Imperial Tobacco Canada Ltd. has denied starting a price war for cigarettes in the Maritimes despite concerns by some store owners, another tobacco company and the Canadian Cancer Society.
The reaction comes after imperial-tobacco discounting-program, called the expansion preferred pricing program, in November. It has been offered to about one-third of retailers in Nova Scotia.
As a result, some cigarettes are being sold for as much as 50 cents less per package in 621 stores across the Maritimes.
Sid Chedrawe, a convenience store owner in Dartmouth, N.S., said he was not invited to participate in the program.
“You are only given the opportunity to join this program by invitation and there’s just something that seems at odds with fair competition rules that we have here in Canada,” he told CBC News.
Eric Gagnon, a spokesman for Imperial Tobacco, said the program is designed to encourage competitive pricing, and it’s up to store owners to decide how much of a discount — if any — is offered to customers.
“Some of them will have a benefit, which is a reduction in the price they pay,” Gagnon said.
“Even before the program, the prices of tobacco products were not the same in all the stores. It was all based on the margin that the retailers themselves wanted to take.”
He refused to say what criteria was used to select stores for the cheaper cigarettes.
Chedrawe said there’s no question he will lose business when smokers start finding which stores sell the discounted cigarettes — such as the one across the street from his.
“Fifty cents is a huge difference, and they will go down the road, across the street or across town for that,” he said.
“It’s just the way it is. It’s like gas. People will drive all the way to Sackville because they think they can get gas for a penny cheaper.”
Cancer society reacts
JTI-Macdonald Corp., one of Imperial Tobacco’s largest competitors, sent a letter to its retailers that said Imperial Tobacco’s new program “raises serious legal issues under the federal Competition Act.”
“ITCO [Imperial Tobacco Company] is asking you to reduce your margin on its premium brands, alleging that it will increase traffic into your store,” said the letter, obtained by CBC News.
“You will lose those adult consumers seeking the lowest-priced cigarettes unless you drastically reduce your own profit margin in what is the fastest-growing segment.”
Chedrawe said what Imperial Tobacco is doing is not how a free market should operate.
“A company should not be allowed to control the destiny of retailers. They cannot just randomly select people and say, ‘We will let you do this,'” he said.
“From a retailer’s perspective, the people who are not on this program seem to take it on the chin because if two retailers across the street from each other — one has it and one doesn’t — the one who doesn’t, people may perceive that retailer as being someone who’s gouging and overcharging.”
Meanwhile, the campaign has also caught the attention of the Canadian Cancer Society, which said the issue will be dealt with at the national level.
“The Canadian Cancer Society supports a total ban on all promotional measures put forth by the tobacco industry that are intended to increase tobacco sales and thus consumption,” said Maureen Summers, executive director of the society’s Nova Scotia division.
“We will be working with our national public issues office to move this issue forward to see what we can do with provincial and federal governments in terms of strengthening the Tobacco Act and legislation that would restrict this kind of activity and promotion from the tobacco industry.”