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To sell or not to sell: cigarette sales in alcohol-licenced premises
  1. Suzan Burton1,
  2. Mark Ludbrooke2,
  3. Kelly Williams2,
  4. Scott C Walsberger2,
  5. Sam Egger2
  1. 1 School of Business, Western Sydney University, Sydney, NSW, Australia
  2. 2 Cancer Council New South Wales, Kings Cross, New South Wales, Australia
  1. Correspondence to Professor Suzan Burton, School of Business, Western Sydney University, Sydney, NSW 2751, Australia; s.burton{at}westernsydney.edu.au

Abstract

Objective To obtain insight into tobacco retailing by alcohol-licenced premises, in order to understand the financial importance of tobacco sales for such retailers.

Method Data were collected by a telephone survey of 1042 clubs, hotels and packaged liquor outlets in New South Wales, Australia. The response rate was 86.1%. Qualitative and quantitative data were obtained. Logistic and linear regression were used to determine factors associated with the probability of selling and stopping selling and the importance of cigarette sales.

Results More than a third (36.4%) of premises contacted did not sell cigarettes. 147 (an estimated 18.1% of those who had ever sold) had stopped selling. There were significant differences in the probability of selling, in the reported importance of cigarette sales and in the probability of stopping selling, between different outlet types and other outlet characteristics (number of gaming machines, proximity of nearest alternative tobacco retailer and remoteness). Outlets where alcohol can be consumed were more likely to rate cigarette sales as ‘not important’ than ‘important’.

Conclusions Despite claims by tobacco companies that tobacco sales are important for many Australian retailers, tobacco sales appear to be of limited importance for alcohol-licenced premises. This means that opposition to stopping tobacco sales where alcohol is consumed and/or sold may be less than expected.

  • tobacco industry
  • public policy
  • advertising and promotion

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In response to evidence that tobacco retailers contribute to smoking by creating environmental cues to smoke and by making cigarettes accessible,1–5 multiple commentators have called for a review of tobacco retailing and a decrease in the number of retailers.4 6–8 Reductions in tobacco retailer numbers can be achieved by large increases in an annual licencing fee, as was observed in South Australia.9 Reductions can also be achieved by other legislative actions: a growing number of jurisdictions (at the time of writing, in Hungary and in the USA) have implemented, or are implementing, policies with the aim of decreasing the density of tobacco retailers, by limiting the types and/or locations of stores that can sell tobacco and/or by imposing caps on the number of retailers.10–13 With the exception of changes in Hungary,11 such legislation appears to grandfather existing retailers but should result in a decrease in the number of retailers over time. However, the possibility of using policy to restrict the number of tobacco retailers was not even mentioned in a survey of tobacco control policies in 34 European countries,14 suggesting that retailer reduction policies are not high on the legislative agenda in most jurisdictions.

In the absence of specific policies, retailers voluntarily stopping selling would appear to be the only mechanism for reducing the number of tobacco retailers. Until recently, research examining why retailers stop selling tobacco has focused on pharmacies,15 a retail group that does not sell tobacco in countries such as Australia. Research with other types of retailers found the main motivators to stop selling tobacco were regulatory pressure, low profit from tobacco sales and/or health or ethics-related concerns.16–18 However, a limitation of only studying retailers who stop selling is that research cannot determine to what extent the same factors may be present for retailers who do not stop selling. For example, the only systematic analysis to date of retailers who have stopped selling tobacco found that declining profits from tobacco sales were generally a necessary but insufficient condition for stopping selling.16 This leaves open the question of whether retailers who still sell tobacco are also experiencing low profits from tobacco sales, thus increasing the likelihood of other retailers leaving the market. Yet studies of retailers’ attitudes towards selling tobacco are limited to small samples in England19 (n=62) and New Zealand20 (n=21). Both studies found that many retailers believe that tobacco sales are important, despite low profit margins, because they are believed to result in sales of other items to customers who purchase tobacco. One study in Pennsylvania found, however, that only a small percentage of purchases from urban corner stores (13%) included tobacco, and the majority of those sales (61%) did not include any other products.21

In the face of this limited understanding of why many retailers continue to sell tobacco while others stop, we planned a large and systematic study of tobacco retailers in New South Wales (NSW), the largest state in Australia. NSW has what is sometimes called a ‘negative licensing scheme’.22 This means that a retailer can lose their right to sell tobacco if they are repeatedly convicted of violating retail regulations, but there are no other limitations on who can sell and no licence fee.23

