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Court agrees to suspend legal proceedings against tobacco companies until fall

An Ontario court has agreed to extend an order suspending legal proceedings against three major tobacco companies as they negotiate a settlement with their creditors after losing an appeal in a multibillion-dollar case in Quebec.

The stay of proceedings was granted in March as part of the creditor protection process and upheld the following month after some of the companies’ creditors challenged it.

The order was set to expire June 28, but will now be renewed until Oct. 4.

The companies – JTI-Macdonald Corp., Rothmans, Benson & Hedges and Imperial Tobacco Canada Ltd. – had initially sought to prolong the stay until December but presented a revised proposal last week.

The order was first obtained shortly after Quebec’s highest court upheld a landmark decision that ordered the tobacco companies to pay more than $15 billion to smokers in two class-action lawsuits.

The stay is meant to maintain the status quo while the companies go through mediation with all those who have claims against them, including the class-action members and several provincial governments.

Lawyers representing the class members argued in April that the stay in their case should be revoked if the companies plan to appeal the Quebec ruling to the Supreme Court of Canada.

Ontario Superior Court Justice Thomas McEwen rejected their request, saying it would give an unfair advantage to the Quebec creditors over the others.

But he ruled the stay would also prevent any of the companies from seeking leave to appeal to Canada’s top court unless they obtain the court’s permission.

McEwen also denied Ontario’s bid to push forward with a lawsuit that aims to recover smoking-related health-care costs from a dozen Canadian firms and their parent companies, including the three companies granted the stay.

The judge said allowing the lawsuit to proceed before settlement talks are complete would favour Ontario over other provincial governments seeking similar relief.

Health groups have also opposed the stay, calling it a delay tactic by companies whose profitability isn’t immediately threatened.

In a statement issued this week, the groups say the companies “have not even initiated settlement discussions, and have set no time limits to address the claims made against them.”


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McCowan: Secure tobacco merchandising is our business

image001Secure tobacco merchandising is an important factor in the Gas Convenience business! McCowan has been at the forefront of designing secure tobacco merchandising solutions that meet “Dark Market” regulations.

Security will always be on the minds of retailers who are concerned about the safety of their employees and the control of their inventory. In addition to tobacco merchandisers, McCowan manufactures backroom lock-ups, vape merchandisers and pass-through boxes for retailers who serve late night shoppers.

 

Secure counter top tobacco cabinet.

Secure counter top tobacco cabinet.

  • Industry Standard. McCowan Tobacco Merchandisers and Security Products have been an industry standard for 25 years. More than 10,000 Secure Tobacco Merchandisers have been sold!
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  • Dark Market Regulations. McCowan Tobacco Merchandisers meet all provincial regulations.
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  • Backroom Lock-Ups. McCowan offers high capacity backroom lock-ups with anti-theft doors and locks.
  • Secure under counter tobacco cabinet with door closed.

    Secure under counter tobacco cabinet with door closed.

    Pass-Through Boxes. McCowan offers pass-through boxes to assist operators in safely serving late-night customers.

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Call 416-291-7111 or e-mail sales@mccowan.ca for a catalogue!

For more information, visit our website.

Under counter cabinet with door closed and door open

Under counter cabinet with door closed and door open


3 tips for protecting your tobacco sales

CigsAs the convenience channel moves away from its traditional cokes-and-smokes reputation and toward fresh and healthier offerings, it is easy to overlook the cigarettes category — with its diminishing volumes and tight margins. But, that would be a mistake, according to the experts.

As 7-Eleven Inc.’s Alan Beach stressed during the NACS State of the Industry Summit last year: “You can’t ignore this. We need to protect this; it is what got us here,”

He’s right. While cigarette sales are declining, they are still a hot in-store purchase that attracts customers and keeps them coming back for more. That alone should make c-store operators sit up and pay attention.

“Tobacco continues to be really important, particularly to the convenience retailer, by far,” says Don Burke, senior vice president of Management Science Associates Inc. “We are seeing a little bit greater decline; however…. Tobacco continues to be a very important category, and we project that it will be for many more years.”

Therein lies the reality that convenience store operators need to protect their tobacco category, and the strategy to do that is twofold: assortment and other tobacco products (OTPs).

