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Lucrative Retailer Incentives Increase Cigarette Sales: Report on Five Asean Countries

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Lucrative Retailer Incentives Increase Cigarette Sales: Report on Five Asean Countries LUCRATIVE RETAILER INCENTIVES INCREASE CIGARETTE SALES: REPORT ON FIVE ASEAN COUNTRIES SOUTHEAST ASIA TOBACCO CONTROL ALLIANCE 2019 LUCRATIVE RETAILER INCENTIVES INCREASE CIGARETTE SALES: REPORT ON FIVE ASEAN COUNTRIES Authors Mary Assunta Kolandai and Worrawan Jirathanapiwat Editorial Team Southeast Asia Tobacco Control Alliance (SEATCA) Cover Design and Layout Wendell Balderas Acknowledgements This regional report is developed based on findings of retailer incentives for cigarette advertising, promotion and marketing at points-of-sale (POS) in five ASEAN countries. The study was conducted in Cambodia, Indonesia, Malaysia, Philippines and Vietnam and supported by the Southeast Asia Tobacco Control Alliance (SEATCA). We would like to thank the following country collaborators and researchers: Cambodia: • Mr. Kao Sovandara, Psychology Master Program Operator, Royal University of Phnom Penh • Mr. Phan Chan Peou, Head of Psychology Department, Royal University of Phnom Penh Indonesia: • Dr. Widyastuti Soerojo, Head of Tobacco Control Unit, Indonesian Public Health Association • Ms. Indah Permatasari, Indonesian Public Health Association • Mr. Mouhamad Bigwanto, Vice Secretary General, Indonesian Public Health Association Malaysia: • Assoc. Prof. Dr. Mohamad Haniki Nik Mohamed, Acting Dean, Centre for Foundation Studies, IIUM, Malaysia • Mr. Ho Rhu Yann, President, Malaysian Green Lung Association Philippines: • Ms. Claire Louise Palou Sienes, Research Consultant, Medical Mission Group Hospital, Davao City, Philippines • Ms. Weanne Myrrh R. Estrada, Research Consultant, University Research Center, Adventist University of the Philippines Vietnam: • Nguyen Thi Thu Hien, Thuong Mai University, Vietnam • Tran Kim Anh, Researcher, Thuong Mai University • Hanh Nguyen, Researcher, HealthBridge Canada Vietnam Suggested Citation M.A. Kolandai & W. Jirathanapiwat. Lucrative Retailer Incentives Increase Cigarette Sales: Report on Five ASEAN Countries, January 2019, Southeast Asia Tobacco Control Alliance (SEATCA), Bangkok,w Thailand. © Southeast Asia Tobacco Control Alliance 2019 This document is the intellectual property of SEATCA and its authors. SEATCA retains copyright on all text and graphic images in this document, unless indicated otherwise. This copyright is protected by domestic and copyright laws and international treaty provisions. The information in this document is made available for non-commerical use only. You may store the contents on your own computer or print copies of the information for your own non-commercial use. You are prohibited from modifying or re-using the text and graphics in this document, distributing the text and graphics in this document to others, or “mirroring” the information in this document in other media without the written permission of SEATCA. All other rights reserved. About SEATCA SEATCA is a multi-sectoral non-governmental alliance promoting health and saving lives by assisting ASEAN countries to accelerate and effectively implement the evidence-based tobacco control measures contained in the WHO FCTC. Acknowledged by governments, academic institutions, and civil society for its advancement of tobacco control movements in Southeast Asia, the WHO bestowed on SEATCA the World No Tobacco Day Award in 2004 and the WHO Director-General’s Special Recognition Award in 2014. For more information, visit: www.seatca.org TABLE OF CONTENTS Introduction 1 Types of Retail Stores Surveyed 2 Regular Visits by Company Representatives 2 Contracts with Retailers 3 Tobacco Power Walls and Planograms 5 Types of Incentives Given to Retailers 6 1. Free cigarettes 2. Cash incentive 3. Free merchandise 4. Shopping vouchers 5. Lucky draws and raffles 6. Special social events Violations of the Law 9 1. Sale of single sticks 2. Retailers selling cigarettes near schools Conclusions and Recommendations 11 INTRODUCTION Tobacco companies do not declare how much they spend on advertising, promotions and marketing of their products. Since many countries, in compliance with the WHO Framework Convention on Tobacco Control (FCTC), have banned tobacco advertising, promotion and sponsorship (TAPS), the tobacco industry has shifted its marketing and promotional budget to provide various incentives directly to cigarette retailers. The retailers receive lucrative incentives and have effectively become the advertisers and promoters of tobacco on behalf of the industry. TABLE 1: PROJECTED CIGARETTE STICK SALES (BILLION) 1 2016 2017 2018 2019 2020 Indonesia 257.1 264.8 271.5 276.9 281.0 Malaysia 11.5 11.6 11.8 12.0 12.3 Philippines 91.2 92.3 93.9 95.8 97.8 Vietnam 68.7 70.4 72.5 66.7 68.1 Despite action taken to reduce