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Tobacco companies’ use of retailer incentives after a ban on point-of-sale tobacco displays in Scotland
  1. Martine Stead1,
  2. Douglas Eadie1,
  3. Richard I Purves1,
  4. Crawford Moodie1,
  5. Sally Haw2
  1. 1 Faculty of Health Sciences and Sport, Institute for Social Marketing, University of Stirling, Stirling, UK
  2. 2 Faculty of Health Sciences and Sport, University of Stirling, Stirling, UK
  1. Correspondence to Martine Stead, Institute for Social Marketing, Faculty of Health Sciences & Sport, University of Stirling, Stirling FK9 4LA, UK; martine.stead{at}stir.ac.uk

Abstract

Introduction Incentives have been used by tobacco companies for many years to encourage retailers to sell and promote their products. However, few studies have examined the use of retailer incentives in countries with a ban on the open display of tobacco products in stores.

Methods As part of the DISPLAY(Determining the Impact of Smoking Point of Sale Legislation Among Youth) study, annual qualitative interviews were conducted with 24 small retailers in four Scottish communities. This article focuses on data collected in June to July 2015 and June to July 2016 after a ban on the open display of tobacco was fully implemented in Scotland.

Results Retailers described being offered and benefiting from a range of financial and other incentives, typically offered via tobacco company representatives (‘reps’). Most of the retailers received tobacco manufacturer support for converting their storage unit to be compliant with the new regulations, and several participated in manufacturer ‘loyalty’ or ‘reward’ schemes. Incentives were additionally offered for maintaining stock levels and availability, positioning brands in specified spaces in the public-facing storage units (even though products were covered up), increasing sales, trialling new products and participating in specific promotions, such as verbally recommending specific brands to customers.

Conclusions Even in a market where the open display of tobacco is prohibited, tobacco companies continue to incentivise retailers to sell and promote their brands and have developed new promotional strategies. For countries that have implemented tobacco display bans, or are considering doing so, one option to combat these practices would be to ban promotional communications between manufacturers and retailers.

  • advertising and promotion
  • tobacco industry
  • public policy
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Introduction

With most tobacco marketing now banned, retail outlets are increasingly central to tobacco company marketing activities.1 A key objective for tobacco companies is to achieve brand visibility and maximise potential marketing opportunities at the point-of-sale.2 Tobacco companies offer tobacco display unit contracts to retailers, whereby retailers receive a free regularly maintained storage unit in return for stocking and displaying the company’s brands in optimal positions.3 Retailers are encouraged to participate in ‘loyalty’ or ‘reward’ programmes which incentivise them for having products in stock, positioning and sales.4 5 Manufacturers’ representatives (or ‘reps’) visit retailers regularly to check availability and sales and encourage participation in new promotions.6 Incentives and rewards offered to retailers include volume rebates, in-kind payments such as free stock,7 cash payments and ‘points’ which are redeemable for cash or goods.4 6

In countries where visible displays of tobacco are prohibited, incentive schemes might be expected to decline. However, news reports from Canada and Australia, where open displays of tobacco products are banned, suggest that tobacco companies are continuing to engage retailers in financial incentive schemes.8 9 To date, there has been limited academic research concerning retailer incentive practices following a display ban. In Scotland, all point-of-sale displays of tobacco products were prohibited in 2013 in supermarkets over 280 m2 of retail space and in 2015 in small stores. We examine small retailers’ experiences of incentives to promote tobacco in the 2-year period after displays were prohibited in small stores.

Methods

Design and sample

The data reported here form part of the DISPLAY study, which is designed to evaluate the impacts of the legislation prohibiting the open display of tobacco products at point-of-sale in Scotland.10–13 This study includes annual interviews with a cohort (n=24) of small independent high-street tobacco retailers to explore their experiences of implementing the display ban and their relationships with tobacco companies over the period. The retailers interviewed were from four Scottish communities selected to match the main DISPLAY study communities in terms of levels of urbanisation and social deprivation, assessed using the Scottish Index of Multiple Deprivation scores (see10 for fuller description). This paper presents data from two waves following implementation of the legislation in small stores, with wave 1 (W1) conducted 2–3 months post ban and wave 2 (W2) 1 year later.

