Multinational and Local Business: Retail Display Ban Should Be Postponed

According to the Tobacco Control Law of Georgia, the retail display ban (RDB) of tobacco products comes into force as of January 1, 2021. It means that in 6 months’ time, retailers, including small and medium-sized businesses, will have to order and pay for new equipment for their respective outlets. Many stores were closed during the recent lockdown; some were able only to operate a few hours a day. As a result, revenues in retail were down and this sector currently lacks financing to procure the new equipment. Banks are reluctant to provide loans, which further impacts the retail sector. Further, the industry will be forced to discontinue contracts for certain outlets, which will add additional economic burden. All the above mentioned will instigate contraband growth and youth appeal towards cigarettes on the market, as happened in other countries with RDB on board, like Ireland and the UK, where illicit trade in tobacco hit 20%.

President of Georgian Retailers Association Luka Chelidze is against the RDB regulation.

“The COVID-19 crisis affected stores: their expenses increased due to new regulations, competitive conditions on the market worsened, and revenues decreased,” Chelidze. Says. “RDB will have a detrimental effect on most retail stores in Georgia. There are more than 12,000 stores in the country, and all of them keep tobacco products, therefore, having dispenser placement contracts helps them to survive. This regulation should be postponed for at least two years, otherwise more than 5000 stores will lose (a) base income from contracts and (b) at least 15% of sales due to keeping tobacco products in stores.”

Legal and Corporate Director for British American Tobacco, Zviad Skhvitaridze stated that “the RDB regulation should definitely be postponed: (1) No RIA was done back in 2016 when this regulation was adopted; (2) The vast majority of EU countries have no such regulation; (3) It will hit more than 50% of retailers, causing further unemployment and deepening the economic crises; (4) More than $10 million will be pulled from the Georgian economy on top of the already lost $20m annually due to ungrounded advertisement regulations; (5) Illicit trade will grow and youth appeal to visually closed products will increase; (6) All tobacco regulations, including this RDB, will have not even a tiny effect on decreasing smoking, as we have seen in the last 5 years.”

Corporate Director for JTI Iva Khasia notes that the “industry proposal is to postpone the introduction of retail display ban until January 1, 2024, in order to allow the trade to move out of the impact of the pandemic. With inflation on the rise, and products costing more due to an unfavorable exchange rate, the entire Georgian supply chain and trade will need to generate enough cash to invest in the new equipment being imposed on them by legislation. The sector will generate additional income for people employed in the sector, indirectly generating additional budget revenues. In other words, giving a longer grace period concerning the retail display ban will give the industry the chance to accumulate more revenues in the retail sector, accordingly in the economy, and eventually contribute to generating more budget revenues.”