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Tobacco growers enter wholesale

30 May 2013 / 22:05:05  GRReporter
4398 reads

Victoria Mindova

"Greek society offered as a sacrifice to international corporations" was the slogan that the federation of wholesalers of cigarettes held in front of the building of the Competition Commission this Thursday. In the already relatively calm political and economic waters of Greece, this slogan attracted GRReporter’s attention and we decided to investigate the problem.

It turns out that from the beginning of June onwards, tobacco growers will limit the number of wholesale suppliers to the regions of Attica, Piraeus, Thessaloniki and Patras, which are some of the strongest markets in the country. So far, the warehouses in Greece have been responsible for supplying retail chains with cigarettes.

Like many others before them, the disgruntled wholesalers who remain outside the distribution network protested in Athens with black flags and discontent. "We are healthy businesses. We pay our taxes and social security contributions. Now, they will force us to close. Not only we but also the state will lose," the victims complained to the Greek media.

Initially, this seems to be a deliberate creation of monopolies in wholesale supplies. Fewer branch representatives will have a larger market share and greater profits. We contacted the Competition Commission, which, earlier in the day, had met with the affected wholesalers, to give us its perspective on the problem.

"It's about inter-company agreements, in which the state cannot interfere. We understand the problem of the protesters who want to protect their interests (wholesalers that are not included in the new agreement of cigarettes distribution - author’s note.), but we, as an organization, can intervene only in cases in which there is a risk of breach of public interest. We cannot take sides when it is considered that there is a danger of breach of individual business or private interests," states the Competition Commission.

In other words the specialists are adamant that the decision of tobacco growers to limit the number of companies with which they work does not infringe free market principles or competition compliance rules, or the consumers' interests.

This is confirmed by the fact that prices for the end user will not change. The Ministry of Finance adjusts the price of cigarettes and tobacco products as well as the level of profits in different parts of the supply chain each year. This means that the change in the structure of the commercial network cannot speculatively increase the price of the product. On the other hand, the state intervention when individual private companies decide on whom they can do business with completely contradicts the principles of free economy and competitiveness.

Last but not least, the Competition Commission expresses its dissatisfaction with the fact that the federation of wholesalers of cigarettes gave no warning about the sudden protest it had organized.

"They did not have to block the entrance of the agency two days before the law enters into force," the Commission states. They explain that the change was announced last year. "Our doors are open to all individuals and organizations that believe that competition rules would be violated and we could have considered the issue several months ago. The truth is that there is no legal basis for the Competition Commission to intervene in this case. We understand the desire of the protesters to attract public attention to the problem, but this could have happened in a different way," the Commission comments on the protest.

There is a problem and it is retailers

After the Competition Commission failed to explain why the demands of the owners of warehouses for cigarettes were ungrounded, we turned to the other party concerned in the process of market reorganization, namely the ordinary sellers of cigarettes, the people who spend between eight and ten hours in a booth for non-essentials and heavily rely on tobacco products to make their monthly living.

"I learnt about the change soon after my supplier told me that he would supply only one type of cigarettes. I should look for the other brands in other warehouses," Nikos, who works in a kiosk selling newspapers and cigarettes (περίπτερο) in the northern suburbs of Athens, told GRReporter.

Tobacco growers are entering the wholesale distribution, imposing their own rules of the game. Different brands of cigarettes will have to be ordered from two or three different suppliers, which will aggravate the process.

A more serious problem, however, is the lack of available funds to maintain the activity. So far, Nikos has been giving orders to his wholesale supplier on a daily basis. When he did not have the full amount to pay for the order, the supplier would wait few days for him to repay. Now, the new suppliers will accept orders four times a week, requiring the full amount in advance to make the delivery.

"After the deepening of the crisis and the increase in excise duties, people have begun buying cheaper cigarettes. Turnover has fallen and profits for retailers on a pack of cigarettes have been reduced from 8% to 3%," says the young man. Like many other small businesses, the owners of kiosks hardly have any cash and the advanced payment of the orders will further impede the supply. Many brands on the shelves will disappear by regions because their retail sale may be unprofitable.

Tags: EconomyMarketsCigarettesTobacco growersGreece
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