The 24 retailers were recruited using a structured protocol to represent five retail categories: grocery/convenience stores (n=12), confectioners, tobacconists and newsagents (CTNs; n=5), off-licences (liquor stores; n=3), petrol station/garage forecourt shops (n=3) and fast food/take-away outlets (n=1). These categories represented all retail outlets in the study communities selling tobacco, excluding large supermarkets, mobile vans and illicit channels.

Procedure

Retailers matching the sample criteria were provided with an information sheet and subsequently recontacted to answer any questions, provide written consent and schedule an interview. Participants were offered a financial incentive (£30, US$39 and €34) for participation. Data were collected by three of the authors (MS, DE and RP) using a 20–30 min semi-structured interview guide administered face-to-face in-store during business hours. During customer transactions, the interview and recording were paused. The interviews examined retailers’ attitudes towards the ban, measures taken to remove products from public view, the level and nature of support provided by tobacco companies and new promotional strategies. Field visits also provided an opportunity to examine marketing materials and incentive offers designed for the retail trade. Ethical approval was provided by the Stirling University School of Management Research Ethics Committee.

Analysis

With participants’ consent, interviews were audio-recorded and then transcribed and coded using QSR Nvivo V.11 software. Analysis of transcripts was led by one researcher (MS), and themes based on the core questions and topic areas were agreed among those undertaking the interviews. The reliability of these themes was then reassessed by a process of familiarisation with the transcripts by one researcher (MS) and cross-examination by the other two researchers (DE and RP). Discussions between researchers enabled identification of emerging themes and resolution of interpretive difference. Few differences emerged, and those that did largely concerned how to best categorise new incentivised retail practices. These analyses allowed the team to identify patterns across the data.

Results

Retailers described being offered incentives in return for a range of practices: retaining a tobacco unit, maintaining availability, positioning products, sales, trialling new stock and promoting brands. Incentives were sometimes offered through retailer ‘partnership’ or ‘loyalty’ schemes such as Ignite (Imperial Tobacco) and Drive Plus (Philip Morris); copies of promotional materials for the schemes were shown to researchers during the fieldwork. Typically, participating retailers were awarded with points redeemable for cash or gifts, including hospitality, iPads and business equipment.

Retaining a tobacco unit

Before the display ban, all but one retailer had a contract with a major tobacco company for the provision of a display and storage unit (termed a ‘gantry’ in the UK). Such contracts offered to supply, maintain and periodically update the unit in return for the retailer stocking and displaying the manufacturers’ products, usually in accordance with a detailed layout diagram. In addition, some of these retailers received payments or loyalty points as part of the unit contract (also referred to as ‘slotting fees’): “they (Imperial) pay us for having a gantry, they pay us £250 a year” (Retailer T, Grocery/Convenience Store, W1).

In the months before the display ban, 17 of the 24 retailers received offers as part of their existing contract to fit covers free of charge to their units to make them compliant. This ensured minimum disruption and cost for retailers and enabled tobacco manufactures to retain and signpost tobacco in a prominent position within the store (see figure 1). In the remaining cases, the tobacco manufacturer chose to terminate the existing contract and offered the unit in situ free of charge. Retailers in this position assumed this to be a commercial decision based on their level of tobacco sales. In these cases retailers had to fund a unit adaptation solution themselves or move stock to another part of the store out of public view. One retailer opted to move tobacco products out of public view, while the remaining six retailers continued to store tobacco within the existing unit. Four were subsequently supplied with free unit covers by Philip Morris subsidiary e-cigarette brand ‘Vivid’.

Figure 1

Example of toboccao display gantry before and after manufacturer adaptation.

Those retailers whose contracts continued after the display ban tended to be visited more regularly by reps and to have more opportunities to negotiate other incentives than did retailers whose contracts were terminated; the pattern was not clear-cut, however, with retailers with and without contracts having varying levels of enthusiasm for engaging in incentivised practices. Overall, most of our sample appeared to engage in at least one incentivised practice.

Maintaining availability

Retailers described being offered a range of incentives in return for maintaining availability of their brands. Several noted that they were awarded points which could be redeemed for cash or gifts in return for having specific brands in stock; one commented that failing to meet a particular points threshold could mean losing out on a regular bonus:

Marlboro seem to be coming in and pushing their brands and making sure you’ve got the [Philip] Morris stock. If I don’t have [it] I’ll lose points and I won’t get my full – it gets paid every two months.

