INTRODUCTION

Tobacco advertising and displays at points of sale (POS) maintain smoking habits, interfere with attempts to quit smoking¹, and are associated with the impulse buying of cigarettes^2,3. Moreover, these activities influence the initiation of smoking among adolescents, as this group makes frequent visits to retail establishments that sell tobacco and display tobacco advertisements^4,5. Indeed, frequent exposure to tobacco advertising is associated with higher cigarette brand awareness and increased susceptibility to smoking^6,7.

For these reasons, Article 13 of the WHO Framework Convention on Tobacco Control (FCTC) stipulates that Parties to the agreement implement comprehensive bans on tobacco advertising, promotion, and sponsorship (TAPS)⁸. That is, Parties are bound to take appropriate legislative actions to prohibit the advertisement of all types of tobacco within 5 years after entry into force of this Convention⁸. Its guidelines also call for a total ban on the display of tobacco products at POS, as such displays directly or indirectly promote the purchase of tobacco products by the public⁹.

Contrary to these global efforts, the international tobacco industries, including Philip Morris International (PMI), British American Tobacco (BAT), Japan Tobacco International (JTI), and Imperial Tobacco Group, are targeting the populations of low-and-middle-income countries, including women and children, in efforts to achieve market expansion¹⁰. Thus, although the prevalence of smoking is declining globally, its decline in low- and middle-income countries has been more difficult to achieve compared with that in high-income countries, and the number of smokers in the former has not changed¹¹. Additionally, tobacco products are being sold at various points of sale¹² in the absence of restrictions on sellers, on places of sale, and on sales volume. Notably, the global trend in the sales of tobacco products is shifting to small stores that are part of a chain, which are increasingly dominating the domestic distribution market¹³. Indeed, these retail chains are considered major clients of tobacco companies as well as main advertising channels because tobacco companies can advertise in every franchisee after a contract with the headquarters has been signed¹⁴.

In South Korea, cigarettes can be sold by only those retailers that are designated by the relevant municipal government agencies, but a tobacco retail license is not required¹⁵. Indeed, cigarettes are sold at convenience stores, including hypermarkets, retail outlets, and kiosks. Recently, however, the number of convenience stores in South Korea, most of which advertise tobacco products, has been increasing¹⁶. Additionally, the number of cigarette advertisements in convenience stores (an average 20.8 advertisements per store) is higher than that in supermarkets (an average 8.0 advertisements) and small cigarette retailers (an average 3.5 advertisements)¹⁶. This implies that anyone who visits a convenience store, including adults, children, and adolescents, has intense exposure to tobacco products and advertisements. Tobacco companies have concentrated considerable resources on displays and advertisements placed in POS¹⁷ because they are important ways to communicate with current and future customers¹⁸.

In South Korea, existing regulations do not comprehensively ban TAPS. According to the National Health Promotion Act, the display of tobacco products or the posting of tobacco advertising materials in POS is authorized if the displayed or posted advertisement is not visible from the exterior of the store¹⁹. Violation of this law is punishable by a fine not exceeding 10 million won (about 10 thousand U.S. dollars). Also, according to the Tobacco Business Act, no manufacturer, importer or wholesaler can offer money or goods to a retailer to promote tobacco sales¹⁵. A person who offers money, goods, or other inducements in violation of the Act can be punished by a fine not exceeding five million won (about five thousand U.S. dollars).

Previous research has shown that a tobacco company and the retailer sign a contract that obligates the latter to display products and the former to provide incentives for sales promotion^14,20. Whether the four major tobacco companies in South Korea―KT&G (Korea Tomorrow and Global), PMI (Philip Morris International), BAT (British American Tobacco), and JTI (Japan Tobacco International)―pay franchisors tobacco advertising allowances is unclear, as this is considered confidential business information, but these allowances are estimated to exceed 150 billion won (about 150 million U.S. dollars)²¹. By contrast, the per-store advertising allowance is 0.3–0.5 million won (about 300–500 U.S. dollars) per month²¹.

To date, the specific relationship between tobacco companies and convenience stores, as the retail POS for tobacco, has yet to be investigated. Convenience stores now play an important role in the South Korean retail landscape, especially as the consumption pattern of one-person households has changed to buying smaller quantities, and thus to shop more frequently²². The top two convenience store franchisors in South Korea account for more than 50% of the total market (based on the number of convenience stores)²³, making it the third largest business in the off-line retail market, behind only hypermarkets and department stores²⁴.

Therefore, the objectives of this study were to gather data on how contracts for tobacco advertisements and displays in convenience stores are made, and to investigate the relationship between tobacco companies and large retail chains. According to these results, we propose regulatory measures to prevent the further spread of tobacco products via a deepening of this relationship.

