As distributors begin to focus on the potential impact of new governmental regulations that may be on the horizon in the U.S, a longtime tobacco executive from Canada outlined developments that have occurred in his country as new laws were enacted to regulate the advertising and sale of tobacco products.

Ron Funk of Funk Consulting, Ontario, drew a dramatic parallel to Canada’s imposition of advertising bans, stark labeling requirements, retail display bans, and confiscatory taxes that have been imposed by the Canadian government and the potential for similar actions in the U.S. as a result of new powers given to the Food and Drug Administration to regulate tobacco. (photo caption: Industry consultant Ron Funk of Canada discussed tough Canadian tobacco regulations and said the U.S. may experience similar requirements.)

“We are where I believe you are going,” said Funk, explaining that the restrictive actions in Canada were taken over a long period of time as concern about the health consequences of smoking increased. He cautioned distributors to be vigilant and support AWMA’s efforts to minimize the impact of any new regulations or restrictions. “The first regulations you get will not be the last ones,” he cautioned.

In Canada, stark, rotating health warnings are required on packages. Retail stores in all but two provinces must keep their displays of tobacco products covered. Taxes skyrocketed. Smoking in workplaces has been banned, and one province has even banned smoking in commercial vehicles and private cars with children under age 16.

The result of all of this, Funk said, has been new entrants in the tobacco manufacturing sector stealing share, business shifting to less than premium price, distributors and retailers suffering “massive deflationary pressures” – and one tobacco company emerging as the big winner. In addition, Imperial Tobacco, the market leader, went DSD resulting in a 30 percent gross margin loss per drop for distributors.

Funk pointed out that both the U.S. and Canada have the same problems that have driven legislation – health risks, environmental tobacco concerns, addiction – and that many states are ahead of the federal government with tax rates and smoking restrictions.

“Frankly, it has already happened,” said Funk. “What matters now is how you manage the process that’s coming.”