Good Fortune or Awful Omen?

For now, sales are up, but San Francisco's pharmacy tobacco sales ban likely to grow

[Editor's Note: This is the first in a two-part series following on San Francisco's banning of tobacco sales in pharmacies.]
SAN FRANCISCO -- In the 18 days since San Francisco banned pharmacies from selling tobacco products, convenience-store retailers have seen cigarette sales rise sharply. But many believe the good fortune will be temporary. "My sense is that they will go after convenience stores," Ray Huff, president of Denver-based HJB Convenience Corp., told CSP Daily News.

Beginning October 1, pharmacies in San Francisco were barred from selling tobacco products, temporarily [image-nocss] giving an advantage to the c-store industry but raising the specter that other channels of retail, too, could one day see cigarette marketing efforts curtailed.

The ban could spread; elected officials in nearby Marin County are considering a similar prohibition. And across the country, Boston city officials also are mulling a curb that would cover pharmacies, as well as any retailer operating on the campus of that city's numerous colleges.

"It just doesn't seem that it's retail justice," said Kris Kingsbury, marketing and merchandising manager of Robinson Oil Corp., a San Jose, Calif.-based firm that operates the Rotten Robbie chain in California. It doesn 't have any stores inside San Francisco city limits, but c-store and retailing managers are watching with interest as both Walgreen Co. and Altria's Philip Morris USA separately challenge the ordinance in California courts.

San Francisco laid the groundwork for the lawsuits when its 11-member board of Supervisors voted to restrict sales and advertising of tobacco products at any of the city's pharmacies. At the time, Mayor Gavin Newsom said, "If this stops one person from smoking, then it's well worth the effort."

The stakes are high, as Walgreen Co. has nearly 60 stores in the city, and Philip Morris said that 20% of its sales come from pharmacies, including Walgreens, Rite-Aid and Long Drugs. So far both companies have struck out with their lawsuits, though both have them on appeal.

Michael Polzin, a spokesman for Deerfield, Ill.-based Walgreen Co., said the lawsuit is more than just about the sale of tobacco products. The ordinance covers only stand-alone pharmacies, and not those that are located inside grocery stores or big box stores such as Costco.

"It lacks basic fairness," Polzin told CSP Daily News. "It penalizes just a few retailers while benefiting others."

Indeed, Huff of HJB Convenience Corp., said reports he's getting from c-stores that he licenses in San Francisco 's financial district indicate that cigarette sales have risen sharply since the ban took effect. Huff, whose stores operate as Russell 's Convenience, isn 't sure how long the good fortune will last, however.

"My sense is that they will go after convenience stores," he said.

Ariel Tolentino, a Russell 's licensee in San Francisco, said he doesn't get the impression that the ban will decrease demand. Instead, he said, smokers will seek out non-regulated retailers or will drive to suburbs where there is no such restriction.

"It's not a good situation when you have the county supervisors deciding what people can and cannot do," he said.

That 's pretty much the position of Philip Morris, as well. The company, marketer of such heavyweight brands as Marlboro and Virginia Slims, cites in its federal lawsuit that the city's regulatory attempt is trumped by the Federal Cigarette Labeling and Advertising Act. Philip Morris further asserted First Amendment rights to free speech, which involves its in-store advertising efforts.

"This type of government oversight is not necessary," Greg Mathe, a spokesperson for Philip Morris told CSP Daily News. Instead, he said, any agreement to sell, or not sell a legal product such as cigarettes should be a matter between the manufacturer and retailer.

Added PM USA spokesperson Bill Phelps, "We believe retailers should be able to choose what products they sell."

R.J. Reynolds Tobacco Co., whose brands include Camel and Winston, has not filed a lawsuit. However, spokesman Frank Lester said the company believes retailers should have the right to sell a legal product.