METHODS

RESULTS

DISCUSSION

The purpose of this study was to gather data on the advertising and display status of tobacco products at convenience stores, the major sites of retail tobacco sales, by interviewing convenience store owners. We found that the characteristics of cigarette advertising and displays, such as quantity, location, display method, type of advertisement, and so on, are determined by a contract between the tobacco companies and the convenience store headquarters. Additionally, the franchise headquarters receives an advertising allowance from the tobacco company, and the franchisee is paid a monthly allowance by the franchisor to maintain the advertisement and display of tobacco products. As specified in contractual agreements with retail chains, tobacco companies install tobacco advertisements and displays in stores; however, they also engage in illegal promotional activities (Figure 1).

Figure 1

Advertising-related relationships among tobacco companies, franchisors, and franchisees

Selling tobacco products is one of the most financially beneficial activities in the retail sector^27,28. South Korean owners recognize the importance of tobacco products, as cigarette sales account for 30–40% of the total gross sales of convenience stores, and thus directly affect total profits²⁹. Additionally, the cigarette advertising allowance is tied to the sale of tobacco products. According to the contract between the convenience store franchise and the franchisee^29-31, the franchisor provides support and education regarding management and sales activities as well as initial stabilization grants, long-term operating grants, and sales incentives to ensure that the economic interests of the franchise are maintained by the franchisee. The cigarette advertising allowance is a fixed supplementary income provided to each convenience store franchisee from the monthly subsidy received by headquarters.

Globally, tobacco companies spend tens of billions of dollars on TAPS each year³². In-store advertising expenditures have been increasing as other tobacco control regulations have tightened³³. In 2016, a total of $9.5 billion were spent on adverting and promotion by the cigarette companies ($8.7 billion) and smokeless tobacco companies ($0.8 billion) in the United States^34,35. In particular, a substantial amount of expenditure was paid to cigarette retailers for price discounts ($5.8 billion) or promotional allowances ($0.2 billion)³⁴.

Clearly, if this subsidy was eliminated due to the prohibition of advertisements and displays, franchisors and franchisees would undoubtedly express strong opposition. It may be difficult to enforce regulations without support from the headquarters of convenience stores. In fact, in 2014, the South Korean government announced a comprehensive tobacco control plan to reduce the demand for tobacco³⁶; this plan included increasing the price of tobacco products, introducing graphic health warning labels, and banning tobacco ads in POS. The stores expressed their concerns about a potential decrease in their allowances³⁷. In 2013, the operators of the 7–Eleven convenience stores even filed a lawsuit against their headquarters, involving a demand by franchisees for a greater advertising allowance^29,38. Although the court ruled against the plaintiffs because they had, in fact, received an advertising allowance, the franchisees continue to feel entitled to an increase in this allowance. Therefore, financial support may be considered when banning tobacco advertising and displays at POS^20,39. Ultimately, it is necessary to build a retail market that can operate without relying on tobacco advertising allowances.

As in other countries^40-42, the Korean government’s plan to introduce graphic health warnings on tobacco packaging was strongly opposed by the Korean Association of Convenience Stores, which claimed that it would cause a loss of profits and thus adversely affect the mental health of convenience store customers and workers⁴³. However, retailers and tobacco companies have long had a close relationship, the existence of which is widely recognized^14,20. The contracts behind these relationships do not involve merely setting up and paying for the installation of cigarette advertising in convenience stores. The tobacco lobby, through promotional allowances⁴⁴, has contributed funds to organizations not directly related to tobacco, including retailer groups, restaurant associations, and the hospitality industry, with the aim of weakening tobacco control regulations. Moreover, the list of organizations receiving allowances is expanding to other industrial and commercial sectors^45-47. Indeed, the tobacco industry has attempted to maintain wider relationships with the distribution industry, especially by expanding its retail chain market, which makes the distribution industry financially dependent on the tobacco industry^45-47. This can be seen as a strategy by tobacco companies to secure a front group that can influence the tobacco control legislative process⁴⁸ by financially supporting it. Thus, it may be difficult to enforce tobacco control regulations without initially obtaining the cooperation of the front groups established by the tobacco industry, such as convenience stores. Therefore, to prepare for class actions and other forms of opposition that delay implementation of such regulations, it is necessary to collect and analyze data from all stakeholders before introducing tobacco-related regulations.

