Mr. Paul Candon:

I thank the Chairman and committee members for the opportunity to participate here today. I am here in my capacity as a Retail Excellence Ireland board member and also as marketing and corporate services director at Topaz Energy.

Retail Excellence Ireland is Ireland’s largest retail industry body. We represent 1,100 retail companies which operate over 11,000 stores in Ireland. A significant cohort of our members responsibly retail tobacco products. Our members employ 110,000 people.

We wish to register our deep concern at the proposal to introduce plain packaging for tobacco products. The implementation of the proposed legislation will have a profoundly negative effect on our members’ businesses. There is no credible evidence that plain packaging as a policy proposal will lead to a reduction in youth smoking or prevent youth initiation. More consideration must be given to other means of tackling tobacco consumption without severely impacting the responsible sale of tobacco products.

The Australian Government announced that an impact assessment would be conducted as to the effectiveness of the measure in December 2014. We would recommend that it would be prudent to await the results of such an assessment before proceeding further. Several countries have initiated World Trade Organization dispute settlement proceedings against Australia, claiming the Australian plain packaging legislation breaches international trade obligations. A final ruling is not expected before December 2014. Several other countries considering plain packaging as a policy proposal are awaiting the outcome of such proceedings before deciding whether to proceed with the measure. We would consider it prudent to await the outcome of these challenges.

The Government estimates that approximately 20% of all tobacco consumed in Ireland is non-Irish duty paid. This costs the Exchequer in excess of €250 million annually and Irish retailers considerably more. The Government should ensure sufficient resources are provided to the law enforcement agencies charged with tackling the illicit tobacco trade in Ireland. A significant commercial opportunity will be afforded to criminal operators in the illegal tobacco trade to supply to the market tobacco products that are in demand in their pre-plain packaging formats. The introduction of plain packaging will afford a far greater opportunity to criminals to copy the plain package design. The introduction of plain packaging will have a disproportionately negative effect on legitimate Irish retail operators. Plain packaging will damage competition, leading to the commoditisation of tobacco products. Commoditisation will reduce margins, as well as reducing cash flow. This means that consumers will increasingly focus on price, leading to trading down from premium brands. If 25% of current premium smokers were to down-trade to value tobacco, retailers would lose more than €42.5 million turnover annually. This obviously will put an increased pressure on margins, resulting in further job losses. Lower prices might also lead to increased initiation of smoking.

The introduction of plain packaging will also increase the number of job losses in the legitimate retail industry. In 2012, loss in turnover to retailers as a result of illicit sales was estimated at around €450 million. According to AC Nielsen, the total turnover from the sale of tobacco products in 2012 was €1.35 billion. This demonstrates the importance of these products to a significant cohort of our members. With 80% of this turnover going to the Government in excise and VAT, it is also a major contributor to the Exchequer.

A recent report by KPMG on the impact of the introduction of plain packaging in Australia for the six months following the introduction of plain packaging showed there has been no reduction in consumption rates but illicit trade figures have increased by over 13%. A report recently undertaken by Roland Berger on the potential impact of plain packaging for cigarettes in Ireland estimates that in total 1,900 jobs and €125 million could potentially be lost if the measure is introduced. We have serious concerns about the measure and believe there are more appropriate ways for the Minister to achieve his objectives of reducing smoking in Ireland.