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Eyvind Dahl owns Dahl's Coin Laundry & Convenience in Renfrew, Ont.

The ups and downs of tobacco 

After a surge in sales during the COVID-19 lockdown, how do c-stores keep smokers coming back for more?

Eyvind Dahl owns Dahl's Coin Laundry & Convenience in Renfrew, Ont.

Eyvind Dahl owns Dahl’s Coin Laundry & Convenience in Renfrew, Ont.

As Canada locked down in the wake of the COVID-19 pandemic, Eyvind Dahl noticed something at his Renfrew, Ont. c-store went up: tobacco sales. 

Dahl, the owner of Dahl’s Coin Laundry & Convenience, attributes the increase in tobacco purchases to the closure of First Nations’ borders in the province, a protective measure to fight the coronavirus. “When they closed the reserves, our tobacco sales more than doubled,” says Dahl. 

He notes that sales of Imperial tobacco alone jumped from 50 to 100 cartons a week. Hand in hand with that increase in business came a surge in impulse purchases. “All my categories shot up,” says Dahl. “We were so busy it was crazy.”

 Surge then slide

Screen Shot 2020-10-27 at 10.40.46 AMDahl was not alone in seeing a surge in tobacco. According to a survey conducted by the Ontario Convenience Stores Association (OCSA), retailers throughout Ontario showed an increase in tobacco sales that ranged from 10% to more than 30%. The survey of the association’s 6,000 members also found that proximity to a reserve played little role in the booming business. Sales increased across the board, and almost half of the stores surveyed were more than 30 kilometres from the closest reserve. Dahl’s Coin Laundry & Convenience is an hour away from the nearest First Nations community. 

The boom has been temporary, however. “Now that the reserves are back open, sales are going down, down, down,” says Dahl. “It’s going back to normal, which shouldn’t be normal.”

The issue of contraband tobacco has been a significant one for retailers, particularly in Ontario. “The illegal cigarette market has been left unchecked for far too long,” says OCSA CEO Dave Bryans, who is based in Oakville. “This can’t go on. In Ontario, 30 to 60% of butts swept are contraband.”

The OCSA is calling on the provincial government to develop an integrated plan to address contraband concerns and other tobacco issues. “The survey demonstrates a need to work with the Ontario government to develop a tobacco strategy from pricing, formats, promotions and incentives to protect small businesses as well as government’s health policies,” says Bryans.

The Convenience Industry Council of Canada noted a similar surge amongst its members. During a recent interview with CSNC, president and CEO Anne Kothawala said CICC is engaging “Ernst & Young to put together a comprehensive study on contraband tobacco across the country. We need much stronger public policy to address this issue.”

 Competing with contraband

Until then c-stores are looking for ways to enhance tobacco sales. In the current environment, productivity is paramount, says Anthony Ruffolo, vice president, McCowan Design & Manufacturing Limited in Toronto. “Plain packaging has definitely made it more difficult to vend the product quickly. You need to be more efficient and organized.”

Products like McCowan’s secure undercounter tobacco cabinets can help. This may also free up the back wall for new opportunities, space often previously dedicated for tobacco products. “There is an ability to generate profits off the back wall. You may even be able to sell advertising,” says Ruffolo. 

Sara Clarkson, president of Storesupport Canada in Mississauga, points out that helping people work through the plain packaging maze will build customer loyalty. “There is still lots of confusion regarding cigarette brands with the start of plain packaging. Knowing what brands to recommend is key and ensuring stock is available of those brands for your regular customers is also of huge importance.”

Bryans recommends c-stores promote the least expensive products they have in inventory as a way of competing with First Nations’ retailers at a basic level. 

While that will attract some new customers and keep others coming back, there is no way c-stores can compete head on with contraband sales, notes Dahl. A carton of cigarettes from the reserve is $20. His cheapest brand is $120. “It’s a huge difference. I can sympathize with the customer.”