We decided to focus on tobacco retailers who are licenced to sell alcohol for three reasons. First, tobacco retailers who sell alcohol constitute the largest category of tobacco retailers in NSW (34% of all tobacco retailers) but, together with newsagents, comprise only 1.4% of all tobacco sales.22 24 This discrepancy between availability and consumption is consistent with the notion that alcohol-licenced outlets are being disproportionately used by lighter smokers for impulse purchases while consuming alcohol.25 Second, consumption of alcohol has repeatedly been associated with increased rates of smoking, and alcohol-licenced premises where people can smoke (usually in outdoor or unenclosed areas) are the most common place for attempting quitters to lapse.26 27 Third, the only systematic study of retailers who have stopped selling tobacco found that alcohol-licenced premises are disproportionately likely to stop selling tobacco, with managers citing low profits and the ‘hassle’ of selling tobacco as major contributing factors.16

We therefore decided to survey alcohol-licenced premises to (1) identify the factors associated with the probability of selling and stopping selling tobacco, (2) determine if selling tobacco is the norm for alcohol-licenced premises, (3) provide insight into the reported importance of tobacco sales for different types of licenced premises and (4) identify retailers’ attitudes to stopping tobacco sales.

Method

A target quota of 500 alcohol-licenced outlets selling cigarettes was predetermined to ensure sufficient precision for the estimates of dichotomous proportions among sellers (approximately ±4.0%). Target interviewees were randomly chosen from a list of 5869 alcohol-licenced ‘registered clubs’ (‘clubs’), ‘hotels’ and ‘packaged liquor’ outlets obtained from the NSW Office of Liquor & Gaming in March 2016 (see table 1 for explanation of these categories). Other alcohol-licence categories such as restaurants, small bars and alcohol producers were excluded from the study, because they do not usually sell tobacco.

Table 1

Operational definitions for possible predictors of selling, stopping selling and importance of selling cigarette sales

Randomly selected premises were called by a market research company, and a request was made to speak to the licencee or general manager. After obtaining informed consent, participants were asked if they sold cigarettes (including in any associated bottle-shop for hotels, clubs, supermarkets and grocery stores), and if not, if they had ever sold cigarettes. (The survey used the term ‘cigarettes’ to avoid confusion with sales of loose tobacco, but we found no evidence, and do not anticipate, that any retailers sold any tobacco products if they did not sell cigarettes.) Ex-sellers (n=147) were asked when they had stopped, and the interview was terminated. Those still selling cigarettes (n=663) were asked to rate the importance of cigarette sales on a seven-point scale (from 1=‘not at all important’ to 7=‘very important’, presented in randomised order), with the scale midpoint of 4 unlabelled. Other questions assessed the number of employees, the distance of the nearest cigarette retailer, selling by vending machine (no/yes). Respondents’ attitudes to cigarette sales and their predictions of clients’ responses if they did not sell cigarettes were probed with open-ended questions. Information about whether the outlet had an ‘extended hours’ licence and for clubs and hotels, the number of gaming machines, if any, was available from the list of outlets.

The target quota of 500 outlets selling cigarettes was achieved after the selling status of 927 outlets had been determined. However, analysis of completed responses indicated that packaged liquor outlets without phone numbers listed on the database (39.1% of such outlets) had inadvertently been excluded from the list for randomised selection. In order to remove potential bias due to non-selection of such outlets, phone numbers were obtained for these outlets, and randomly selected packaged liquor outlets without phone numbers on the database were contacted until they comprised 39% of packaged liquor outlets in the sample (thus reflecting their representation among packaged liquor outlets listed on the database).

Of 1230 outlets surveyed, 1062 (86.3%) agreed to answer the first screening question on whether they sold cigarettes, with the remainder either refusing (n=122, 10.1%) or unavailable (n=46, 3.8%) (figure 1). After removing 20 responses that were unusable due to communication difficulties, this resulted in a final sample of 1042 outlets where the selling status was established. Of these 1042 respondents, 954 (91.5%) answered the additional questions applicable to their selling status. Table 2 shows the sample composition, relative to the total number of licences of those types in NSW.

Table 2

Alcohol-licenced retailers in New South Wales: survey sample versus population

Figure 1

Sample details, relative to population of clubs, hotels and packaged liquor outlets. NSW, New South Wales.

