Difference between Recommended Retail Price and Sales Price for tobacco products in independent and convenience (small) retailers before and after the introduction of standardised tobacco packaging in the UK

Abstract

Aim: Recommended Retail Price (RRP) is a marketing strategy used by tobacco companies to maintain competitiveness, communicate product positioning, and drive sales. We explored small retailer adherence to RRP before and after the introduction of the Standardised Packaging of Tobacco Products Regulations in the United Kingdom (fully implemented 20th May 2017), which mandated standardised packaging of cigarettes and rolling tobacco, set minimum pack/pouch sizes, and prohibited price-marking. Method: Monthly Electronic Point of Sale data from 500 small retailers in England, Scotland, and Wales were analysed. From May 2016-October 2017, we monitored 20 of the best-selling fully-branded tobacco products (15 factory-made cigarettes, 5 rolling tobacco) and their standardised equivalents. Adherence to RRP was measured as the average difference (%) between monthly RRPs and Sale Prices by pack type (fully-branded vs. standardised), price-marking on packaging, and price segment. Results: The average difference between RRP and Sales Price increased from +0.36% above RRP (SD=0.72) in May 2016, when only fully-branded packs were sold, to +1.37% in October 2017 (SD=0.30), when standardised packs were mandatory. Increases above RRP for fully-branded packs increased as they were phased out, with deviation greater for non-price-marked packs and premium products. Discussion: Despite tobacco companies emphasising the importance of RRP, small retailers implemented small increases above RRP as standardised packaging was introduced. Consequently, any intended price changes by tobacco companies in response to the legislation (i.e. to increase affordability or brand positioning) may be confounded by retailer behaviour, and such deviation may increase consumer price sensitivity.