlets (NATO). He added: "Convenience stores should prepare for this significant sales decline."
In addition, many existing problems in the convenience channel will be exacerbated when the new FET rates go into effect, according to an editorial letter written by Tony Miller, senior vice president of sales and marketing for Thorntons Inc., and obtained by CSNews Online earlier this month. Given that cigarettes represent 30 to 45 percent of convenience store inside sales, he wrote, the deterioration of the category will have devastating consequences......
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