TOBACCO TRADE

Poverty Bay Herald, Volume LV, Issue 17029, 14 August 1929, Page 11

TOBACCO TRADE

(To the Editor of the Herald.) Sir,— Misleading and incorrect .statements have recently been made, per medium of some papers, concerning the sale of cigarettes and tobaccos. In substance, these complaints, originating from tobacconists, allege that certain firms retail cigarettes and tobaccos at a figure Which is below cost, doing so as an advertising measure. Such statements as these are incorrect, and are designed solely to arouse sympathy of the Government for those shopkeepers whose methods are as antiquated as are their ideas of a reasonable profit. We will pay the sum of £SOO into the earthquake fund if anyone can prove we are selling cigarettes and tobaccos without making a profit. We have no hesitation in saying that our distribution and selling organisation is largely responsible for our low prices, anil our tobacco department lias returned us a very handsome profit, but has yet permitted us to give the general public the article they require at a fair and reasonable price. It is not generally accepted by retailers, but in assessing the retail value of any class of merchandise the question oi turnover must be considered. For instance, a section of goods which may be

"turned over," say, once per annum, must obviously cany a more substantial margin of profit than the class of goods

"turned over" four times }>er annum. Our tobacco stock is "turned over" 25 times per annum, so it will be obvious, oven to the layman, that a small margin of profit per article will at the end of the year amount to a very consMlernMe figure, in comparison with the invested capital of the department. Therefore, presuming a firm is averaging 8 per cent, profit on its tobacco department, and is turning the. stock over 25 times per annum, the percentage of profit on the outlay will approximate somewhere in the vicinity of 220 per cent, per annum. Although this last-mentioned percentage is high, it is lactually on the conservative side, as in our experience we have ouite often turned over our stock weekly. 71 'has always been the principle of our firm to study all aspects of retailing, and to pass on to the public such benefits as we can. 'On the other'hand we can point to cases where tobacconists are paying rent up to £2OOO a. year. We claim if we have a more economical method of distributing to the public we are entitled to use same. Price-cutting exists in several other trades in New Zealand to-day. We do not think any Government would tackle such a. herculean task as to attempt to regulate prices, more especially the present Government, whose slogan was "Less Government interference in business." Any action taken to preclude the sale of tobaccos and cigarettes by such organisations as ourselves will give a direct fillip to the already high cost of living, and certainlv will not be appreciated by the public generally, who have shown their appreciation of our efforts, bv their generous patronage. 'We attach certificate from our auditors—Messrs. Watkins, Hull, Hunt and Wheeler, certifying that the percentage of gross profit en tobacco sales for the year ended August 31, 1928, was 8.301 per cent.—Yours, etc.. J. R. MrKENZIE, LTD.