Buydown Restrictions Anger Tobacco Retailers

Retailers who have joined the Retail Rights organization say they are frustrated by the control that buydown contracts place on their ability to merchandise -- a right that already is severely restricted by the federal government, they point out."One program says there can be only their signs within four feet of the cigarette display," says Pat Leahy, owner of Lex Beverage Center in Mansfield, Ohio. "As a small store with limited space, giving one company eight feet doesn't leave me much room for anyone else. It gets rather frustrating."Leahy also says that companies fall behind in paying his buydown discounts, which he doubts happens to the large stores. Inventory levels are a concern for Vicky Grogan, owner of The Tobacco Patch #1 in Hobbs, N.M. Several contracts stipulate that the store must have a specific number of cartons of a particular brand on-hand at all times -- which means the store must order more to maintain that minimum. "They're pushing product to get us to buy more, and it's hard to handle that force feeding, especially at times when it's not on sale and not our best-selling brand."Although some retailers have reported that reps have removed competitive signs not in compliance with their own buydown agreement, Grogan says that doesn't happen in her store. "I don't allow them to touch anybody else's signs."Mike Litwak, owner of Family Bargain in New Rochelle, N.Y., has a different problem -- he'd like to participate in buydowns, but he won't give up the merchandising control of his store. The stance is costing him money, he says. "What's going on is a total mess," he says. "I want a contract so I can get better deals, but the big companies don't want me selling any other products." Litwak sells a lot of generics and brands from small companies that are affordable but not well-known, he explains. Buydown agreements push those products below the counter, where they can't be seen.But without the buydown contracts and the promotional payments they provide, he operates at a disadvantage. "I'm not entitled to their special deals, so for that period, I don't get any sales on those products. And customers don't buy one product somewhere else and then come to me for the rest. So I'm losing across the board."Promoting other brands is important to him, but without the contracts, he has a hard time. "We need to change it at the federal level, because it's very difficult for the little guys to change it. But if the major manufacturers lined up with the retailers, then there'd be a chance."

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