Respondent details

In order to understand any obvious variability within licence types, premises that reported that they sold cigarettes were asked to describe their business. All those with club licences described their business as a ‘club’, but outlets with hotel and packaged liquor licences used a variety of names to describe their business. Hotel licences (n=252) most commonly called themselves a ‘pub’ (72.6%, n=183), ‘hotel’ (7.1%, n=18) or ‘bar’ (12.3%, n=31), but also a ‘bottle-shop’ (7.1%, n=18), ‘club’ (0.4%, n=1) and ‘supermarket’ (0.4%, n=1). Packaged liquor licences (n=192) most commonly described themselves as a ‘bottle-shop’ (68.2%, n=131), but also used various descriptions, such as a ‘supermarket’ (16.1%, n=31), ‘general store’ (9.4%, n=18), ‘convenience store’ (2.6%, n=5), ‘café’, ‘marina’, ‘tobacco retailer’ or ‘caravan park shop’ (each 0.5%, n=1).

Analysis

Logistic regression was used to examine associations between (1) selling cigarettes (vs not selling) and (2) stopping selling cigarettes (vs not stopping) and characteristics of the outlet (with OR as effect measure). Linear regression was used to examine associations between rated importance of cigarette sales (on a scale of 1–7) and outlet characteristics (with differences in mean score as effect measure). Independent variables included outlet type, extended trading hours (no/yes), number of gaming machines and remoteness. The linear regression models also included number of staff, distance to the nearest alternative cigarette seller, and in exploratory analysis, selling via a vending machine (vs not selling by vending). After allowing for other variables, selling by vending (48.6% of the 599 sellers who answered all questions) was not significant nor a confounder of other effects in any model (with change-in-estimate criterion of 20%),28 so it was omitted from the final models. Tests for linear trends were performed by substituting the categorical versions of the three relevant independent variables with an ordinal or continuous version of the variable, as appropriate. Ordinal versions were used for ‘number of staff’ and ‘distance to the nearest cigarette retailer’, where respondents had chosen an answer from a range. The ordinal versions for those variables were coded with the left-hand cutpoints (the minimum value from the selected range of values) and with ‘Don’t know/can’t say’ responses coded as missing values. For ‘number of gaming machines’, the exact number of gaming machines was available from each outlet’s licence details, so that number was used to provide a continuous measure. Analyses were carried out using StataV.13.

Results

What proportion of alcohol-licenced outlets sell cigarettes?

As shown in figure 1, 63.6% (663/1042) (95% CI 60.7% to 66.5%) of the outlets surveyed sold cigarettes. Outlet type was significantly associated with selling cigarettes after adjustment for other outlet characteristics (P<0.001) (table 3).

Table 3

Associations between retailer characteristics and selling cigarettes (n=1042)

Clubs were less likely to sell (56.6% selling) than hotels (65.2%) and packaged liquor outlets (68.6%). There were, however, large differences between the selling rates and perceived importance of cigarette sales between packaged liquor outlets describing themselves in different ways. As a result, the category of packaged liquor outlets was further subdivided according to participants’ characterisation of their business type and our knowledge of whether the outlet was owned by a corporate chain or is independent/franchised. This subdivision was based on the assumption that independent/franchised outlets are likely to be able to decide whether to sell cigarettes themselves, compared with corporate owned chains, where the decision is more likely to be made by the corporate owners. This categorisation resulted in five groups of packaged liquor licences: two groups of bottle-shops (corporate owned and independent/franchised), two groups of supermarkets (corporate owned and independent/franchised) and ‘Other’ (n=2, comprising one self-described ‘restaurant’ and one ‘tobacco retailer’).

Compared with other outlet types, corporate chain bottle-shops and independent supermarkets were more likely to sell cigarettes, with respectively 95.6% and 91.5% of each selling (table 3). Chained supermarkets in the sample were almost exclusively Aldi stores (29/30), which do not sell tobacco in Australia. Outlets with more gaming machines (which packaged liquor outlets do not have) were significantly more likely to sell (P trend <0.001) (see table 3). Neither extended trading hours nor remoteness were associated with the likelihood of selling.

Importance of cigarette sales

There was wide variation in the stated importance of cigarette sales among the outlets that sold them. However, there were more outlets rating cigarette sales as ‘unimportant’ (n=263, comprising ratings of 1, 2 and 3) than those rating sales as ‘important’ (n=245, comprising ratings of 5, 6 and 7).

After adjusting for other factors, there was significant variation in the rated importance of cigarette sales between outlet types (P<0.001) (see table 4). Compared with hotels, clubs rated cigarette sales less important (mean difference (MD)=−1.12, 95% CI −1.64 to –0.61)), and independent supermarkets/general stores rated sales as more important (MD=1.42, 95% CI 0.58 to  2.27). Greater importance of cigarette sales was associated with increasing distance to the nearest alternative retailer (P trend <0.001), having more gaming machines (P trend=0.027) and marginally associated with having more staff (P trend=0.082). Level of remoteness and extended trading hours were not significantly associated with rated importance (both P>0.1).

