Front of store, front of mind – but for WHO?

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Martin Moodie
Martin Moodie is the Founder & Chairman of The Moodie Report.

Where, in an acutely sensitive regulatory environment, should the tobacco category be positioned in a duty free store?

When The Nuance Group opened its splendid new 650sq m tax & duty free store at Geneva International Airport earlier this month, it opted to place the entire tobacco category at the entrance of the store – displayed in what Nuance called a “breathtaking black and white setting”.

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The logic is obvious. As many studies have proven, tobacco is not just a major drawcard in most duty free stores, it is also a tremendous fooftall (and therefore penetration) driver for other categories.

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In Geneva that’s especially the case.  The airport’s cigar assortment has long been a hallmark of the retail offer (it has been considerably enhanced here) and the cigarettes category is particularly important to the Geneva passenger profile.

But one wonders how that positioning sits with the approach likely to be adopted in English and Scottish duty free stores, where travel retailers have sought an exemption from proposed tobacco display restrictions that are being touted under the Health Bill.

As we reported recently, The Tobacco Advertising and Promotion (Display) (England) Regulations 2010 propose wide-ranging limitations on the display and merchandising of tobacco products.

However, following a strong, behind-the-scenes lobbying campaign, the proposed regulations (as contained in a consultation document) would allow airside duty free shops to display bulk tobacco provided that there are no other products in the area and the display is not visible from outside the area.

A notice stating ‘It is illegal to sell tobacco products to anyone under the age of 18’ must be exhibited at the entrance of the tobacco area, which will serve both to indicate where the tobacco area is and as a reminder of the age restrictions on tobacco purchasing.

UK travel retailers, and lobby group ETRC, are quietly confident that such an exemption will be granted in both England and Scotland. The government consultancy document contended that if airport duty free sales were subject to a complete tobacco display prohibition, fewer customers would purchase tobacco, resulting in losses to the income of regional airports.

“It is expected that these customers would purchase duty free tobacco at the arrival airport resulting in a displacement of trade from English regional airports to airports in other, non-EU countries,” the report said.

The issue of duty free tobacco sales is particularly sensitive given the World Health Organization’s (WHO) long-running campaign to eradicate the sector on health reasons (though nominally as part of a wider crackdown on alleged ‘illicit trade’). And where is the WHO based? You guessed it – Geneva.

The tobacco category – so crucial to both the sales and profitability of duty free retailers – is fighting for its life. Because of that threat, one leading travel retail executive was heavily critical of Nuance’s approach in Geneva (and our coverage of it), noting with heavy irony: “That’s very helpful in our drive to prove that we are a responsible channel.”

But is he right? Remember tobacco is a legal product – a simple but crucial premise in the travel retail industry’s campaign to protect duty free tobacco sales from abolition. It’s fair to say that opinions on the issue vary sharply across the industry.

Here’s what JTI Director Strategic Key Account Management, Worldwide Duty Free Christopher Powell had to say about the Geneva store – in which JTI played a lead role.  “One of the key messages we are trying to deliver is that the airport retail industry has under-performed on tobacco when compared to the domestic market.

“That isn’t simply down to regulation; it’s linked to the action, or rather the inaction of the industry over time. The question is this: is there the will to achieve what is a huge prize, and capitalise on the potential of tobacco in this channel?”

He added: “We want to work with retailers to change how tobacco is retailed at airports, and that is through upscale, new solutions. It’s also about seeing the category as a part of the overall offer and not in isolation. We want to act on the potential of tobacco today, rather than plan negatively. Crucially, it’s about taking a consumer view of the category.”

There you have it – two diametrically opposed positions.

At the recent Trinity Forum in Macau, DFS Vice President of Business Development Christian Strang (below) added his own astute insight to the debate.

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He noted: “Most frustratingly we are still defending the right to sell duty free tobacco… when we should have taken the bull by the horns ten year ago and introduced an industry code of conduct for the responsible retailing of what is still a legal, if not altogether healthy product.”

If the exemptions in the UK are accepted – and the health lobby may well oppose them stongly – the WDF tobacco offer at London Heathrow Terminal 5 (pictured yesterday, very much front-of-house) will be discreetly tucked away out of sight of travellers who are in the public concourse.

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But if those same travellers are Geneva-bound, they will have a very different and in-your-face experience of the tobacco category if they return from Geneva International Airport (and remember that duty free Arrivals sales will likely be introduced in Switzerland next year).

At the superb new Larnaka Zenon International Airport that celebrated its official opening yesterday, travel retailer CTC-ARI Airports has deliberately positioned its tobacco department (below) at the back of the store. Aer Rianta International-Midde East Managing Director John Sutcliffe told me he was a firm advocate of an understated approach to tobacco retailing rather than what he described as “a red rag to a bull” philosophy of placing it front of store and front of mind.

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What’s better in both the short and long terms in terms of  tobacco display? Softly softly or in your face? Not for the first time (look at the sharply differing positions taken by the ETRC and ACI Europe on proposed changes to LAGs screening procedures) different strands of our industry are not on the same page.

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