—Retailer B, Grocery/Convenience Store, W1

There was a perception among some retailers that whereas before the display ban they had had to work ‘extremely hard’ to qualify for points or bonuses, after the ban simply having specified brands in stock was sufficient: now it’s a case of just having them in store and you will get your reward… there are more incentives now, they pay out more now than previously” (Retailer S, Grocery/Convenience Store, W2). One described making “like, 200–300 quid out of one rep.… just for stocking their brand” (Retailer D, Grocery/Convenience Store, W1).

Retailers perceived that they were being incentivised to maintain availability because tobacco companies were concerned that stock levels would drop after the ban. Some commented that as they no longer needed to maintain full shelves (because the unit was covered up), sometimes stock levels ran low. Where this happened, there was a risk of losing a sale or a customer switching to a different brand: “They (tobacco reps) want to make sure that the products are in stock, because (a) if somebody asks for them and you don’t have them, they don’t make a sale, and (b), if their product is in stock and somebody else’s isn’t, then a customer might be able to say ‘oh well give me something else at the same price’’ (Retailer S, Grocery/Convenience Store, W2).

Positioning

Even after their tobacco units were covered up, retailers were rewarded for adhering to specified layouts (known as ‘planograms’). One described being awarded "extra points" for maintaining Imperial Tobacco’s two-thirds share of the unit space (Retailer T, Grocery/Convenience Store, W1), while another noted that Japan Tobacco International (JTI) “still want those three shelves even though it’s dark” (Retailer S, Grocery/Convenience Store, W2). Retailers commented that even though products were no longer in view, companies still sought to secure prime positions, such as eye level or top shelves.

For some reason they [JTI] want their products stocked at the top shelves. And then everything else can go at the bottom, different brands… I don’t know is it for convenience sake or is it for the customer, it’s easier for us to locate their products?

—Retailer M, Grocery/Convenience Store, W1

One retailer described how a rep had rearranged his unit so that JTI brands, rather than clustering in the prime ‘diamond’ at the centre of the display, were now arranged across "ten shelves" (Retailer G, Off-Licence, W2), with some of the unit lying empty because he was not allowed to fill the space with competitor brands. Another noted that manufacturers were less concerned with overall quantity of stock than with securing exclusive unit facings:

Q: Do they stipulate how much stock you’ve got to hold?

R: No…Even if you’ve got just one, one, two, two on front, that’s absolutely fine.

Q: As long as you’re filling the front row?

R: Yeah.

—Retailer N, Grocery/Convenience Store, W1

A few retailers speculated that the tobacco companies’ aim was to ensure that when the unit was opened, customers were exposed to a solid block of only that particular company’s brands: "I think when your flaps go up, they want to hit the person, you know, like" (Retailer E, Grocery/Convenience Store, W1). In contrast, some retailers noted how reps advised them to place new products "next to something that is similar to it" (Retailer G, Off-Licence, W1), that is, a competitor brand in a similar price bracket, to create incidental customer exposure when the flaps were opened.

Sales

Several retailers described how incentives were linked to sales, with ‘points’ being awarded which could be converted to cash or gifts: “If you make your targets, if you sell every product that they want you to sell, you get so many points an’ then the points give you vouchers” (Retailer K, Garage, W2). Some described retaining the bar codes from ‘outers’ (cartons of cigarette packs purchased at wholesalers) to provide the rep with proof of sales which could be converted to financial rewards in the region of £100–£120:

The last 3 months, they gave me £120 actually for collecting bar codes … £60 on my card and £60 shopping vouchers.

—Retailer P, CTN, W2

For every bar code you get 100 points and 100 is equal to £1… So basically, to get 100 bar codes, I have to sell 100 outers.

—Retailer D, Grocery/Convenience Store, W2

One retailer noted that he had been initially required to provide proof of sales, in the region of “57 to 59 outers per week” (Retailer S, Grocery/Convenience Store, W1), to qualify for a new storage unit contract, but that the threshold had subsequently been relaxed. Incentives for meeting sales targets were also offered as part of specific promotions, as subsequently discussed.

