Focus on tobacconists and tobacco stores: Is the tobacco monopoly on the right track?

In Austria, tobacconists and tobacco stores can look back on a long tradition. Tobacconists also enjoy a good reputation as inclusive businesses as well as important taxpayers. Yes, the tobacco monopoly probably draws a large part of its reputation in Austria from this. However, with the EU plan for a "tobacco-free generation" by 2040, a turning point for the tobacco industry and its retailers could be just around the corner. At a recent anniversary event, industry representatives and experts highlighted the importance of tobacco-free nicotine products in this context. You can find out why this could affect Germany as well as other EU member states here.

Around 2.7 billion euros a year from tobacco tax and VAT

As part of the 240th anniversary of the tobacco monopoly in Austria, the WKÖ Federal Committee of Tobacconists hosted an anniversary event in Graz (AT) at the beginning of June. In his speech to the guests, Finance Minister Magnus Brunner emphasized the importance of tobacconists and tobacco stores for the Austrian state budget:

"Durch Tabak- und Umsatzsteuer fließen dem Staatshaushalt jährlich mehr als 2,7 Milliarden Euro zu. Trafiken sind wichtige Arbeitgeber und Steuerzahler, die wesentlich zu den Einnahmen des Staates und zur Sicherung unserer Sozialsysteme beitragen."

In the last 240 years, it is estimated that around 400 billion euros in tobacco tax revenue has been collected for Austria.

Kurt Egger, Secretary General of the Austrian Economic Association, had similar words of praise at the event:

"Die österreichischen Trafiken sind ein bedeutender Wirtschaftsfaktor und unverzichtbarer Bestandteil unserer Gesellschaft. Sie tragen wesentlich zu den Staatseinnahmen bei und leisten einen wichtigen Beitrag zur Aufrechterhaltung der Versorgung, insbesondere im ländlichen Raum."

However, the industry is now facing various challenges, first and foremost the upcoming increase in EU regulations, which point in the direction of a tobacco-free future and could at least put a stop to tobacco cigarettes in the medium term.

>> You can also read more on this topic in: Tobacco Directive in the new EU Commission: The future for Snus and nicotine pouches

Future challenges for tobacconists and tobacco stores

Whether the right course is currently being steered seems to be in doubt, at least for all those who are aware of the EU's anti-cancer plan. Cigarette consumption could soon be significantly reduced as a result. A modernization of the tobacco monopoly is now necessary, said Wolfgang Streißnig, Federal Chairman of the Tobacconists of the Austrian Chamber of Commerce, focusing on upcoming challenges:

"Das 240 Jahre alte Tabakmonopol muss modernisiert werden, um den Herausforderungen wie der steigenden EU-Regulierung und dem EU-Krebsplan 2040 zu begegnen. Wir müssen die Innovationskraft der Tabakindustrie nutzen, um die Tradition und Identität der österreichischen Trafiken zu bewahren und gleichzeitig die Existenz der Trafikanten zu sichern."

Lukas Mandl, Member of the European Parliament, also wanted to see the changing requirements as a key factor for modernization:

"Das Tabakmonopol und damit verbunden unsere Wirtschaft stehen vor großen Veränderungen und Herausforderungen, insbesondere mit Blick auf die EU-Regularien und für die nationale Tabak- und Nikotinstrategie. Es braucht mehr Freiheit nach innen und weniger Bürokratie, damit einher geht eine sorgfältige Abwägung zwischen Regulierung und der Sicherung der wirtschaftlichen Existenzgrundlage der Trafiken und ihrer Mitarbeiterinnen und Mitarbeiter."

Based on a "national tobacco and nicotine strategy", a noticeable drop in the smoking rate in particular prompted a discussion on how the sale of different products should now be designed. According to Wolfgang Ziniel, Senior Researcher at KMU Forschung Austria, in order to remain economically stable, tobacconists need to make their product range more flexible and adapt it to local conditions. And he added that limited open spaces for the sale of different products should be introduced accordingly.