The focus on tobacco sales includes another harsh reality for c-stores: the category is declining.

Bryans notes that c-stores sell 99% of all legal cigarettes and sales are declining 1.5 to 2% a year. “That is a huge concern for the channel. The time has come for a task force to review the tobacco business in Canada.”

Filling the void

One solution is to look for options that can replace tobacco. Vaping seemed a promising category and the profit margin is greater than tobacco. The product is also very popular, but there are concerns about safety and increasing regulations that are undoubtedly affecting retailers.

Many would like to see c-stores be able to sell alcohol, and the industry has been lobbying the government and raising public awareness for the last seven years to encourage a move to an open retailing market. Doug Ford’s Progressive Conservative government has promised that market will soon be a reality in Ontario, but the wait continues.

Ruffolo also recommends retailers look for products and services that set them apart, such as foodservice or local products. “You need to draw in new customers. The more you know your customers, the more you will be able to retain them.”

It’s also critical to remind customers—through signage, conversation, and any other means—that c-stores offer what competitors, from larger stores to smoke shacks and vape shops, do not. That message resonates more clearly and convincingly in a COVID-19 world, notes Clarkson. “With access to grocery stores being more difficult with line-ups and extra time needed to shop, quick convenience is more important than ever. Ensuring staples are in stock and healthy snacks will promote a quick stop at the convenience store.” 

 

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Coca-Cola recovery continues as it grows leaner in pandemic

Coke-Facebook-delivery-360x203Coca-Cola measured gradual improvement in the third quarter as it focused on emerging leaner from the global pandemic.

Revenue fell 9% to US$8.7 billion, edging out Wall Street expectations of $8.4 billion, according to analysts polled by FactSet. It was far better than the 28% drop in revenue in the second quarter.

Net income was $1.7 billion. Earnings, adjusted for one-time items, fell 2% to 55 cents per share. That also outpaced analyst forecasts of 46 cents.

Coke has been decimated with the closure of arenas, restaurants, theatres and other public places where it books about half of its revenue.

It has been making up for some of that damage as people buy more beverages, such as orange juice, at home. However, sales of sparkling soft drinks fell 1% in the July-September period; sales of trademark Coca-Cola grew 1% for the quarter. But other beverages struggled. Sales of enhanced water and sports drinks dropped 11% and tea and coffee sales were down 15%, hurt by closures of Costa retail stores.

So far this month, sales based on unit cases are seeing single-digit declines compared to last year; in April, those sales were down 25%.

Chairman and CEO James Quincey said the company had accelerated a planned reorganization that would put more emphasis on fast-growing brands.

In August, the company began offering voluntary buyouts to around 4,000 people, which it hopes will reduce the number of people it eventually lays off. Coke is reducing the number of individual business segments from 17 to nine.

Coca-Cola Co. also announced last week it was retiring several products this year, including Tab, Zico coconut water, Diet Coke Fiesty Cherry and regional offerings such as Northern Neck Ginger Ale. In July, the company announced it would retire Odwalla juices.

Coke plans to reduce its brands by half, to 200.

Coke said it would use the savings to invest in growing brands like Minute Maid and Simply juices and fund the launch of new products like Topo Chico Hard Seltzer, Coca-Cola Energy and Aha sparkling water.


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Health Canada recalls more hand sanitizer products

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Health Canada continues to add new products to its growing list of recalled hand sanitizers, included a product is has deemed counterfeit.

Hand sanitizer is an important category for c-stores and the ideal last-minute purchase at check-out.

Most recently, Health Canada warned a counterfeit version of the authorized Daily Shield hand sanitizer had been found for sale at a Dollarama store in Thunder Bay.

The product may not be effective at killing bacteria and viruses, and may pose serious risks to health.

It also says the product is suspected to contain methanol, which is not authorized for use in hand sanitizers and could cause severe adverse reactions or death when ingested.

