Title: Anti-contraband campaign makes waves

Sub-title: Convenience store industry officials land on Parliament Hill with a bang.

 

The anti-contraband tobacco campaign launched by convenience store owners in mid-May, appears set to make a big impact. The 25-city Ontario leg began in Ottawa with a bang, when Michel Gadbois, Senior Vice-President at the Canadian Convenience Store Association, took the stage on Parliament Hill to call on the Harper government to reduce contraband tobacco smuggling to 10 percent of overall consumption by year end.

 

“The spread of contraband tobacco has been growing steadily for seven years,” said Gadbois.  “Proportions are now reaching alarming rates.” To demonstrate the gravity of the problem, Gadbois released results of a Cigarette Butt Study, which showed that not only are government officials avoiding the problem, many are contraband tobacco users themselves.

 

The study assessed cigarette butts collected during April on the grounds of the Supreme Court of Canada and the offices of the finance department. Assessors noted that 22 percent of butts found at the judicial institution and 32 percent found in the finance department property were contraband.

 

The need for immediate action

“Government officials can do a lot to mobilize the community, but first they have to mobilize themselves,” added Chris Wilcox, Vice-President of Quickie Convenience Stores, who shared the stage with Gadbois. ”Morally speaking, the courts, the finance department and schools are in government’s back yard, so there should be zero tolerance there. Since smuggling is happening where (members of Parliament) live, it’s their responsibility. It’s their corner store retailers that are suffering from it.”

 

Just as shocking though were the results of assessments conducted on cigarette butts collected in six Ontario high schools, where close to one in five butts collected were contraband. “When you have a situation in which criminals are now selling cigarettes to children, at per-pack prices that are less than what it costs to buy gum, you know you have got a problem,” says Wilcox. “The RCMP are telling us about cases where kids are earning up to $1,000 a week cash selling contraband. You can be pretty sure that they are not going around asking their customers for ID.”

 

Turning a blind eye some lawbreaking such as contraband tobacco smuggling feeds the spread of organized crime, said Wilcox. “The practice leads to the creation of transportation, distribution and communications networks, and puts enormous amounts of money in the hands of criminals that can be used for other criminal purposes.”

 

“That the laws must be respected,” added Wilcox. “The best way to do that is to apply all laws equally. What kind of example does it set for our children when you have one set of laws that are rigorously enforced, and another set which are basically ignored? We are going to be pushing that message and will be supporting MPs who take this issue seriously.”

 

Not a victimless crime

Wilcox’s job at Quickie Stores, a 50-outlet chain based in Ottawa, with two stores in Quebec, gives him a unique perspective on the harm that contraband tobacco can cause. “It’s not a victimless crime,” says Wilcox. “The convenience store industry in particular has been badly hurt.”

 

“There are only a few items that are real big drivers of repeat business,” said Wilcox. “Beer, for stores in those provinces that are allowed to sell it, is one. Cigarettes are another. The problem is that when convenience store customers stop going there to buy their tobacco products, they also stop buying the ancillary products.”

 

The scars have been telling. “Ontario alone has lost close to 1,500 stores. We have had to close two of our stores ourselves,” says Wilcox. “But getting (Ottawa politicians) to listen is not easy. I have been coming here every year for several years now, but other than polite smiles and expressions of concern, I haven’t been able to get much traction.”

 

Ramping up the pressure at the local level

According to Gadbois, the convenience store industry is tired of waiting around, and is thus gearing up to take actions on its own at the grass roots level, to build support for its 10 percent contraband target. It’s an ambitious undertaking particularly in Ontario, where 50 percent of overall tobacco sales are thought to be contraband.

Another factor said to hamper contraband tobacco opponents is the fact that more and more Canadians, as much as 80 percent according to recent numbers, don’t smoke. For them the problem simply does not appear regularly on their radar screen.

 

But Wilcox brushes off objections. “We have a lot of tools at our disposal,” said the veteran convenience store executive. “For example there are on average between 70 and 80 convenience stores in each (of the 308) federal ridings. They will be able to generate considerable ground-up pressure, both through meetings with local members of Parliament, links with local schools and school board officials and through discussions and contacts with the thousands of consumers that pass through their stores each day.”

 

The Cornwall launch

The first stop made by convenience store officials on their Ontario 25-city public awareness campaign was in Cornwall, which is located right beside the Akwesasne Indian Reserve, bordering Quebec, Ontario and the United States, through which experts say that 90 percent of Canada’s contraband tobacco flows.

 

Last year, a dispute over whether border agents could carry firearms on the reserve, forced the federal government to move a key border crossing from Mohawk territory, into Cornwall itself. Ironically locals say that the move, which has made life substantially more difficult for smugglers, provides a good indication what government can do if it puts its mind to it.

 

“Our sales went up by between 30 and 40 percent after the change,” said Thuraisingam (Tas) Kanagaratnam, proprietor of TAS Convenience Store. “But it is not enough. Smugglers are already finding new routes and they are still coming through almost non stop. I get customers coming in here all the time telling me that they just need a pack or two at the regular price, because their contraband supply has run out temporarily.”

 

“Public officials including politicians, the Ontario Provincial Police and the Royal Canadian Mounted Police all need to do more,” added Kanagaratnam, a Tamil immigrant from southern India, who loves his store and the industry he works in, but worries about its future. “They all know what is going on. But they just sit around with one eye open, and one eye closed.”

 

A wide range of ideas

Kanagaratnam also offered some concrete thoughts on how contraband tobacco could be combated. “They should cut the taxes they charge on legal cigarettes,” he said, noting the direct causal relationship between higher taxes and increased smuggling. For example the RCMP has said that the most recent upsurge in contraband coincided with a substantial tax increase on tobacco products starting in 2001.

 

“We are forced to sell top name brands here at $82 a carton. That includes little or no profits built in,” said Kanagaratnam. “But customers can get contraband cigarettes at $15.00 per bag. This is a very price sensitive neighborhood, so you can bet that even the most honest people get tempted.”

 

Elizabeth Church, who along with her husband Chris, runs the Shortline Convenience Store, which is located across town from Kanagaratnam’s store agrees with him that improved tax measures, which put a big dent in the contraband explosion during the early 1990s will likely play a big role this time again too. “We have to level the playing field among various cigarette brands inline. Otherwise this problem is going to continue.”

 

Better relations with Canada’s aboriginal communities could also be part of an overall solution, industry officials say. They site Alberta and British Columbia, as examples of provinces that have kept the problem to manageable proportions, by negotiating agreements with First Nations groups located there.

 

Tighter enforcement would also almost certainly have to be an important element of an eventual overall package of measures to bring contraband into line adds Wilcox. “Smugglers right now are just getting a small slap on the wrist when they get caught,” he says. “Sure, their trucks are supposedly seized. But they have gotten smart over the years and now many of them are either rented or stolen.”

 

Although Ontario convenience store industry officials have a wide range of views regarding the best strategies needed to achieve the industry’s 10 percent contraband target, the all agree on one thing: the need to act now.

 

“The HST harmonization initiative, which will push the price of a carton of cigarettes from $82 to $88 per carton in my store is going to make the problem much worse,” said Kanagaratnam. “It will provide consumers even more incentive to use contraband products.”

 

Gadbois agrees. “This will be another step in the continuing escalation of the problem. If we don’t act now, we accept criminality,” says Gabois. “It’s as simple as that.”

 

 

Peter Diekmeyer (peter@peterdiekmeyer.com) is a Montreal-based freelance business writer.

 

 

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