Table 4

Perceived importance of cigarette sales: difference in mean importance scores according to seller characteristics (n=599)

Attitude to stopping selling

When retailers were asked whether they could imagine stopping selling cigarettes, their open-ended responses reinforced the evidence that for many retailers, cigarette sales are not important. Even retailers who rated cigarette sales as most important (6 or seven on the seven-point scale) frequently said that they made little or nothing from cigarette sales, selling cigarettes only as a service to customers and/or out of fear that customers would leave to buy cigarettes. Many also saw the end of cigarette sales in licenced premises as inevitable, with the projected impact being negligible, for example, ‘…we do not make a lot of money in any case’. When asked about customers’ anticipated response if they did not sell cigarettes, while many reported that customers would be upset, a very common additional statement reflected that they thought that customers would get used to it, for example, ‘They wouldn’t mind, there are other facilities nearby’. Others actively favoured ending cigarette sales and smoking in licenced premises because ‘It smells and makes it worse for other customers’.

Who is most likely to stop selling?

There were significant differences between outlet types in probability of stopping selling (P<0.001, table 5). Clubs were most likely to have stopped, with 68 (or 28.0%) of ever-sellers (those still selling plus those who had stopped) having stopped. In contrast, only 19.4% of hotels had stopped selling, and only 5.1% of packaged liquor outlets (though there were substantial variations between different types of packaged liquor outlets; see table 5). After adjusting for other outlet characteristics, clubs were significantly more likely to have stopped selling cigarettes than hotels (OR=3.34, 95% CI 1.94 to 5.75) when adjusted for number of gaming machines and other factors. Outlets with a larger number of gaming machines were less likely to have stopped selling (adjusted P trend <0.001). Compared with outlets in major cities, retailers in inner regional and in outer regional, remote and very remote areas were marginally more likely to stop selling (P=0.057). There was no difference between outlets with and without extended hours in the proportions that stopped selling (P=0.9, table 5).

Table 5

Associations between retailer characteristics and ex-selling (vs current selling) of cigarettes (n=810)

Discussion and conclusion

The study set out to identify the factors associated with the probability of selling and stopping selling tobacco, in order to determine if selling cigarettes is the norm for alcohol-licenced premises (and therefore presumably important) and to provide insight into the reported importance of tobacco sales for different types of licenced premises in different geographic areas. The results can be viewed in the context that British American Tobacco Australia has claimed that ‘The revenue and gross margins generated by sales of cigarettes and tobacco products comprise a major part of business for many Australian retailers, particularly small mixed businesses and tobacconists’.29 Although the industry’s statement does not mention alcohol-licenced tobacco retailers, this study’s findings contradict the industry’s position, particularly with regards to hotels and clubs. Almost half (43.4%) of the clubs surveyed, and more than a third of the hotels (34.8%), did not sell cigarettes, suggesting that they did not expect to obtain a worthwhile return from selling. Even among those who sold cigarettes, more outlets rated sales as ‘unimportant’ (a rating of 1–3) than ‘important’ (a rating of 5–7), with the difference being particularly marked for clubs, where 53.6% rated sales as unimportant, compared with only 30.3% who rated sales as important. The possibility that cigarette sales are not important to the majority of clubs and hotels is reinforced by the high estimated proportion that has stopped selling (28.0% of clubs and 19.4% of hotels).

The study also set out to investigate the attitudes of retailers to selling tobacco. These attitudes are particularly important in view of the lower than expected importance rating for cigarette sales by hotels and clubs—the outlets where alcohol can be consumed and where tobacco sales are so problematic. While there was variability in responses, the open-ended responses reinforced the perceived lack of importance of cigarette sales, which were commonly said to be sold only as a service to customers and/or out of fear that customers would leave to buy cigarettes.