Furthermore, by implementing a ban on tobacco advertising and displays at POS, the government should also prepare for litigation, because the multinational tobacco industry has consistently used legal challenges to prevent the enactment of tobacco control regulations⁴⁹, arguing that there is no scientific evidence to prove that smokers continue to smoke and that non-smokers start smoking as a result of the advertising and displays at POS⁵⁰. Rather, as these are intended as product information for smokers, banning these materials violates rights of freedom of expression and free enterprise⁵⁰. However, as the FCTC stipulates, a ban on tobacco advertising at POS is a non-price policy that has been credibly proven to be effective⁸.

Moreover, in Norway, Panama, Columbia, and Costa Rica, restricting the interests of tobacco companies through the ban of tobacco advertising was deemed constitutional because it is a necessary measure to protect public health and the ban does not interfere with free trade⁴⁹. These cases have made it more difficult for the tobacco industry to succeed in overturning bans on cigarette advertising and displays at POS in other countries. In fact, Iceland, Canada, Thailand, Australia, Ireland, UK, New Zealand and Norway are among the countries that have banned cigarette advertising at POS⁵¹. The introduction of such measures elsewhere around the world, therefore, seems likely⁵².

Following the enactment of the National Health Promotion Act in 1995, South Korea has implemented a variety of tobacco control policies, including extending smoking ban areas, providing and promoting prevention education programs directed at the public, and supporting smoking cessation⁵³. As a result, there has been a dramatic short-term decrease in the prevalence of smoking among adult males aged 15 years and older, from 64.1% in 2000⁵⁴ to 48.5% in 2013⁵⁵. However, the decreased tobacco sales due to the decline in smoking prevalence has encouraged competition among the tobacco companies. Specifically, in 1989, a global tobacco company was allowed to enter the domestic market and, in 2001, the privatization of KT&G led to competition between the domestic tobacco company and a global tobacco company for the domestic tobacco market⁵⁶.

In addition, because tobacco advertising through mass media is prohibited, the legal and consistently available advertising venues for tobacco companies are convenience stores, in which they can place advertisements and displays. In this context, we expected to find that tobacco companies engaged in promotional activities other than placing advertisements and displays at convenience stores⁵⁷. Despite its focus on only a few cases, this research determined that tobacco companies do, in fact, engage in complex illegal promotional activities. Although the placement of advertisements and displays at convenience stores follows strict contractual agreements, the sales representatives of tobacco companies engage in illegal promotional activities in stores with which their companies have individual contacts. At this time, tobacco companies not only provide incentives to franchisees^14,20 but also verbally communicate with them directly to promote their products. Although retailers are aware that certain promotional activities are illegal, they nonetheless accept the financial rewards offered by the tobacco companies for engaging in these activities.

Based on our findings, we recommend that vendors be asked to voluntarily refrain from participating in illegal promotional activities^39,58 and that appropriate education be provided to tobacco sellers⁵⁹. Although the Ministry of Strategy and Finance has the authority to prohibit the offering of money, goods, etc., for the promotion of tobacco sales, there is no action or measure allowing for the monitoring of these illegal activities. However, they could be identified and monitored through various types of research and activities aimed at continuously disclosing such practices. Tobacco sellers could be made aware that they are being monitored and that public attention is being drawn to this issue^60,61.

This study has several limitations. First, the number of participating franchise owners was very small (n=3); indeed, because franchisees have an obligation not to disclose management information, it was difficult to recruit representative participants. Despite our contacting many owners, none from the third largest franchise chain agreed to participate in our study. However, as the operations of convenience stores are standardized by the individual franchise brands⁶², we believe that the three participants were able to provide representative information, as the contracts between tobacco companies and convenience store franchises would have been the same even if more owners had been interviewed. Second, it was difficult to generalize the results on the promotional activities of tobacco companies. Although we found that illegal promotional activities differed according to the target customers and retail trade areas, we had few examples, and differences between regions and chain stores could not be determined. Further interviews and surveys should be conducted to identify potential differences among locations, regions, and franchise chains.

CONCLUSIONS

The sale and display of tobacco products at convenience stores ‘normalizes’ tobacco products by treating them as common and essential, similar to other products^63,64; this promotes continued smoking and creates new smokers. Therefore, to ‘denormalize’ smoking and phase out tobacco products throughout society, we suggest that tobacco advertisements and displays in convenience stores be banned as soon as possible. The expansion of convenience stores is related to the increase in tobacco advertisements and displays at POS. Tobacco products not only directly affect the total profits of convenience stores, they also provide additional income in the form of monthly payments in return for advertising. For these reasons, convenience stores continue to feature cigarette advertising. Tobacco companies also provide financial incentives to franchisees for participating in illegal promotional activities. Promotional activities should be periodically monitored to detect those that are illegal and to limit tobacco sales and advertising. Comprehensive data from all stakeholders should be collected and analyzed before bans on advertising and displays at POS are introduced.