Pilferage in Perspective

This R.J. Reynolds document, Pilferage in Perspective, is a presentation whose purpose is to talk retailers out of the "knee jerk reaction" of moving their cigarettes out of reach of customers in response to pilferage. The document shows how retailers can, in most cases, make more profit if they allow their cigarettes to be stolen (due to the industry-paid "placement fees" or "slotting fees"). The document contains equations that demonstrate how slotting fees more than offset retailers' loss from theft. Note the example at the end of the document which cites the average "Winn Dixie" grocery store as selling 450 cartons a month. The document demonstrates that this Winn-Dixie store can actually make a higher profit from tobacco if the owner accept up to a 6% pilferage rate--along with their slotting fees.

Analysis A 6% pilferage rate (at the stated quantity of sales) equates to an average loss of 5,400 cigarettes each week-- or almost 290,000 cigarettes each year--from a single grocery store. If just one half of these cigarettes make it to kids who smoke ten cigarettes each, and just 1/4 of them go on to be regular smokers, then the pilferage from this single store will recruit over 3,000 new smokers each year. At an average smoking rate of 1 1/2 packs a day, each smoker stands to generate about $36,000 --or, if the group is taken in aggregate, many hundreds of millions of dollars-- for the industry, state and federal governments before they quit or die. All from just one store. This document can be valuable at public hearings for measures to eliminate self-service cigarette displays, if you take the math a little further and demonstrate the public health impact of the theft rates stated in the document.

Title	 Pilferage Presentation. Core Presentation. Date	 19850912 (September 12, 1985) Type	 Graphics, report. Bates	 514348983/9015 Collection	 RJ Reynolds Pages: 33 URL: http://legacy.library.ucsf.edu/tid/zac13d00

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