Trialling new stock

Several retailers described being offered incentives for trialling new brands, such as loyalty card points, free stock of the new product or exchange of old stock which was not selling:

They let you know, ‘That’s a new brand. If you keep it, we’ll give you something free.

—Retailer N, Grocery/Convenience Store, W1

That’s Ignite, that’s something Imperial Tobacco’s doing at the moment … and this is what I get points on, is the trialling stock, if I’ve, anything new that comes out, I’ve got it so I get points for that, availability, share of space and point-of-sale.

—Retailer D, Grocery/Convenience Store, W1

Other retailers noted that they were reluctant to trial new brands in case they were left with stock they could not sell, particularly as customers could not see these products, although this put them in a potentially strong bargaining position in terms of negotiating favourable incentives:

They say this is a new brand we are launching, and then they say ‘well, we will give you free packets to do this with and this is the margin’, you know… it’s quite good that way. I normally don’t stock Rothmans so I asked the rep ‘how are you going to help me sell these cigarettes’, and that’s a way of saying ‘what are you going to give me to promote your cigarettes?

—Retailer M, Grocery/Convenience Store, W1

This same retailer noted how these kinds of incentive agreements fostered complicity between reps and retailers, subtly pushing the retailer not only to stock new brands but also to encourage their sale:

They throw in a couple of packets of free stock to move it, so then you are incentivised to say ‘well why don’t you try this’ quietly between two friends, do you know what I mean? … unconsciously you are becoming the rep for the company.

—Retailer M, Grocery/Convenience Store, W1

Participating in specific promotions

Several retailers described incentives for participating in specific promotions of new products. One example was a 2016 promotion entitled ‘Sell More, Earn More’, aimed at retailers participating in Philip Morris’s Drive Plus programme, for the value brand Chesterfield. The promotion rewarded retailers and their staff, in the form of payments to their Drive Mastercard or vouchers, for each Chesterfield pack sold above an agreed base rate.

It’s a new scheme just now. Chesterfield are saying if you keep a bar code of every box of an outer… if you keep that and send them … then they will give you free money or free stock.

—Retailer L, Grocery/Convenience Store, W2

At W1, some retailers thought that they were not allowed to inform customers about products which they had not asked for, as that could be construed as advertising:

I think what the manufacturers want you to do is maybe talk to the customers and say we’ve now got this one or that one, but we wouldn’t do that.

—Retailer Q, CTN, W1

However, it was apparent from other interviews at W2 that reps were financially incentivising retailers to draw customers’ attention verbally to new products. Some retailers described how they had been informed by the rep that they would be visited over the next few weeks by a ‘mystery shopper’ who would ask for a rival brand; retailers who instead recommended Chesterfield at £5.99 to the mystery shopper would be awarded £100. Although some retailers who had engaged in the promotion were sceptical that customers would take up the offer, some noted that they did sell more Chesterfield during the promotion period.

If we sell the Chesterfield, they send mystery shoppers to a shop and if we just ask the customer ‘would you like this cigarette rather than trying other cigarette’, they give you a hundred pounds.

Interviewer: If you do it correctly you get a bonus?

Yeah we had a hundred pounds for it.

—Retailer N, Grocery/Convenience Store, W2

So this way now they’ve got us pushing the brand verbally. … They come in and they’ll ask for the opposite, the leading brand for the other company and we’re supposed to offer them the brand that they’re trying to push and that’s when they’ll say ‘we’re the mystery shopper, you’ve passed or you’ve failed’ … They give us a timescale of when they’re doing it, so for the next four weeks we’re pushing that product off our shelves because we don’t know who the person is going to be.

—Retailer G, Off-Licence, W2

Retailer-facing promotional material produced for the Chesterfield promotion confirmed the nature of the financial incentives (figure 2 14). Although it did not mention the mystery shopping test, it did state that retailers should ‘recommend’ Chesterfield to customers interested in other low-priced brands.

Figure 2

Text of chesterfield sell more earn more retailer promotion.

