All of the Atlantic provincial budgets have been tabled. It’s tough times fiscally for all of the provinces and there’s a mix of good news and not so good news for the c-store industry coming from the budgets.
First off was New Brunswick. The good news is that the government announced that it was going ahead with the creation of a dedicated Contraband Enforcement Unit to crack down on the illegal tobacco trade in the province. Bad news is that the tobacco tax was raised immediately by 3.26 cents per cigarette, with another 3.26 cent increase coming in February.
“New Brunswick’s budget is a mixed blessing,” says Mike Hammoud, president of the ACSA. “We fully support the new anti-contraband unit, but the tobacco tax increase was a little over the top, even if some of those extra dollars will be used to fund the new unit. It’s a wait-and-see situation now to see what impact the unit will have.”
Next up was Newfoundland and Labrador and everyone in the province is going to take a big hit in the pocketbook. While the government made a modest 1 cent per cigarette increase in the tobacco tax, the provincial tax on gasoline was raised a whopping 16.5 cents. That’s double what the rate was.
“We’ve had several discussions with the provincial government about illegal tobacco and we think they accept the fact that big increases in tobacco taxes fuel increases in illegal tobacco sales,” says Hammoud.
“The gasoline tax increase was a surprise. It’s supposed to be temporary and the price of gasoline will likely stay lower for at least the next 18 months, so maybe they think the overall impact won’t be so bad. There’s been a lot of push back from both consumers and different industries, so maybe the hike was short sighted.”
Nova Scotia tabled their budget next, increasing tobacco taxes across the board. The tax on cigarettes was increased $4.00 per carton while the tax on cigars went from 56% to 60% of the suggested retail price.
“Nova Scotia has increased the tobacco tax on cigarettes by 17% in two years,” says Hammoud. “It’s simply a tax grab because what is the government doing to help smokers quit? We really disagree with the government’s estimate of illegal tobacco activity in the province, and this increase is only going to add fuel to the fire in terms of illegal tobacco activity.”
Prince Edward Island was last to table their budget. The HST was increased to 15% from 14%, but there were no tobacco or gasoline tax changes.
ACSA meets with NB’s Contraband Enforcement Unit head
The New Brunswick government wasted no time in getting the new Contraband Enforcement Unit up and running. The unit is focused on cracking down on the illegal tobacco market in the province.
In late March, the ACSA met with Inspector Gary Forward who heads up the unit. Forward was formerly an inspector with the Fredericton police force with responsibility for the major crimes unit.
At the time of the meeting, the unit was building its intelligence base while the new unit members completed the training required that will give them police officer status.
“We had a good meeting with Gary,” says ACSA president Mike Hammoud. “We really liked his mind set that his job is to dismantle the illegal tobacco market as opposed to disrupting it.”
The ASCA and Inspector Forward have agreed to look at ways that the c-store industry can support the work of the Contraband Enforcement Unit. These activities could include research, Crime Stoppers and youth education programs.
Ontario first province to index tobacco tax to inflation
In its February budget, Ontario became the first province to index its tobacco tax. The move follows a similar move by the federal government in 2014.
Under the new model, the tobacco tax rate on cigarettes and other tobacco products (except cigars) are currently scheduled to increase 2% per year for five years beginning in 2017. The rate is based on the Bank of Canada’s 2% inflation-control target.
“This approach makes more sense than simply raising tobacco taxes to generate more revenue,” says ACSA president Mike Hammoud. “There are a couple of ways of indexing a tobacco tax. And as an association we’d be interested in exploring the possibilities with the provincial governments in Atlantic Canada.”
PEI craft brewers looking for distribution through c-stores
Craft brewers in Prince Edward Island are calling on the provincial government to support industry growth by expanding the sale of locally produced beer through c-stores.
“Craft beer is the fastest growing segment of the beer industry and we have great product here,” says Kevin Murphy, who owns Prince Edward Island Brewing Company. “Expanding distribution of Island product through convenience stores would be a real boost to our industry and a real economic boost for the province.”
Mike Hammoud at the ACSA says that the c-store industry supports any initiative to efficiently retail beverage alcohol in c-stores: “Québec and Newfoundland and Labrador have successful models of selling beer through the c-store channel and we’ve always supported the idea of broader distribution in the Maritime provinces.”
Nova Scotia retail gasoline margin review
The Nova Scotia Utility and Review Board will hear an application for an increase in the retail gasoline margin on May 2nd.
“We certainly think that a margin increase is warranted since the last adjustment came into effect in January of 2012,” says ACSA president Mike Hammoud. “What we have though is conflicting evidence on how much that increase should be, so it’s hard to say what the outcome will be.”
A decision by the NSUARB will likely come a couple of months after the hearing.
NL government wants business case for higher c-store beer margins
The ball is in the c-store industry’s court to demonstrate the need for higher margins on beer products in Newfoundland and Labrador. The current model is a fixed dollar commission and the industry is looking for a percentage-based commission and an adjustment to a higher margin level than what is currently being paid.
“Everyone in the industry agrees that beer margins are too low given the costs associated with displaying and handling the product,” says Mike Hammoud, president of the ACSA. “We had a good meeting with the Finance minister and she basically said to put a business case together where a margin increase makes sense.”
The ACSA is currently working with retailers in the province to determine the best way to develop that business case.
June 8 and June 9
June 8 is the ACSA Board meeting, Annual General Meeting, evening mixer (sponsored by TRA), and lead-up to the annual golf tournament the next day. This year’s get-together is being held at the newly renovated Crowne Plaza Hotel in Moncton. Regardless of whether or not you’re golfing, drop in and socialize with your industry colleagues.
The 2016 Maritimes Golf Classic will be held on June 9th at Fox Creek Golf Club in Dieppe, NB.
The Newfoundland & Labrador Children’s Golf Classic is taking place on August 25th, 2016 at Clovelly Golf Club in St. John’s, NL.
For complete details on the golf events including schedule and registration form, visit our website by clicking here.