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February, 2017:

Study: CVS Health’s tobacco halt reduces overall cigarette purchasing

Author
Daphne Howland @daphnehowland

Published
Feb. 17, 2017

http://www.retaildive.com/news/study-cvs-healths-tobacco-halt-reduces-overall-cigarette-purchasing/436470/

Dive Brief:

• Since CVS stopped selling tobacco products in 2014, Americans are now less likely to buy cigarettes, with CVS shoppers in particular 38% less likely to buy cigarettes anywhere, according to a study conducted by CVS researchers recently published in the American Journal of Public Health.
• Those who purchased three or more packs per month were more than twice as likely to stop buying cigarettes altogether, according to the study.
• The CVS researchers analyzed data from a nationally representative survey of consumers’ cigarette purchasing behavior at drug, food, big box, dollar, convenience and gas station retailers prior to and one year following move, according to a press release.

Dive Insight:

CVS Health is eager to tout its findings that its decision two years ago to cease tobacco sales, leaving an estimated $2 billion worth of business behind, has helped diminish tobacco sales. The research confirms and expands on initial impact data the retailer released a year after the move.

“When we removed tobacco from our shelves, a significant number of our customers simply stopped buying – and hopefully smoking – cigarettes altogether instead of just altering their cigarette purchasing habits,” CVS Chief Medical Officer Troyen A. Brennan, M.D., said in a statement. “This research proves that our decision had a powerful public health impact by disrupting access to cigarettes and helping more of our customers on their path to better health.”

Several medical experts and anti-tobacco advocates have pushed other retailers to follow in CVS’s footsteps, but so far its main rivals have resisted the peer pressure. At its shareholders meeting in January, for example, many more shareholders pressed Walgreens on its cigarette sales than on its merger outlook. One noted the incongruence of Walgreens’ position as a healthcare provider (especially one offering products and services to help people quit smoking).

Executive chairman James Skinner said the company spends a lot of time “trying to convince people to stop smoking … but we also respect the choice of our consumers — that’s also part of our decision over time.”

While CVS’s decision to halt tobacco sales has strengthened its position as a health care provider, the company hasn’t done enough to support its other retail sales, analysts say. Fourth quarter revenue in CVS’s retail/long-term care pharmacy increased 4.7% to $20.8 billion, largely driven by the addition of Target pharmacies acquired in December 2015, the company said. Q4 pharmacy same-store prescription volumes rose 2.0% on a 30-day equivalent basis, and Q4 same store sales decreased 0.7%, with pharmacy same store rising 0.2% but front store same-store sales falling 2.9% on softer customer traffic and efforts to rationalize promotional strategies (partially offset by an increase in basket size).

GlobalData Retail managing director Neil Saunders said earlier this month that his firm’s analysts were “surprised at the complete lack of evolution in the format and the paucity of innovation” in some CVS stores. “An attempt to dial back on front of store promotions and difficulties in driving traffic to shops diluted sales on the pure retail side,” Saunders said in a note emailed to Retail Dive. “However, in our view, these factors are simply part of the wider malaise in CVS’s store-based business. We have, for a long while, been critical of CVS’s lack of thinking in retail — an opinion that remains largely unchanged.”

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Slovenia adopts plain packaging

Congratulations to SFP Coalition Partners No excuse Slovenia and Slovenian Coalition for Public Health, Environment and Tobacco Control for their tireless advocacy to support this legislation in the last year.

http://www.smokefreepartnership.eu/partner-news/item/slovenia-adopts-plain-packaging

On 15 February the Slovenian Parliament adopted the draft law proposed by the government without a single vote against. Plain packaging is expected to enter into force in 2020.

Briefly, the new Slovenian Tobacco law includes:

– Plain packaging (65% coverage with health warnings and quitting information)
– Introduction of license for selling tobacco products,
– Total display and Tobacco advertising, promotion and sponsorship (TAPS) ban
– Prohibition of selling tobacco products with aromas and other additives
– Prohibition of smoking in cars with a minor present
– Prohibition of smoking indoors including E-cigarettes
– Mystery shopping/test purchasing by underage,
– Measures of prevention of illicit trade

PM Thailand facing USD 2.8 billion in fines

Philip Morris Thailand was charged with underpaying import duty on cigarettes shipped from Indonesia, accusations that come one year after similar charges were filed over Philippine shipments, company documents show.

http://www.tobaccojournal.com/PM_Thailand_facing_USD_2.8_billion_in_fines.54073.0.html

Philip Morris International’s (PMI) Thai subsidiary faces fines totalling THB 100.6 billion (USD 2.85 billion) in the two cases, PMI said in its annual report filed with the US Securities and Exchange Commission. The latest charges filed on 26 January in Bangkok Criminal Court concern cigarette imports from Indonesia between 2002 and 2003, the document shows. The Public Prosecutor is seeking fines of THB 19.8 billion. A procedural hearing is scheduled for April.