Another new product which retailers were encouraged to promote was the £5.99 price-marked Player’s Crushball, introduced by Imperial Tobacco shortly before W1. One retailer was advised by his rep to place Crushball next to the £6.99 price-marked Sterling in the storage unit, so that customers asking for the latter would glimpse the new lower-priced product and say, “alright, we will take that one” (Retailer E, Grocery/Convenience Store, W2). Another retailer described how the rep advised him to pick up the new product ‘by mistake’ when a customer asked for its competitor to bring the product to customers’ attention.

I kept one packet [of Player’s Crushball] next to the Sterling one …so I’ll just deliberately pick up this packet an’ go, ‘Oh sorry, I got the wrong packet but do you want this?’ That’s the way the tobacco rep told me to start selling them so, just to play with the customer a bit, so they move from Sterling.

—Retailer D, Grocery/Convenience Store, W1

Discussion

We found that even in a country with a ban on the open display of tobacco products, retailers continued to be incentivised for stocking, selling and promoting tobacco. Our findings substantiate news reports describing similar practices after display bans in Canada and Australia.8 9 The sample is not necessarily representative of all tobacco retailers in Scotland, and the small sample size meant that there was limited scope to explore subgroup variations (eg, by shop type), although heterogeneity across shop types was achieved in the overall sample. While there was variation in the extent to which retailers reported engaging in incentivised practices, most engaged in at least one practice, suggesting that the strategies identified in our study are likely to be adopted in other countries with, or planning to implement, a display ban.

Tobacco industry documents from the 1970s describe the purpose of retail point-of-sale marketing as fourfold: to (1) inform the consumer of the presence of the brand, (2) promote recognition, (3) generate interest and excitement,and (4) stimulate trial purchase and repurchase.2 The rationale for bans on tobacco promotions and displays at point-of-sale is to reduce the ability of tobacco companies to exploit the retail environment in this way.1 However, this study demonstrates that display bans do not prevent tobacco companies from attempting to exert influence on retailers via their sales reps.

There are several possible explanations for tobacco companies offering incentives to retailers in a market where tobacco products cannot be openly displayed. Some retailers have questioned the value of having prime retail space devoted to a product hidden from view.15 The UK retail trade press contains accounts of retailers reducing the amount of tobacco stock they carry, shifting tobacco products into smaller and less prominent storage units and reusing the tobacco unit space for other product categories.16 Our findings suggest that tobacco companies are investing considerable resources in persuading retailers that tobacco remains a viable and profitable category deserving of a premium position in store. Nearly all retailers in our sample had new covers fitted to their storage units free of charge by tobacco companies or their subsidiaries, thereby ensuring that the tobacco unit remained in place.

There is evidence that tobacco companies encourage retailers to maintain full storage units, and avoid their brands being out of stock, to prevent a possible loss of sales.17–20 There is a risk for the companies that retailers may reduce the number of brands carried, or fail to keep storage units topped up, as customers can no longer see them. This study indicates that tobacco companies who supply retailers with purpose-designed public facing storage units continue, after a display ban, to use contracts and financial incentives to maintain availability of their own brands and to restrict stocking and promotion of competitor brands.

Retailers were also incentivised to continue to display products according to specified layouts (planograms), even though customers could no longer see the full array of products. The rationale for this seems to be to maintain prime eye-level position and reduce customer exposure to competitor brands when the unit is opened. Within the retail press, one retailer stated that “If a customer requests a JTI brand they only see JTI brands when that section of the gantry is opened”,19 and another was quoted: “There is a school of thought that the traditional-style back-wall gantries with doors do still offer a small marketing opportunity as adult smokers can get a glimpse of your range when you slide the doors open to retrieve a product”.16 While a display ban reduces the ability of the packaging to act as a sales reminder, incidental exposure occurs when tobacco purchases are made. In view of this and the ability of prominently positioned tobacco storage units to signal the availability of tobacco, consideration could be given to measures to further reduce temporary exposure to tobacco products at point-of-sale, for example, by stipulating that tobacco units are completely out of customers’ sight, in overhead or under-counter units (eg, https://www.conveniencestore.co.uk/advice/your-business/the-future-of-tobacco-merchandising/534195.article). For retailers, this would free up space for displays of other products.

