Hong Kong - convenience store chains cut cost of cigarettes by HK$2..

March 8, 2011 - Leading chains of convenience stores cut the cost of cigarettes by HK$2 (0.26 USD) to match news-stand prices, reversing an increase that had been introduced at about the same time as the higher tobacco tax in last month's budget. Both 7-Eleven and Circle K now sell cigarette packs at HK$50 each, on a par with news-stand prices.

The chains raised cigarette prices by HK$2 to HK$3 on top of the HK$10 (1.28 USD) rise in tobacco tax last month. Sales at one 7-Eleven store dropped by more than half, while business at news-stands was unaffected, the South China Morning Post (SEHK: 0583, announcements, news) reported on Monday. (Hong Kong - Tax increase adds HK$10 (1.28 USD) to cigarette price..)

A spokeswoman for 7-Eleven said: "The price of tobacco has been adjusted after negotiation with major suppliers." At 7-Eleven, the reversal was announced through an internal memo on Saturday.

One shop manager said the company made the about-turn to win back lost business. "As I understand it, the wholesale price of cigarettes remains unchanged," he said.

Before the tax increase, his outlet sold about 400 packs of cigarettes a day. That fell to about 170 after the rise. He said that after the HK$2 increase was withdrawn on Saturday, sales improved 10 per cent. "The customers are gradually coming back to us," he said.

The price increase at convenience stores sparked an outcry among smokers, with some of them organising petition campaigns on Facebook. One of the smokers, Ada Cheung, said on the social networking website that the price cut was a "victory". But others said they would continue to buy cigarettes from news-stands as a show of support for small businesses.

Hong Kong Newspaper Hawker Association vice-president Tang Yap-ming said cigarette sales at news-stands were bound to be affected by the price reversal. "We cannot do anything about it. It's a natural adjustment in the market."

The tobacco tax was raised on February 23. The Department of Health's quit smoking hotline has been receiving more than 240 calls a day since the financial secretary delivered his budget speech, which included the tax rise. That figure was more than six times the daily average of 38 calls received last year.

Reference: 7-Eleven and Circle K reduce tobacco prices, Ng Yuk-hang, South China Morning Post, 3/7/2011.

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