6|Retail News|December 2013|www.retailnews.ie
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PLAIN PACKAGING TO COST 1,900 JOBS A NEW study estimates that the introduction of plain packaging on cigarettes in Ireland could put up to 1,900 jobs and €125m in tax revenues at risk. The study by Roland Berger Strategy Consultants, commissioned by Philip Morris International (PMI), measures the potential economic impact of plain packaging and forecasts that all legal segments of the tobacco market in Ireland could lose significant market share, whereas the illicit market could grow by up to 40%. This is particularly alarming since the illicit market share in Ireland is already one of the highest in Europe. In 2012, about 3.7 billion cigarettes were sold in Ireland, 45% below the number sold in 2002. A key reason for this is a thriving illicit cigarette market. The tobacco sector in Ireland currently accounts for about 5,500 jobs in manufacturing, wholesale, distribution and retail. It is a major driver of tax revenue of about €1.4 billion per annum. “Most job losses are not expected in the tobacco sector, but rather in the rest of the economy and sectors such as retail,” said Patrick Mannsperger, Partner at Roland Berger Strategy Consultants. “Tax losses are likely to translate into a significant contraction of the Irish economy, much higher than would be expected in ‘normal’ times, i.e. without the current
financial crisis, the tough austerity programmes and the deficit limits Ireland faces today and in the near future. The likely tax losses due to plain packaging are particularly worrying since taxation of tobacco products accounts for almost 3% of the Irish government’s total revenues, far above the EU average.” The report concludes that: • Plain packaging could shift the tobacco market from a highly differentiated product market towards acommoditised market and could lower consumers’ willingness to pay for legal cigarettes by about 17%; • Plain packaging is likely to lead to strong price competition triggered by illicit market suppliers. This will put pressure on legal prices, and all legal segments of the tobacco retail market could lose significant market share; • Tax revenue under plain packaging will likely decline by up to €125m, compared to a situation without plain packaging; • Up to 1,900 jobs could be lost, most of them (about 88%) not in the tobacco sector but in the rest of the economy, triggered by the potential loss in tax revenue and the negative growth effects induced on the Irish economy;
Pictured are (l-r): Damien English; Patrick Mannsperger, Partner at Roland Berger Strategy Consultants; and Joe Sweeney, President, NFRN.
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The illicit market could grow by about 40%, i.e. from about one billion sticks in the status quo without plain packaging to 1.4 billion sticks. The authors point out that these effects will take place gradually. The full effect of plain packaging, therefore, is likely to materialise over a few years after its introduction. The study calls for the evaluation of plain packaging regulation, according to the Irish Regulatory Impact Assessments (RIA) standard to achieve “better regulation”. Key questions guiding a comprehensive regulatory impact assessment of plain packaging in Ireland would be: • Is plain packaging effective in reducing smoking prevalence, smoking initiation rates, as well as smoking intensity (the number of cigarettes smoked
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per capita)? Is plain packaging a proportionate way to achieve these goals? Is there a better way to achieve the same goals? Good tobacco regulation, the study argues, should help achieve predefined health goals without harming tax revenue, economic operators (for example by impairing intellectual property rights of tobacco manufacturers) and the economy as a whole. “We have shown how the introduction of plain packaging would deprive the economy from tax revenues due to consumers’ substitution of legal products with cheaper and illicit products,” the report concludes. “Legitimate health goals could be pursued through tobacco control measures that, unlike plain packaging, have proven effective without harming tax revenue.”
Musgrave Group Wins Sustainable Energy Collaboration Award MUSGRAVE Group has been named the winner of the Sustainable Energy Collaboration Award for its support to 650 SuperValu and Centra stores nationwide, at the 10th annual Sustainable Energy Awards. The project included piloting SEAI’s Energy Map training in 2008 as well as technology retrofits and store upgrades. “Energy management is embedded in the culture of our retail partners,” said Ciaran McNally, Musgrave Group. “The Musgrave/SEAI Energy Map programme is the largest in Ireland within the SME sector with sustainable savings of up to 30% equating to over €2m annually for our retailers, and a
target of €9m projected.” Hosted by the Sustainable Energy Authority of Ireland (SEAI), and sponsored by Electric Ireland, the Awards recognise and reward excellence in energy management. Overall energy savings of €750m have been made by the 600 organisations that have participated in the Sustainable Energy Awards over the last decade. “These organisations have made massive savings. Given that between them they employ 400,000 people it is impossible to underestimate the importance of this achievement,” said Dr Brian Motherway, Chief Executive, SEAI.
The Musgrave winning group are pictured collecting their Award with Pat O’Doherty, Chief Executive, ESB; Brendan Halligan, Chairman, SEAI; and Minister for Communications, Energy and Natural Resources, Pat Rabbitte TD.