The counterfeit version is labelled with NPN 80098979, Lot 6942; Expiry May 2023 and is sold in a 250 mL format.

The agency also recently pulled two Sanix products for containing methanol: Prairie Potions’ Purify Hand Sanitizer and Antibacterial Spray.

Last Best Brewing and Distilling Hand Sanitizer and Rocky Mountain Soap Company’s Nomad Hand Sanitizer (Lemongrass) are both being recalled for missing risk statements, in additions to containing unauthorized technical-grade ethanol.

Since June, Health Canada has recalled more than 100 hand sanitizer products, often for containing unauthorized ingredients or improper labelling. For the latest recalls, visit the Health Canada website.

To find out if the hand sanitizer you’re selling is safe, CLICK HERE to search by brand name. 


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PepsiCo Beverages to distribute Evian in Canada

PepsiCo Beverages Canada and Danone Waters of America (DWA), the U.S. and Canadian importer and distributor of Evian natural spring water, have entered into an exclusive alliance for PepsiCo to distribute Evian in Canada.

As of January 1, 2021, PepsiCo Beverages Canada will sell, distribute, and merchandise Evian across Canada.

“We are thrilled about this new partnership with PepsiCo Beverages Canada,”Henri de L’Épine, CEO of Danone Waters of America, said in a release . “Their extensive Direct-to-Store Delivery system, strong selling capabilities and a complementary brand portfolio will undoubtedly increase Evian’s ability to serve our business partners who want to offer Canadian consumers an exceptional natural spring water.”

“In the bottled water category, Evian has thrived as a premium and innovative brand,” said PepsiCo Beverages Canada president, Richard Glover. “This alliance plays an important role in PepsiCo’s overall hydration strategy and enables us to use our distribution networks and sales capabilities to accelerate the growth of Evian in the Canadian marketplace.”

The company said that PepsiCo’s presence in all key channels will allow Evian, which has a portfolio of single serve and multi-pack options, to further reach consumers in both the retail and foodservice segments.


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Vapers, smokers take a hit as N.L. budget focuses on prevention

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If you took up vaping to avoid the taxes on cigarettes, your luck just ran out.

A 20% tax on vaping products was a key feature of the Newfoundland and Labrador budget September 29, which aimed to focus as much as possible on community health and prevention.

Vaping has so far escaped the province’s sin tax net, even though research suggests the practice can present significant health risks, especially for teens and young adults.

The province also added an extra 10 cents in taxes per gram of loose tobacco and five cents per cigarette.

The budget also allocated $1.7 million for school initiatives, awareness campaigns and cessation programs to help reduce tobacco use and vaping.


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How to prevent disruptions in food supply chains after COVID-19

By John G. Keogh, strategist, advisor, academic researcher, University of Reading

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Almost all businesses involved in the food supply chain have experienced effects ranging from a mild shock to severe disruptions during the COVID-19 pandemic, and further disruptions may be ahead during the second wave.

Yet not all organizations have learned critical lessons, and history shows us some companies are destined to remain unprepared for the next waves.

Many companies have taken decisive action to survive the pandemic and enhance their supply chain resilience. In doing so, they are protecting their interests and those of their business customers or consumers. We believe that successful firms are taking what’s known as a systems thinking approach to enhance food supply chain resilience.

In the systems engineering world, systems represent the interconnected complexity of ecosystems that are connected both internally and externally.

For example, a food production business is connected to numerous ecosystems internally and to those of their suppliers, business partners and customers.

Businesses have varying degrees of inter-dependence on infrastructure ecosystems outside of their direct control, such as the power grid, telecommunications and internet service providers. Other ecosystems include banking and insurance, logistics and technology providers and various levels of government that provide inspections, permits and approvals.

The cascading consequences of an outage, failure or cyberattack in any one of these interconnected ecosystems can be catastrophic for any food business.

