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How the menthol cigarette ban could affect your business

After a ban was initially proposed against menthol cigarettes in 2016, the flavoured cigarettes will now be completely banned by May 20th. This is because of worries that menthol and flavoured cigarettes appeal primarily to young people, and studies have shown that menthol cigarette use is significantly more common among newer, younger smokers and leads to higher levels of nicotine dependence. 
For businesses, though, this ban could have a significant impact on sales and profit margins related to tobacco products. We’re going to look at the possible effects this could have on your business and how switching to e-cigarettes and vape liquid could help bring in revenue.
Man vaping on street
What is the ban and what does it mean?
The ban will come into force on May 20th this year, and will ban menthol cigarettes, dual cigarettes and any other flavoured cigarettes or flavoured rolling tobacco. There is also no sell through period for these products, which means that retailers must have sold through any remaining stock of these menthol and flavoured products by the end date. 
This is likely to have an impact on smoking rates, especially in young adults, and hopes to reduce the number of new people starting to smoke. This is in a climate where tobacco sales have already been diminishing for decades, and much faster in recent years. A study by Cancer Research found that average cigarette consumption fell by nearly a quarter between 2011 and 2018. In contrast, the use of vape liquid and e cigarettes in the UK has either increased or stayed stable between 2014 and 2018.
What effect could this have on your business?
For small retailers that rely on tobacco sales, you are likely to see a 26% loss in tobacco sales. The public nature of the ban could also push current smokers to take steps towards cutting down their tobacco intake or quitting altogether; a government survey found that 58.4% of smokers ages 16 or over said that they wanted to stop smoking. Tobacco sales have been in a terminal decline since the 1960s and as this trend continues, more and more people are choosing to switch to e-cigarettes. 
How could selling e-cigarettes help?
First, let’s look at the facts. Tobacco tax has both specific duty, plus an ad valorem rate of 16.5% of the RRP, and VAT is added on top. This means that tax accounts for around 80-90% of the price of a pack of cigarettes, which cuts down the profit received by the retailer. Let’s look at the Profit On Return (POR) on tobacco products and e cigarettes or vape liquid. 
A typical 20-a-day smoker will spend £10 daily on tobacco, equalling a consumer spend of £3650 annually but only giving the retailer a profit of £182.50. This results in a small 6% POR for the retailer despite the high consumer expenditure. 
With e-liquids and e-cigarettes, on the other hand, a typical consumer spends £3.99 every other day. So although this only adds up to £730 a year, it results in a retailer profit of £291 - that’s a POR of over 50%. This makes e cigarettes and vape liquid a much more attractive choice for retailers.
How easy is it to make the switch to selling vape liquid and e cigarettes?
Riot Squad offers a fantastic range of e-liquids, including a diverse selection of menthol flavours, to entice those who used to smoke menthol cigarettes to transition to a healthier option without sacrificing the taste they know and love. It allows retailers to give an alternative to those seeking menthol cigarettes after May 20th when they are no longer available. 
We make it as easy as possible for the retailer to sell vape liquid and e cigarettes even if you aren’t very familiar with the products. We provide a premium range of point of sale options for all size retailers, as well as an online extended media pack to help inform you and your customers. If you’re worried about loss of sales and profit after the May 20th ban on menthol cigarettes, contact us today to make the switch to e cigarettes and e liquids!
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