I had an indie on the helpline complaining that Co-ops near him were selling cigs below recommended retail price (rrp). Mark Wilson in Nottingham sells his at manufacturers’ rrp but has had customers telling him the Co-op is cheaper.
He cited premium brand Lambert & Butler Silver, where a regular customer told him he could get it 25p cheaper at the Co-op, and value brand Players Superkings, which Co-op was selling for about £8 versus Mark’s £8.70.
Mark’s point is that it isn’t ethical for the Co-op to price-cut a product when much recent legislation has been passed to drive down smoking rates. He says: “It doesn’t sit well with their mission statement.” (This says in part: “Members believe in the ethical values of honesty, openness, social responsibility and caring for others”.)
Mark is also irked that customers have accused him of being too expensive (he has resorted to showing them his manufacturers’ price list). It’s a bit ironic, because many retailers will add a bit on the rrp so that they can make a tad more, so Mark is actually cheaper than most.
I put all this to the Co-op and the response was: “Co-op takes its responsibilities very seriously, and fully complies with tobacco and electronic cigarette legislation.”
I did a bit of research by asking retailers on the closed Booker symbol site and Nisa Partners’ forum whether they had experienced anything similar, and quickly discovered that many were well aware of what they called discounting.
One retailer wrote: “My understanding is that JTI and Imperial have done a deal that involves sales and overriders with the Co-op. In simple terms, Co-op sells at below rrp, then if they hit a predefined target they get a huge windfall.
“Second part is that cigs are a major draw and by selling at below rrp the Co-op gets the customers in and they buy other things. I am reliably informed that the way the Co-op look at it is not an individual margin on a product, but the basket spend.”
I also quickly realised that a lot of deals are done between head offices of buyers and suppliers and therefore rrps vary even in groups within groups.
However you look at it, tobacco is an awkward/difficult/complicated subject.