Snowball to an avalanche

When a seemingly small disruption occurs within a company – such as a production line stoppage – the impact may be felt far and wide in the food supply chain. We can view a disruption like a tiny snowball that starts to roll down a mountain and may result in a catastrophic avalanche.

Disruptions can result from actions or decisions of individuals, departments or organizations. For example, in Canada, the government food safety inspectors union, citing health and safety concerns, refused to allow its members to enter meat-processing plants experiencing COVID-19 outbreaks.

Like the aforementioned snowball, this decision contributed to a disruption – the plant’s closure – with complex, unintended and potentially devastating outcomes and far-reaching implications, including domestic beef supply and exports. The outbreaks in geographically concentrated meat-processing plants in Alberta resulted in approximately 75% of the Canadian beef supply going offline when three Albertan facilities closed temporarily.

That disruption sent ripples through food services and grocery businesses nationwide and resulted in consumer concerns about food security and increasing prices.

It’s been noted that Canada’s failure to invest in and adopt digitalization accounted for 85 per cent of the technology investment gap between the United States and Canada, and has contributed to Canada’s lagging productivity. When that lack of digitalization is coupled with poor interconnectivity among supply chain ecosystems, it results in food uncertainty concerns.

Food uncertainty is knowing we have enough food but without the visibility to know where it is in the supply chain. These concerns have led to calls for enhanced supply chain resilience through digitalization.

Avoid internal silos

To enhance food supply chain resilience during the pandemic, companies should be using systems thinking to consider the unique requirements of food supply subsystems (livestock, for example) and to prepare for potential systems shocks in these interconnected ecosystems.

We believe it’s vital to look through a systems lens to understand how future food chains should interact and how risk should be managed. This is particularly critical as we confront a second wave of COVID-19 and the threat of additional disruptions.

Many organizations have internal silos that barely communicate with other divisions or subsidiaries often dependent on their decisions or output. Using the metaphor of the snowball, without an adequate avalanche detection system, organizations are at a higher risk of a shock or significant disruption.

That’s mainly because timely, actionable information is not being captured and shared within and across organizations, and because no one has contemplated the potential cascading consequences of interconnected system failures.

Digitalization and systems thinking

Systems thinking can help organizations to visually map their business’s ecosystems landscape. Once this is done, they can examine or simulate where a failure or system shock may come from.

A business should assess its foundational requirements as it determines how to use technology to provide early warnings of potential disruptions.

When businesses apply advanced or predictive analytics tools, such as artificial intelligence and machine learning, these tools can provide invaluable pre-alerts of potential disruptions before they happen, and allow for a course correction. This is akin to GPS warning a driver of an obstacle on the road ahead or traffic congestion with a suggested change of route.

In the figure below, we build on 2013 empirical research from logistics scholars John R. MacDonald of Michigan State University and Thomas M. Corsi of the University of Maryland by visualizing these advanced warning systems that we call tripwires and circuit-breakers.

The circuit-breakers are analogous to the GPS providing a suggested change of route _ they help companies correct a disruption before it cascades out of control. For example, closing a food-processing plant for sanitization purposes to address an outbreak is a circuit-breaker intervention.

Advances in technology require organizations to continually adapt to new ideas, innovations and methodologies. There is no doubt that many businesses employ brilliant people and technologies, and they just work fine in everyday situations.

Unfortunately, we’re living in an unprecedented era of social and economic turmoil and must react accordingly with a strategic, holistic, agile systems view. For food chain resilience, that approach must include integrated early detection alerts and rapid course-correction capabilities.

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This article was co-authored by Karen J. Hand, founder and president of Precision Strategic Solutions in Guelph, Ont., and Carl “CJ” Unis, systems engineer at Sandia National Laboratories in Albuquerque, N.M.


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Ontario c-stores are encouraged to ‘Support Ontario Made’

Screen Shot 2020-10-05 at 9.29.15 PMThe Ontario Convenience Stores Association is teaming up with Canadian Manufacturers and Exporters to ‘Support Ontario Made’.