“In a study we did in the past several years, we found that about 30% of convenience stores are able to increase their tobacco category sales each year,” says Burke.

Here’s how:

  1. “Make sure you are carrying the right number of SKUs, the right number of products and the right amount of selection. When consumers shop convenience, they are looking for selection,” says Burke.
  2. C-stores need to embrace the large cigar segment, which has one of the greatest growth rates of all the tobacco segments. “One of things we found recently is that pre-priced items, which most convenience stores don’t like, have helped this category considerably,” he noted. If a retailer does not want pre-priced items, then it needs to offer a range of price points within the large cigar segment to meet consumer demand.
  3. Take advantage of consumer interest in the vapor category, particularly in the vaporizers that typically retail for $20-plus, Burke explained. “That’s a high cash-register ring for the tobacco category and contributes considerably to revenue growth in convenience.”

A version of this article was originally published by Convenience Store News. 


Imperial Tobacco denounces plain packaging

In the wake of the Health Canada’s new legislation, Imperial Tobacco is coming out swinging, calling plain packaging a “nanny state” approach that does little to change consumer behaviour.

“We remain shocked that despite all of the evidence, the Government of Canada is moving ahead with bad public policy,” said Eric Gagnon, head of corporate and regulatory affairs at Imperial Tobacco Canada.  “The experience of other countries demonstrates that plain packaging does not change consumer behaviour and that it’s a proven way to fuel an already booming illegal tobacco market in Canada.”

Imperial Tobacco points out 20 percent of the market remains controlled by illegal operators and criminal organizations selling products outside of any regulatory framework and untaxed (depriving Canadian governments of more than $2 billion in tax revenue every year).

Eric Gagnon of Imperial Tobacco.

Eric Gagnon of Imperial Tobacco.

“The illegal tobacco problem in Canada is poised to get much worse now that it will be impossible to differentiate between a legal and illegal product.  Not only has the federal government had its head in the sand for long enough when it comes to illegal tobacco, they have facilitated the thriving illegal market by allowing illegal operators unfettered access to the Canadian market,” says Gagnon. “The RCMP have stated that there are 50 illegal factories operating in Canada and 175 criminal gangs involved in the illegal trafficking of tobacco, and the feds have done nothing about it.  They now need to step up and address the issue they created themselves.”

Still, plain packing continues to gain traction around the globe. In 2012, Australia became the first country to introduce plain packaging of tobacco products, leading the way for others to follow suit. Today, New Zealand, France, Norway, Ireland, Saudi Arabia, Thailand and United Kingdom required standardized packaging. Singapore, Belgium and Turkey will institute plain packaging in 2020.

Global uptake notwithstanding, Gagnon maintains plain packaging isn’t effective.  “Despite what some Canadian anti-tobacco lobbyists will claim, plain tobacco packaging has been tried, tested and failed, and it will have the same result in Canada,” he said. “The plain packaging experiment in Australia, New Zealand, France and the United Kingdom have yielded the same results: plain tobacco packaging does not work.”


Industry reacts to Health Canada plain packaging rules for tobacco

Canadian cigarette packs will have to be plain drab brown with standardized layouts and lettering under new rules that start this fall, Health Canada says.

The government says plain packages will increase the impact of graphic health warnings about the dangers of smoking, keeping them from getting lost amid colourful designs and branding.

Health Canada says plain packages will increase the impact of graphic health warnings about the dangers of smoking.

Manufacturers will have to begin complying with labelling rules for packages and dimensions for cigarettes by Nov. 9, 2019, while retailers will have to sell only products meeting the new rules by Feb. 7, 2020.

Officials said plain packages will increase the impact of graphic health warnings about the dangers of smoking, keeping them from getting lost amid colourful designs and branding.

The government wants to stop cigarette companies from using their packs as tiny ads for their products, insisting even on a single shape and design for the packs themselves – meaning soft packs are out, as are creative designs with bevelled edges and any other distinctive features.

Health Canada picked the same dark brown for the packages as Australia did for its tobacco products a few years ago, one identified by market researchers as the ugliest colour in the world. Several European countries have used the colour as well.

