Let’s take a stroll down regulatory memory lane. The year is 1989, and White Bear Lake, Minn., has just become the first city in the country to ban the sale of cigarettes through vending machines.
“As the local regulatory effort spread across the country, more cigarette vending machines ended up either in dumps or as collector’s items in basement rec rooms,” says Thomas Briant, executive director of NATO, Minneapolis.
On the surface, the ban had little effect on c-stores; vending machines weren’t exactly part of their business model. Yet Briant says it marked the beginning of a trend that endures today, of state, city and local governments proposing and enacting tobacco regulations stricter than what’s been passed on the federal level. In the ensuing 27 years, local legislatures have moved from nixing cigarette vending machines to banning self-service displays and restricting promotions and pricing—all the way up to last year’s unsuccessful attempt to outlaw the sale of all tobacco products in Westminster, Mass.
“Just five years ago, there were about a dozen proposals introduced at the local level related to tobacco products and retail licensing requirements,” says Jacob McConnico, spokesperson for Reynolds American Inc., Winston-Salem, N.C. “In 2015, the number of local proposals rose to more than 400.”
“There are many idealists that would like to eliminate the legal and lawful selling of tobacco products,” says Ralph Brown, vice president of governmental affairs for Cheyenne International, Grover, N.C.
Reynolds and Cheyenne are hardly alone in voicing concerns: Increased activity on the local front has garnered the attention of retailers, trade organizations and manufacturers big and small. The question that remains is what, if anything, the industry can do to fight it—or keep their businesses afloat despite it.
Extreme & Troubling
While Westminster has been the only town to attempt an outright tobacco prohibition (so far), there’s no shortage of less extreme, but still troubling, regulatory trends.
“It used to be limited to local inspection and permitting,” says Anne Flint, senior category manager for Framingham, Mass.-based Cumberland Farms. “Lately, it’s everything from raising the purchase age to 19 or 21, to banning flavored products, to regulating the price and quantity of cigars.”
“We are seeing more legislatures draft regulation emerging to increase the legal smoking age, and continued efforts to introduce and change tax levels on e-cigarettes,” says Miguel Martin, president of Logic Technologies LLC. (The Pompano Beach, Fla., e-cig maker was recently acquired by Japan Tobacco Inc.)
Others point to usage restrictions, limiting the number of stores where tobacco can be sold and discount bans as examples of damaging regulations passed in recent years.
A prime example, Brown says, is Minneapolis’ flavored-tobacco ban that went into effect Jan. 1. Opponents argue that the legislation is particularly biased against convenience stores, because it allows flavored tobacco products to be sold at tobacco and vape shops.
Though regulations on flavors and which retailers can sell different tobacco products are nothing new, the stakes have grown even higher with the rise of e-vapor. The total effect of vape is still uncertain, and sales and usage restrictions could have a major effect on its story arc.
McConnico says Reynolds is particularly concerned when local governments try to lump electronic cigarettes and vapor products in with combustible products.
“Vapor products are tobacco products, but they are very different from traditional cigarettes,” he says. “Onerous regulation that is not science-based has the potential to stymie vapor product innovation.”
Facing the Black Market
Minneapolis’ flavor ban is expected to have big consequences for retailers, manufacturers and consumers alike.
“Adult consumers will need to go outside the city to purchase their products, and local retailers in the city will lose business,” says David Sutton, a spokesman for Altria Group Inc., Richmond, Va. “This causes unnecessary inconvenience for adult consumers and hits the bottom line for the retail businesses.”
McConnico says it’s not only lost sales tobacco retailers have to worry about, but also the safety of their employees. In cities and states with high cigarette excise taxes, the black market has become a big business.
“A truckload of cigarettes could be worth millions of dollars, making cigarette theft and burglary more common at every stage of distribution,” he says. “From convenience-store robberies to warehouse break-ins to truck hijackings, cigarette crime can be expected to increase—putting the men and women who work with cigarettes in danger on the job.”
There’s no doubt that certain cities and states are more apt to pass flavor bans and high taxes, and with that comes more confusion.
“It totally depends on where you are, and there is no consistency or predictability,” Flint says. “It’s constantly changing without a real rhyme or reason.”
