Tobacco Documents Online

Frot_ lk I J St ne & RsSociates C-P PHONE No. : 617 447 7720 May.18 1995 10:07PM P01 THE ECONOMIC EFFECTS OP E3ANNINC3 CIGAFIE'f'Tt= DISPLAYS IN CAMBRtDGE, MASfiACHUSETTS # raj Cambridge, MqBsachusetts, recpntiy a4eele!M a propoaal that bans Cigaretto displeys In stores that sali a{garettes. This !s Ilkely to have an adverse economic Impact on ouch rotall e*tabllshmanta given the experience In other areaa. In order to estimate these effects, a wtnprehpn4tve survey of retail etdres has been completed by the Massachusetts Whoiesaie Marketers Association. The study estimates tho o(gArattA sates for 130 retail establlartments in Cambridge, These establttshments en0ompass mor.t of the retail outlets which satl cigarettes. 9mIIBR?lQ.I alm Economic lo;dea to Cambridge retatlers could bg slflnlt7cgnt. These losses are essentially of thrAe types. First, each store would lose Its alotting allowance. This Is a flnanatel Inoentlve given to suoh stores to display cigarettes. It is estimated, on average, that the loss of the stottinp allowance is worth $5,000 ptt atore eaoh year. 8eoond, each store would have to cottatruct a now container arrangement for cigarottes behind the counters or sdme other concealing plaon. ' Such a ratro-f(t could Oost $4,000 per store, Over a five year iife-span this would be an arttorttzad cost of $$00. Third, these display ban-Induced costs would Increase product prioes. Some smokers may also take their clgaretto business to other stores outside of Cambridge that allow promotional gifta and dlspltiys. Consequently, cigarette demand ta likely to fail. In this reflard, a modest demand reduction factar of 7% has been emptoyed. A 13.H~'a reduction In demand has alrgady been recorded by som8 retailers In East Lansing, Miah(gan, where a similar ordinance Is now Imposed. Gross profit and salas losses are projected as follows. The sales loss. per establishmant, Is estimated to be: Z8.677 (cigarattes) and $6,247 (tie-In ffiales)_ This stacks up to a total eales loss of $14.924 per establishment. The gross profit lose (cigarette and sundry products) would be $Q,9a5 per osiabfishrn6nt. Adding Up the Cesls The display ban will be coetiy to Cambridge merchants. EaOh storb ealiing ctgarettes, On average, WIII lose the slotting allowance of $8,000, pay $800 (amortized costs) per year for a counter retro-ift, and lose, on average about $$2,9t35 in gross profit due to declining demand. This comes to an pvnraQe $8,788 gross profit loss per store. i Each Cambridge store, on nverage, would have to boost its retail sa1©s by $43,925 or moro to rnako up for gross profit loas aQnorated by tha display ban. 5- tq TS Q ~ 3A~5 OAO; G~oG~~,~ .~ S p~ n F~ ~ AQ cC% t,~ I ~N ~ ~ 1/ E J•~,, a ~ `" Le%_i Q~11'- N 0 tn ~ ~ ~ w N ~ N 0 rn ~ ~ ~ ~ r_n N N _