The multi-pronged celebration of Ontario Manufacturing brings together consumers, retailers and manufacturers. The initiative is designed to increase sales of Ontario-made goods by helping consumers make informed decisions about the products they purchase, as well as helping retailers to make informed decisions about the items they stock. Manufacturers and supplierscan register and promote their products through the website.

According to the group, “polling suggests that nearly 75% of Ontarians are looking to buy locally manufactured goods over imported ones. That may not always be possible, but where it is possible, we need to provide consumers with that information.”

“OCSA is fully committed to supporting Ontario-made products, we are Ontario retailers so we have a vital role to play,” says OCSA CEO Dave Bryans, who suggests retailers set up special displays or sections in their store to support Ontario made.

He is encouraging convenience retailers and manufacturers large and small to find out how their companies can play a role in the initiative.

In a letter to members, OCSA encourages organizations to “to explore how your company and brands can be recognized in the retail channel. You also have the rights to use the logos on your Ontario made products and we will encourage the c-store operators to support Ontario made during these unknown times.”

It’s worth noting that Ontario-made products span independent companies like Horse & Buggy Brands to multinationals, such as Frito-Lay. The idea – backed by the provincial governement – is to support companies that create jobs for 750,000 workers and add value to communities across the province.

Ontario retailers, including convenience stores, are being asked to:

  • Use the logo in store, on websites, and through other promotional materials on goods that have been qualified as Ontario Made.
  • Where possible create in-store set-aside areas for Ontario Made goods.
  • Use the Support Ontario Made website to identify local manufacturers of Ontario Made goods and sell those products.

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Paper towel in short supply as people stay home, clean more

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The head of Canada’s largest manufacturer of tissue products says he’s concerned about the industry’s supply of paper towel ahead of a potential second wave of COVID-19.

Kruger Products CEO Dino Bianco said demand for paper towel has soared as people stay at home and clean more frequently.

“Toilet paper was the highlight of the COVID stay-at-home mandates but now we’re seeing the big use of paper towels,” he said in an interview.

“COVID doesn’t make you go to the bathroom more, but it does make you clean more.”

Bianco said the industry’s paper towel inventory is “very tight” across North America, despite efforts to build up supply.

“Paper towel is the big watch out for us,” he added. “We’re trying to build our inventory but we’re very tight.”

Kruger, which makes SpongeTowels paper towels, isn’t the only tissue manufacturer seeing continued strong paper towel sales.

Geraldine Huse, president of Procter & Gamble Canada, said demand for the company’s tissue products, including Charmin toilet paper and Bounty paper towels, increased significantly in mid-March.

But while toilet paper consumption has returned to normal levels, she said paper towel sales continue to outpace pre-COVID levels.

“Consumer demand for paper towels remains high across Canada as consumers are staying at home more and their cleaning and hygiene habits have increased,” Huse said in an emailed statement.

She said the company expects strong sales of cleaning products, including its paper towel, home cleaners and dishwashing liquid, to continue in the coming months and that P&G is “producing and shipping 24/7 to meet demands.”

Tim Baade, senior vice-president and general manager of Irving Consumer Products, agreed that demand for toilet paper has started to level off while paper towel usage remains strong.

“Demand for our towel has remained high,” he said in an emailed statement. “Bath demand is still up from pre-COVID-19 levels, but lower than its peak earlier this year.”

Baade said the company, which makes Royale paper towel and other brands under store “house brands” and private labels, continues to maximize its production to help mitigate any supply gaps.

Meanwhile, Kruger is pushing to open its new plant in Sherbrooke, Que., to add more capacity in Canada, Bianco said.

Initially slated to open in February 2021, he said the company is trying to get the factory up and running faster. Some machines started over the summer, while more are set to come online next month.

Bianco said the plant will increase the company’s paper towel and toilet paper manufacturing capacity by 20 per cent.