That leads to yet another set of problems for retailers.
“When states legislate to different agendas, we end up with a regulatory patchwork across the United States,” says Martin. “This makes the job of compliance much harder.”
The variety in local tobacco regulations means multistate retailers such as Cumberland Farms must manage hundreds of different legal requirements for pricing, merchandising, permitting, training and more.
“We always aim for 100% compliance, and we want it to become second nature for our store teams,” Flint says. “Instead, we have circumstances where they have to constantly second-guess themselves.”
Speaking Out
With so much at stake, most retailers understand the importance of speaking up when potentially harmful regulations are proposed. But it’s not always an easy or a fair fight.
“Normally, regulations require some degree of public notice and comment and transparency,” says Flint. “But, again using Massachusetts as an example, local boards of health have figured out a way to directly regulate tobacco with little, if any, required opportunity for retailers and consumers to weigh in.”
Those who would like to see tobacco’s continued regulation have a lot of powerful allies, both in government and in anti-tobacco groups and lobbyists. But so do the tobacco and c-store industries.
Most major tobacco and vape companies remain very involved in regulatory battles from Washington to Main Street. Altria offers retailers “analysis of the proposed legislation or regulation, talking with elected officials, speaking with their local media,” says Sutton.
Like Altria, McConnico says Reynolds “works hand in hand with retailers and trade associations” on local regulations, from its local government affairs team and Transform Tobacco website to grassroots consultants and resources deployed to build retailer and consumer awareness of proposed restrictions.
“It is important for all stakeholders to stay engaged,” McConnico says.
Logic and Cheyenne have taken a similar stance: Logic now has its own government-affairs division to aid retailers on regulatory battles big and small, and Brown and his team at Cheyenne remain very active on all levels of legislation, from calling and educating retailers to partnering with state and national trade associations.
And have no doubt that this battle will blaze on.
“The local tobacco regulatory landscape has evolved since 1989 … to the point of ushering in a new era of prohibition,” says Briant of NATO. “Not only [in] the kind of legal tobacco products that retailers can sell, but also where adults can and cannot purchase tobacco products.”
Flint agrees: “Unfortunately, state lawmakers have been afraid to even mention the idea of taking away this local control and replacing it with a uniform state policy, because our cities and towns have some very powerful lobbyists at the statehouse. But we need someone to have the courage to start that discussion, because the status quo is becoming unsustainable.”
Local Tobacco Regs: An Evolution
We’ve come a long way from merely banning vending machines. Here’s a look at local regulatory trends over the past 20 years.
1980s: Cigarette Vending-Machine Bans
White Bear Lake, Minn., was the first city to ban the sale of cigarettes in vending machines. Other states and cities soon followed, marking the birth of the movement to regulate tobacco on the local level.
1990s: Self-Service-Display Bans
In the mid-1990s, regulators turned their focus to self-service tobacco displays—especially in retail stores that allow minors to be present, such as convenience stores.
1995: Smoking Bans
California became the first state to enact a statewide smoking ban, setting in motion coast-to-coast actions dictating where consumers can and can’t smoke.
2000s: Licensing and Pricing Restrictions
There’s no shortage of regulatory activity on the local level as we enter a new century. Some cities chose to limit the number of tobacco retail licenses they’ll issue, others chose to prohibit tobacco sales based on a retailer’s proximity to schools or churches, and other legislatures focused on limiting the minimum package sizes and/or minimum price per cigar—or outright banned the redemption of coupons for all tobacco products.
2010s: Flavor Bans and Minimum Purchase Age
Technically, New York banned the sale of flavored tobacco products in late 2009. From there, numerous other cities followed suit, with many also banning the sale of flavored electronic cigarettes. The Big Apple was also a “leader” in the move to increase the minimum age to purchase tobacco products; the age went from 18 to 21 in 2013.
2014: Tobacco Sale Ban
Not to be outdone by New York, the town of Westminster, Mass. sought to ban the sale of all tobacco products in October 2014. Though the board of health ultimately voted down the measure (after a disastrous public hearing), it marks the first time in the United States that a local government tried to ban tobacco.
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