tobacco use under the WHO FCTC, cigarette sales are increasing in countries (Table 1). Tobacco companies launch new cigarette brands or relaunch old brands regularly and need to advertise and promote them, which they are able to do, partly through retailers who conduct these activities at their retail outlets. The WHO FCTC Article 13 guidelines’ list of examples of tobacco advertising, promotion, and sponsorship (TAPS) includes: “payments or other contributions to retailers to encourage or induce them to sell products, including retailer incentive programs (e.g. rewards to retailers for achieving certain sales volumes).” This report documents incentives given by tobacco companies to retailers in five countries in the ASEAN region, namely, Cambodia, Indonesia, Malaysia, Philippines and Vietnam. Using a cross- sectional study design, retail outlets were identified by multi-stage random sampling, and face- to-face interviews were conducted with key retail personnel (store owner, manager, supervisor, or cashier) using a structured questionnaire. The Indonesia survey was conducted in 2016 in four cities, namely Bogor, Depok, South Tangerang, and Bekasi. Data collection for the other four countries was carried out between April and June 2018. The survey found many similarities in the types of incentive the tobacco companies provided to retailers, as well as some differences depending on the type of retailers. Table 2 shows the main tobacco companies in each of the five countries; the three top transnational tobacco companies, namely Philip Morris International (PMI), British American Tobacco (BAT) and Japan Tobacco International (JTI) operate in all five countries. TABLE 2: TOBACCO COMPANIES OPERATING IN COUNTRIES Cambodia BAT, Heng Heng Import Export and Viniton Group, Indobest group, Huotraco Ltd Indonesia HM Sampoerna PT (PMI), Gudang Garam PT, Djarum PT, Bentoel (BAT), Wismilak, Malaysia BAT, JTI, PMI Philippines Philip Morris Fortune Tobacco Corp., JTI Philippines Inc. Vietnam Vinataba, BAT, Dong Nai Tobacco Company, PMI, JTI u 1 Euromonitor International Passport, 2017 1 | Lucrative Retailer Incentives Increase Cigarette Sales: Report on Five ASEAN Countries Lucrative Retailer Incentives Increase Cigarette Sales: Report on Five ASEAN Countries | 2 TYPES OF RETAIL STORES SURVEYED Figure 1 provides the types of retailer stores covered in the survey across the five countries. Grocery shops, convenience stores and coffee shops/restaurant were the most common types of stores surveyed, and these are also the ones most targeted by the tobacco companies in the incentive scheme. FIGURE 1: TYPES OF RETAIL STORES IN FIVE COUNTRIES The retail stores can be divided into two broad types: 1) convenience stores and supermarkets which belong to a retail chain of stores throughout a country, and 2) independent retail stores such as traditional grocery shops and coffee shops/cafes which are owned by individuals. Both types are important targets of tobacco companies. REGULAR VISITS BY COMPANY REPRESENTATIVES Overall, at a minimum, tobacco company representatives visit retailers once, sometimes twice, a week. These visits were conducted to check pack displays, promote their cigarette brands, monitor cigarette sales, and deliver new stock. In Vietnam the stores that recently joined the program were more frequently visited by staff (1-2 times/week) compared to those in the program for a longer time. Sales representatives came to these stores to see if they displayed cigarettes and other relevant images according to the deal, to update on their sales situation, and to run promotional events for customers at POS. In Malaysia, while the representatives visited most of the retailers (75%) at least once a week, they visited eateries and independent groceries about 2-3 times per week. While the sales representatives checked on stocks and planograms2, they also checked the ‘expiry dates’ of existing batches of packs on shelves as the ‘expired cigarettes’ were claimed to be “less tasty”. Expiry dates have never been applied to tobacco products and the tobacco industry have routinely told regulators they need a long time to clear ‘old stock’ from the shelves, but never defining what is meant by ‘old stock’. u 2 A planogram is ‘a diagram that shows how and where specific retail products should be placed on retail shelves or displays in order to increase customer purchases...it is a skill used in merchandising and retail space planning’ (from Rouse, M., Planogram, retrieved from https://whatis.techtarget.com/definition/planogram (accessed on 24 November 2018)). 1 | Lucrative Retailer Incentives Increase Cigarette Sales: Report on Five ASEAN Countries Lucrative Retailer Incentives Increase Cigarette Sales: Report on Five ASEAN Countries | 2 CONTRACTS WITH RETAILERS Some tobacco companies require retailers to sign contracts. The type of contract varies from
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