Geographical differences in the financial impacts of different forms of tobacco licence fees on small retailers in Scotland

Objective

Retailer licencing fees are a promising avenue to regulate tobacco availability. However, they face strong opposition from retailers and the tobacco industry, who argue significant financial impacts. This study compares the impacts of different forms of tobacco licence schemes on retailers’ profits in Scotland.

Methods

We calculated gross profits from tobacco sales in 179 convenience stores across Scotland using 1 099 697 electronic point-of-sale records from 16 weeks between 2019 and 2022. We estimated different fees using universal, volumetric and separate urban/rural schemes. We identified the point at which 50% of retailers would no longer make a gross profit on tobacco sales for each scheme and modelled the financial impact of 10 incremental fee levels. The financial impact was assessed based on changes in retailers’ tobacco gross profits. Differences by neighbourhood deprivation and urban/rural status were examined.

Results

The gross profit from tobacco per convenience store averaged £15 859/year. Profits were 2.29 times higher in urban (vs rural) areas and 1.59 times higher in high-deprivation (vs low-deprivation) areas, attributable to higher sales volumes. Tobacco gross profit decreased proportionally with increasing fee levels. Universal and urban/rural fees had greater gross profit reductions in rural and/or less deprived areas, where profits were lower, compared with volumetric fees.

Conclusion

The introduction of tobacco licence fees offers a potential opportunity for reducing the availability of tobacco retailers. The likely impact of a tobacco licence fee is sensitive to the type of licence scheme implemented, the level at which fees are set and the retailers’ location in relation to neighbourhood deprivation and rurality.