For now, Kruger has cut back on its stock keeping units _ or SKUs _ to maximize its production of key products.

At the height of the pandemic, the company slashed the number of products it makes in half to about 90, down from 180 key products. The company is back up to about 110 items, Bianco said.

There will be plenty of the company’s Cashmere brand toilet paper, for example, but the recycled sub-brand EnviroCare will be harder to come by.

That’s in part because it’s less popular, he said, but also because of issues with the supply of the raw product _ recycled paper.

“We use recycled paper that comes from white paper used in offices,” Bianco said. “That market has dried up because people aren’t in offices printing, so it’s hard to get the recycled fibers used to produced recycled tissue.”


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With trick or treating in doubt, experts say Halloween sales could be weak

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A Halloween night that falls on both a Saturday and a full moon would normally be ideal for spooky festivities, driving up sales of candy, costumes and decorations.

But with cases of COVID-19 on the rise, experts expect retailers to see soft demand for Halloween supplies as plans are scaled back and trick-or-treating is questioned altogether.

They add that sales related to the spooky celebration may also serve as an indicator for what retailers can expect this Christmas, the largest shopping season of the year.

Farla Efros, president of HRC Retail Advisory, says Halloween is a significant portion of business for many retailers and candy makers.

She says the lack of gatherings, office parties and trick-or-treating could lead to soft sales for retailers from grocers to specialty Halloween pop-up stores.

Retail analyst Bruce Winder says families and friends might plan their own “bubble Halloween” like a backyard celebration or scary movie night.

He says while people will still buy some candy, decorations and costumes, it likely won’t be as profitable a season as usual for retailers and candy manufacturers.


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Imperial Tobacco opens vape shop in Toronto

The company plans to open more locations in cities across the country

image002Imperial Tobacco Canada is opening a new retail store in Toronto that offers adult consumers a full-range of vapour products, while a select portfolio of these vaping products will continue to be available at convenience stores.

“The opening of our first Vuse store in Canada is an important component of our harm reduction strategy and an integral part of our goal to reduce the health impact of our business by offering a greater choice of less risky products to adult consumers,” Ralf Wittenberg, president and CEO at Imperial Tobacco Canada, said in a release. 

The tobacco giant pointed to multiple studies and academic journals reaffirming the “less harmful nature of vaping products,” adding many health groups, including Public Health England, have estimated that vaping products are” at least 95% less harmful than traditional cigarettes.”

“We have come a long way but there is still significant progress to be made,” said Wittenberg. “Health Canada’s acknowledgment of vaping as a less harmful alternative to cigarettes is indicative of the shift we’re seeing around the world.  This global movement among public health authorities is still unknown to most smokers, and that is where our efforts must be placed: creating the necessary awareness among adult smokers to make the switch.”

The company stated that in order for vape products to “achieve their full potential, it will require the federal and provincial governments to implement a science and evidence-based regulatory framework – a framework that allows and supports the appropriate communication to adult smokers, ensures the availability of these products to adults who are looking for an alternative to cigarettes, and enforces the protection of youth from gaining access to these products.”  

However, most provinces, as well as the federal government, are cracking down on vaping by introducing new rules and regulations that restrict advertising and the selling of vape products in environments frequented by youth. This has been particularly challenging for c-stores. The Convenience Industry Council of Canada argues that c-stores are not a major source for youth vaping and a flurry of new rules and regulations introduced in the last 18 months actually punish neighbourhood stores, while restricting choices for adult smokers who want to quit.  

“As technology advances and social attitudes towards reduced risk products change, we believe that embracing the principles of harm reduction can play a key role in helping Health Canada achieve its goal of reducing Canada’s smoking rate to less than five percent by 2035,” said Wittenberg.  “We are particularly proud to be opening this store during these difficult times. This one location has the potential to have a positive impact on thousands of smokers in Toronto, and we look forward to opening Vuse stores in other Canadian cities when and where regulations permit.”