A year ago, PM Thailand was charged over cigarette shipments from the Philippines between 2003 and 2007. Fines in that case amount to THB 80.8 billion. Trials are scheduled to begin late this year, the PMI filing shows.

Plain packs coming in 2020

Parliament unanimously approved a law to ban advertising for tobacco products and require uniform packaging from 2020, Reuters reported.

http://www.tobaccojournal.com/Plain_packs_coming_in_2020.54074.0.html

Slovenia joins countries like Australia and the UK in requiring a standard colour and branding on tobacco packaging. Roughly one-in-four Slovenians aged 15 to 64 smoke. Health Minister Milojka Kolar Celarc reportedly said the country wants to reduce the smoking rate to below 5 per cent of the adult Population.

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Philip Morris Facing More Thai Tax Evasion Charges

By Bryan Koenig https://www.law360.com/articles/891973/philip-morris-facing-more-thai-tax-evasion-charges

Law360, Washington (February 14, 2017, 6:38 PM EST) — Philip Morris International Inc. announced a widening Tuesday of the government of Thailand’s long-running criminal investigation seeking billions of dollars in potential penalties based on allegations the company deliberately shorted cigarette import prices to avoid full taxation.

The charges announced in Philip Morris’ annual report with the U.S. Securities and Exchange Commission were filed Jan. 26 and follow charges levied against the company a year earlier. While the January 2016 charges are seeking more than $2 billion in fines purportedly stemming from imports from the Philippines, the new charges cover cigarettes imported from Indonesia, Philip Morris said in the report.

“The government is seeking a fine of approximately THB 19.8 billion (approximately $562 million). The first hearing, which will focus on preliminary procedural matters, is scheduled for April 2017,” Philip Morris said in the filing. “PM Thailand disagrees with the allegations and believes that its declared import prices are in compliance with the Customs Valuation Agreement of the [World Trade Organization] and Thai law.”

According to the cigarette giant, the Thailand Department of Special Investigation, or DSI, probed Indonesian imports and the subsequent excise taxes and customs duties paid from 2000 through 2003. The late-January charges the public prosecutor filed in Bangkok Criminal Court also targeted a Thai ex-employee, Philip Morris said.

The company stands accused of working with the employee “with the intention to defraud the Thai government” on “under declared import prices of cigarettes” from 780 import entries between January 2002 and July 2003, all to avoid full taxation and duties, according to the filing.

The charges filed last year against Philip Morris (Thailand) Ltd. and seven current and former workers in the same court followed an investigation into the period from 2003 to 2007, according to the filing. Those charges cover allegedly “under declared import prices” from 272 entries brought in from the Philippines from July 2003 to June 2006, Philip Morris said.

“The government is seeking a fine of approximately THB 80.8 billion (approximately US$2.29 billion). The case is in the pre-trial evidentiary phase. Trials are scheduled to begin during the last quarter of 2017,” the company said.

“PM Thailand believes that its declared import prices are in compliance with the Customs Valuation Agreement of the World Trade Organization and Thai law and that the allegations of the public prosecutor are inconsistent with several decisions already taken by Thai Customs and other Thai governmental agencies.”

The Thailand charges are not the end of Philip Morris’ international tax woes.

Tuesday’s filing also discussed a South Korean Board of Audit and Inspection probe into whether inventory changes by cigarette companies like Philip Morris Korea Inc. complied with the country’s tax laws in the run up to a Jan. 1, 2015, cigarette tax increase. According to the filing, the audit wrapped up in November with the assessment of underpaid taxes and penalties. In order to avoid “nonpayment financial costs,” Philip Morris’ Korean affiliate paid the full amount of taxes assessed to the tune of about $185 million, according to the company.

Philip Morris also reported an early 2017 demand for around US$46 million total from other government authorities. The company vowed to appeal the assessments, while noting that the matter has been referred to the public prosecutor, who will investigate the potential for criminal charges against the company and others.

“If the public prosecutor decides to prosecute, it may seek up to three times the underpaid tax for company criminal penalties and up to five times the underpaid tax for individual criminal penalties,” the company said. “PM Korea believes that it has paid cigarette-related taxes in compliance with the South Korean tax laws.”

South Korea’s Ministry of Strategy and Finance has also filed criminal charges against the country’s Philip Morris unit and its managing director, according to the filing, which characterized the charges as allegations that it went over monthly product withdrawal restrictions imposed by the ministry. The public prosecutor will conduct an investigation into that complaint and make a decision about pursuing a case, according to Philip Morris, which noted disagreement with the allegations.

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Shisha bars to be banned

The government soon will announced a complete ban on commercial use of shisha to protect the country’s youth, according to the Pakistan Observer.

http://www.tobaccojournal.com/Shisha_bars_to_be_banned.54070.0.html

Shisha sales and hookah use in bars, cafes and lounges would cease. Shisha sales would be banned in bazars, the Observer said. Authority for the expected ban from the Ministry of National Health Services, Regulations and Coordination is contained in the Prohibition of Smoking and Protection of Non-smokers Health Ordinance of 2002, the newspaper said on its website.