Tobacco Retailers

AMERICAN WHOLESALE MARKETERS ASSOCIATION September 24, 1997 Tobacco- Retailers Mr. Bruce Reed Assistant to the President for Domestic Policy The White House Washington, DC Dear Mr. Reed: We are writing on behalf of the approximately 1,000 wholesale distributor members of the American Wholesale Marketers Association (AWMA). AWMA is the only national nonprofit trade association representing wholesale distributors of tobacco, confectionery, snacks, foodservice items, groceries, and general merchandise sold through, mostly small, independent retailers and convenience stores. This channel of distribution's 50,000 employees serve approximately one million retail outlets and represent more than $40 billion in annual convenience product sales. In his statement last week on the proposed Tobacco Settlement, President Clinton stated, "And finally, any tobacco legislation must protect tobacco farmers and their communities." To single out farmers for special treatment when distributors will be similarly harmed by the proposed agreement adds insult to the financial injury our members anticipate. The President went on to say that farmers deserve this special protection because: (1) they haven't done anything wrong, (2) they haven't done anything illegal, (3) they're good, hard- working, tax-paying citizens, and (4) they have not caused this problem. The same can be said of the wholesale distributors of tobacco products. We haven't done anything wrong or illegal, we're good, hard-working, tax-paying citizens and have done nothing to cause this problem. Just as farmers cannot readily change their cash crop from tobacco to soy beans without substantial loss of income, wholesale distributors cannot finance an increase in their inventory costs, either of the magnitude anticipated by the proposed settlement or suggested by The President, without experiencing severely negative economic consequences. Nor can they, in the short run, sufficiently increase their margins on other products to compensate for the additional costs of selling tobacco when the effect of these increased costs is compounded by an anticipated drop in consumption which is one of The President's stated goals. A presumption of the Settlement is that the manufacturers' cost of complying with the terms of the agreement will be financed through an increase in the sales price of tobacco products to the consumer. This also means that wholesalers will experience a dramatic increase in their cost 1128 16TH STREET N.W. WASHINGTON, DC 20036-4808 (202) 463-2124 FAX (202) 467-0559 www.awmanet.org/awma/