The group behind the Londis and Budgens convenience store chains says tobacco sales have plunged since new rules came into force which mean cigarettes must be sold in standardised packaging bearing graphic warnings of the dangers of smoking.
Booker, the cash and carry group which has agreed to a £3.7bn takeover by Tesco, said tobacco sales had fallen nearly 10% in its second quarter. The fall in demand for cigarettes weighed on overall sales, which grew by 1.1% in the 12 weeks to 8 September. Stripping out tobacco, sales were up almost 6% over the period.
“Tobacco sales continued to be adversely impacted by changes in tobacco legislation,” Booker said in its second-quarter trading update.
Under EU rules that came into force in May, all cigarette packs must contain at least 20 cigarettes to make sure they are big enough to display health warnings covering 65% of the front and back. The brand name is restricted to a standard size, font and colour.
The measures are designed to prevent young people taking up the habit, and to cut the number of smokers across the EU by 2.4 million.
Deborah Arnott, chief executive of the campaign group Action on Smoking and Health, welcomed the fall in cigarette sales and said it was a sign of the diminishing importance of tobacco to retailers.
“It’s excellent news that this large wholesaler is reporting such a substantial fall in tobacco sales,” Arnott said. “While it will be many years before we see the full impact of plain packaging policy today’s results show that removing glitzy visual tobacco branding and focusing on the disastrous health impacts of smoking has been an important public health measure.”
Booker agreed in January to a £3.7bn takeover by Tesco, Britain’s biggest supermarket chain. The proposed deal is currently the subject of an in-depth investigation, after the competition watchdog said it could result in higher prices for shoppers in about 350 areas across the UK.
As well as supplying convenience chains including Premier, Budgens and Londis, Booker operates the Makro cash and carry business. It also serves numerous high street restaurant chains, such as Carluccio’s, Wagamama, Byron and Prezzo, a growing part of the market that Tesco wants to tap.
Marks & Spencer, most of the cinema chains in the UK, and the prison service in England and Wales are all counted among the group’s customers.
The Competition and Markets Authority is expected to make a final decision on the deal by Christmas.
“Booker Group continues to make good progress,” said Charles Wilson, the chief executive, commenting alongside the trading update. “The competition review of the planned merger with Tesco is progressing. We continue to help our retail, catering and small business customers prosper through improving our choice, prices and service.”
David Alexander, lead analyst at the consultancy Global Data, said the trading update suggested the Booker business was in healthy shape.
“It continues to be the grocery sector that weathers the storm of rising prices and squeezed household finances better than non-food retail. With Tesco keen to get a slice of Booker’s restaurant ties, it will be heartened by the news that both the catering and retail sides of the business performed well.”