Our findings indicate that retailers were also being rewarded for trialling new stock and participating in new product promotions. With customers’ ability to find out about new products severely restricted in dark markets, the retailer has become the key channel of information and influence: “when the doors go up, retailers will become true tobacco category managers as adult smokers are anticipated to ask them more questions” British American Tobacco (BAT) acting head of business development, quoted in Convenience Store, 13 March 2015). In our study, we found evidence of retailers being offered financial incentives to promote and sell new products through verbal recommendations. Similar tactics were reported in Australia, with retailers rewarded for verbally recommending John Player Special in a mystery shopper test.19 The display ban legislation in Scotland and the rest of the UK contains detailed regulations on the removal of permanent displays of tobacco products and printed material, but does not address product promotions through verbal communication by retailers. Comments made by our sample suggested that there was confusion on this point, and that while some perceived verbal recommendations as contravening the legislation, others were happy to comply with reps’ encouragement to make such comments to customers. Verbal communication is likely to become particularly pertinent in markets where standardised packs are introduced (retailers were not required to sell tobacco in standardised packaging when this study was conducted).

The practice of offering retailers contracts and rewards for the stock, placement and sale of tobacco products is not new,5 21 but this study demonstrates how the strategies used by tobacco companies have been adapted to work within the context of a display ban. Placement of products within the tobacco unit continues to be incentivised, now with the aim of maximising incidental exposure when flaps are lifted, and new incentives are being offered for sales and promotions, in particular ‘mystery shopper’ schemes which reward making verbal recommendations to customers. One potential measure to further reduce tobacco manufacturers’ ability to exploit the retail environment would be a ban on payments to retailers.21 In Quebec an amendment to section 26 of the Tobacco Control Act bans promotional communication between manufacturers/distributors and retailers.22 Manufacturers/distributors will not be allowed to offer rebates, gratuities or other benefits related to tobacco sales from November 2017.23 Not allowing any type of payment to retailers is considered an important first step towards the retail reform of tobacco products.24 Other options for reducing tobacco companies’ exploitation of the retail environment include reducing retail density, banning tobacco sales near schools and incentives for retailers to stop selling tobacco.25 26

Evidence suggests that display bans can restrict exposure to tobacco products at point-of-sale.11 27–29 However, our study reveals a range of new marketing strategies and tools designed to promote and maintain the visibility of tobacco in the retail environment. Continued monitoring is needed to identify emerging approaches by tobacco companies to counter display legislation.

What this paper adds

  • We explored how tobacco companies incentivised retailers to sell and promote their brands after a display ban in Scotland.

  • Retailers described receiving incentives for maintaining a tobacco gantry, availability, product positioning, sales, trialling new products and participating in promotions, such as verbally recommending specific brands.

  • A ban on the open display of tobacco products does not prevent tobacco companies from promoting their products within the retail environment. A ban on promotional communication between manufacturers and retailers is one possible option to address this.

Acknowledgments

The authors would like to acknowledge the contribution of the DISPLAY study team (Amanda Amos, Catherine Best, Dorothy Currie, John Frank, Farhana Haseen, Andy MacGregor, Anne Marie MacKintosh, Gozde Ozakinci, Jamie Pearce and Winfried van der Sluijs), the administrative support provided by Aileen Ireland, Aileen Paton and Susan Fair and the retailers who participated in the study.

References

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Supplementary materials

Footnotes

  • Contributors MS drafted the manuscript. MS, DE and RP collected, coded and analysed the data. CM and SH advised on the structure of the paper and contributed to the Introduction and Discussion. SH conceived of and is principal investigator of the overall study. All authors commented on drafts of the manuscript and approved the final version.

  • Funding The study was funded by the UK National Institute for Health Research (NIHR) PHR project 10/3000/07. The study sponsor had no influence on study design and the collection, analysis and interpretation of data, the writing of the article and the decision to submit it for publication.

  • Competing interests None declared.

  • Patient consent Not conducted with patients.

  • Ethics approval School of Management Research Ethics Committee, University of Stirling.

  • Provenance and peer review Not commissioned; externally peer reviewed.

  • Data sharing statement Retailers gave consent for their data to be shared only with the research team and in study reports and publications. Because some of the unpublished data are commercially sensitive, they are not available. The authors are happy to be contacted by researchers wishing to know more about the study.

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