“Packages with darker colours were perceived to be more ‘harmful to health’ and their products ‘harder to quit,’ in contrast to packages with lighter colours,” the department said in a summary of the plans.

Health Canada said there could be a shortage of the new packs in the early going as a very limited number of suppliers retool to make just one design instead of many different ones.

The regulations released May 1 also standardize the size and appearance of cigarettes, cigars and other tobacco products inside the packages.

Specific rules have been awaited since Parliament passed a law requiring them last fall, joining 13 other countries that have adopted similar measures.

The new rules are part of a larger strategy aimed at driving the rate of tobacco use among Canadians down to five per cent by 2035. Federal statistics show that in 2017, 18 per cent of Canadians over the age of 15 said they used tobacco in the previous month, an increase of 15% from 2015.

The Canadian Cancer Society praised the government’s regulations, calling them “the best and most comprehensive in the world.”

On the flip side, the industry association representing convenience stores said plain packaging increases the appeal of contraband tobacco products and makes them harder to distinguish from legally marketed ones.

“Instead of addressing the 20% of tobacco that is sold illegally in Canada, government is adding one more burden to law-abiding retailers who don’t sell to minors, comply with display bans, and partner with government to collect and remit most of the $9 billion in tobacco tax revenue every year,” Anne Kothawala, president of the Convenience Industry Council of Canada, said in a statement.

Representatives from the Ontario Korean Businessmen’s Association agree, saying the new rules will hurt small businesses.

“The only way the government can guarantee this will occur is if the law is applied equally to all products being sold and purchased in Canada, including the up to 40 percent of illegal tobacco consumed in Ontario today. To date, this government has shown no willingness to crack down on illegal manufacturers,” stated OKBA spokesperson Kenny Shim. “The booming black market of illegal, unregulated, and untaxed products not only leads to a loss in market share for our members – it also leads to a loss of hundreds of millions of dollars in government revenue, contributes to the funding of organized crime, and further compromises Canadian public health by introducing unregulated products to the market.”

The convenience industry has long advocated that plain packaging is not an effective tool to reduce smoking. In its recent eNewsletter, CICC stated: “We were successful in one key area: standardized packaging (slide and shell) will not happen for another 24 months for manufacturers, with retailers being given an additional three-month transition period to comply. On plain packaging, a few technical issues arose out of last week’s regulations that the CICC is working to clarify. We will be providing comprehensive information to both wholesalers and retailers in the coming weeks to help prepare them for this significant policy change.”

With files from Michelle Warren


Ontario court upholds stay of legal proceedings against 3 tobacco companies

An Ontario court has upheld an order that suspended legal proceedings against three major tobacco companies, rejecting arguments from lawyers representing Quebec smokers.

Ontario Superior Court Justice Thomas McEwen issued his decision Wednesday but did not lay out his reasons, saying those would be released at a later date.

The companies _ JTI-Macdonald Corp., Rothmans, Benson & Hedges and Imperial Tobacco Canada Ltd. _ were granted the stay last month as part of the creditor protection process.

They obtained the protection shortly after Quebec’s highest court upheld a landmark decision that ordered them to pay more than $15 billion to smokers in two class-action lawsuits.

The companies have said they had no choice but to seek the stay so they could continue to operate as they try to negotiate a global settlement with all those who have claims against them, including the class-action members and several provincial governments.

But lawyers representing the class members argued the stay in their case should be revoked if the tobacco companies plan to appeal the Quebec ruling to the Supreme Court of Canada.

At a hearing earlier this month, they said the companies cannot negotiate a settlement in good faith while also challenging the findings of the court.

The lawyers said if the companies plan to seek leave to appeal, the matter should be sent back to the Quebec court so it halt the implementation of its ruling until the appeal process is complete.

In his decision, McEwen said the stay order would require parties to seek the court’s permission before launching new proceedings involving the companies, including any applications for leave to appeal to the Supreme Court.

The judge had previously extended the order to June 28, with a hearing to be held a few days earlier.

The Quebec Council on Tobacco and Health, which was behind the class-action suits, said it would hold off commenting on the ruling until the judge’s reasons were released.

Lawyers representing several provincial governments had opposed the Quebec lawyers’ application, saying one group of claimants should not be prioritized over others.


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