What is quite positive news for London smokers may be a bad one for small-scale retailer as Canada’s largest tobacco company is currently dropping cigarette prices.

Starting from November, Imperial Tobacco started a new pricing program that allows about 10000 retailers, approximately a third of all stores, a $5 a carton discount. Those retailers, who decide to participate in this program, agree not to sell above a maximum price but they also can decide to sell for less that the offered price. At present the Ontario Korean Businessman’s Association (OKBA) is opposing the move, declaring that all stores will be compelled to reduce cigarette prices and decrease lower net margin in order to remain competitive. “I think that it is unfair. They a have a big market share and try to control it,” stated David Son, an OKBA member, who owns a store. He also added that smokers will always look for any discounts and it will become rather tough when one store accepts the deal and another one does not.

Imperial representative Eric Gagnon stated that the company can’t allow the discount to all retailers and it has the right to choose who will get this option. According to Imperial, retailers were chosen basing on their tobacco turnover, location and also their capability to work with Imperial Tobacco (IT). “IT decided to take actions in order to drop consumer prices and thus struggling with the expanding trade in illicit tobacco market that sell smoking products for lowered prices. At present we face a huge gap, so we want to introduce a maximum price to cut that gap,” Gagnon said. “It is very easy for IT to affect small scale retailers and the given program is a simplest way for Imperial to drive down prices. Instead of just cigarette companies competing, this prompts retailers to compete amongst themselves that increases the affect on the prices,” said Cynthia Callard, executive director of Physicians for a Smoke Free Canada. She said that many convenience stores would inevitably reduce as smoking rate decreases and illicit tobacco market covers the main part of the market.

A few years ago, the collective market system for Ontario tobacco growers was curtailed and farmers who continue to grow tobacco are forced to sell directly to manufacturers. Shortly afterward, Imperial moved to bypass distributors by starting a program to sell and deliver tobacco products to retailers and giving them a $3 discount per carton. When the program was already extended, Imperial raised the drop shipment price by $2 per carton and then decreased it by $3 to those chosen for the program thus creating the $5 differential. Son also added that many retailers are afraid to make any comments worrying of being excluded from the program.

By Sara Norton, Staff Writer. Copyright © 2011 Cigarette-Store.org. All rights reserved.