This is the first systematic analysis of the perceived importance of cigarette sales for alcohol-licenced retailers and confirms results from a smaller NSW study that reported retailers who stop selling tobacco report low (or non-existent) profits from selling tobacco.16 While there was variability in the reported importance of cigarette sales in this study, the results suggest that banning tobacco sales in outlets where alcohol can be consumed may not create significant retailer opposition. A large percentage of alcohol-licenced outlets did not sell cigarettes, many have stopped selling (presumably because they did not think it is worth doing so) and, as discussed above, many rate cigarette sales as unimportant. Qualitative comments revealed that many sell cigarettes only as a service to patrons or out of concern that they would lose business to comparable outlets if they stopped selling. Such a finding is not surprising, since the tobacco market share of alcohol-licenced outlets is less than 2% of Australian tobacco sales,24 and even as far back as 2004, cigarettes and tobacco products were estimated to comprise just 1% of sales at hotels, clubs and liquor stores.30 That report, prepared for British American Tobacco Australia, claimed that any changes in the operating environment ‘that lead to a reduction in revenue generated through sales of cigarettes and tobacco products is likely to have a major adverse impact on the viability of many of these retailers’. While these results are limited to NSW, the evidence of apparent low profitability of tobacco sales by retailers is important for other jurisdictions. A tobacco industry website has recently opposed retail regulation by arguing that tobacco retailing restrictions will result in retailers losing non-tobacco-related sales.31 These results are not consistent with that claim for alcohol-licenced outlets and add to evidence from urban corner stores in Pennsylvania discussed earlier that challenges the prevailing assumption that tobacco sales are associated with sales of other products.21

More than 80% of retailers reported that the nearest cigarette retailer was within 1 km, which is consistent with a previous study reporting high density of tobacco retailers in NSW.22 This evidence of the ubiquity of alternative providers suggests that stopping tobacco sales at outlets where alcohol is consumed—through changes to either liquor licencing and/or tobacco retailing legislation—would probably not result in significant inconvenience to smokers. However, not selling tobacco at outlets where alcohol can be consumed (such as clubs and hotels) would reinforce the smoke-free policies at such premises and assist in denormalising smoking. As a result, it is likely to decrease impulse sales at those premises, especially among attempting quitters, and thus assist quit attempts.

The study is subject to some limitations: first, questions relating to selling status asked only about cigarettes and not tobacco more generally. However, we think the likelihood of an outlet not selling cigarettes, but selling other tobacco, would be very low. Second, the final sample of 1042 outlets where selling status was determined over-represents clubs and hotels. This over-representation, however, would not have affected adjusted estimates because models were adjusted for retailer type. Third, bottle-shop and supermarkets were classified by self-description, and this may have led to some misclassification. Fourth, the samples for some categories of outlets (ie, corporate owned supermarket/general store and ‘other’) are small, particularly for the models that report only data on sellers, and thus statistical estimates for these groups should be interpreted with caution.

As far as we are aware, the study is the first systematic analysis of what proportion of alcohol-licenced premises sell cigarettes and stop selling and of the attitudes of owners/managers of those premises to tobacco sales. The large sample and the high response rate suggest that the results are likely to accurately represent the diverse views of the population of tobacco sellers among alcohol-licenced premises. In summary, although alcohol-licenced outlets capture only a tiny percentage of tobacco sales in Australia, they are likely to have a disproportionate effect on attempting quitters. Yet these results, coupled with the very low market share of this retail sector, spread between a very large number of outlets, suggest that tobacco sales are of limited value for most hotels and clubs. Given the role of such outlets in cueing smoking and purchases by lapsed quitters and the apparent low importance of sales of cigarettes for such premises, legislative action to ban tobacco sales at such premises would appear to be justifiable. Based on these results, such an action may engender less resistance than anticipated from those outlets.

What this paper adds

  • Tobacco sales at alcohol-licenced premises are particularly problematic, due to the positive association between alcohol and smoking, particularly for attempting quitters. Yet the tobacco industry argues that tobacco sales are important for the viability of many businesses. Limited previous investigation into why retailers stop selling tobacco has identified low profits from tobacco as a major cause, but it is not clear if tobacco sales are financially attractive for those who continue to sell.

  • There has been no previous systematic study of what proportion of alcohol-licenced premises sell tobacco or the perceived importance of tobacco sales for such retailers.

  • The results suggest that tobacco sales are not financially important for the majority of alcohol-licenced tobacco retailers. More than a third of those outlets do not sell cigarettes (or presumably any tobacco), and among those where alcohol can be consumed, more retailers rated cigarette sales as ‘unimportant’ than ‘important’.

References

Footnotes

  • Contributors SB, ML, KW and SCW contributed to the study design and data collection strategy. SE led the data analysis. All authors contributed to manuscript writing and approved the final version of the paper.

  • Funding This research was funded by Cancer Council NSW.

  • Competing interests None declared.

  • Ethics approval Ethics approval was obtained from the Western Sydney University Ethics Committee.

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

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