Tobacco-free nicotine products also appear to be an opportunity here - with a view to expanding diversity and reducing risk. British American Tobacco Austria's Country Manager Aziz Aliev continued the discussion by showing that he is well aware of this:

"Wir setzen auf Vielfalt und Risikoreduktion. Damit ermöglichen wir erwachsenen Konsumentinnen und Konsumenten risikoreduzierten Nikotingenuss, sichern Trafiken eine wirtschaftlich erfolgreiche Zukunft und dem Staat die Chance, den EU-Krebsplan umzusetzen. Daher ist es entscheidend, dass Trafikantinnen und Trafikanten das Potenzial risikoreduzierter Nikotinprodukte wie E-Zigaretten, Nikotin Pouches und Tabakerhitzer erkennen und nutzen. Sie enthalten weniger Schadstoffe und bieten eine wirtschaftlich tragfähige Zukunftsperspektive für die ganze Branche."

Nicotine pouches, also known as tobacco-free nicotine pouches are currently not only given an excessively negative connotation in the media, their risk assessment also often appears to be insufficiently differentiated or in some cases greatly exaggerated. Of course, these products should not be trivialized because they still contain nicotine - a substance that could lead to addiction. But as cigarette alternative they nevertheless have the potential to further reduce smoking rates in a controlled manner, thus creating opportunities for a smoke-free future.

With regard to future regulations, Ralf Lothert, member of the JTI Management Board, said that practical legislation was needed to meet the challenges facing the tobacco industry and that gold plating should be abandoned.

Gold plating" is usually understood to mean undesirable overfulfilment by EU member states when it comes to the national implementation of EU directives - particularly in the context of the discussion: the implementation of the EU Tobacco Directive.

"Sinnvolle Regulierung muss Vorrang vor überzogenen Verboten haben. Wir müssen darauf achten, dass Regulierungen die Innovationskraft nicht gefährden und Planbarkeit und Rechtssicherheit für die Wirtschaft gewährleistet bleiben."

, said Alexander Schönegger, Managing Director of Philip Morris Austria, in the course of his remarks.

Germany and the EU plan

It seems clear that the forthcoming EU regulation, which is pushing for a "tobacco-free generation" in around 16 years' time, will also affect other member states.

The local trade in nicotine pouches in Germany, for example, is currently banned at least temporarily in some federal states or districts. However, these bans are not yet a done deal and the direction that will be set for the future of tobacco and new alternative nicotine products at EU level could have a significant influence on this.

Such products are seen as an opportunity for tobacconists and tobacco stores - indeed for overcoming the challenges that are already being faced throughout the EU - at least to the extent that this was mentioned by various industry representatives at the Austrian anniversary celebrations. How national decisions will ultimately be made as to whether a path along the lines of Gold Plating could be taken depends, at least today, largely on the direction that the European Union will take now that the new Commission has been constituted.

Does a possible change in the tobacco monopoly jeopardize the online trade in nicotine pouches?

The purpose of this article was on the one hand to show that at an industry meeting in Austria, the potential of tobacco-free nicotine products - including nicotine pouches - was/is likely to have been recognized by some industry representatives. There was also talk of giving preference to sensible regulations over excessive bans. On the other hand, what can be read between the lines in any case is a hint of the potential of nicotine pouches with regard to possible tax revenues, and thus the inclusion in a monopoly position for the exclusive sale of the same by tobacconists, tobacco stores and authorized hospitality businesses - thus also a danger for online trade in the end customer sector. 

How the media discussion about tobacco-free nicotine products could now develop with regard to an "economically viable future perspective for the entire industry", how future connotations for products such as nicotine pouches could be set - one could guess, and that a monopoly position could enter through the back door here, too. But then it would seem at least a little distorted - if negatively connotad before and monetary goals should ultimately clean such language.