Supermarkets are considering a once-unthinkable move to ditch tobacco from their shelves, as the illegal trade makes stocking cigarettes almost unviable.

The immense scale of the loss of legal sales and retailers revenue is clear from financial reports issued this season.

Quarterly data posted by Woolworths on Wednesday showed sales down 51 per cent compared with the same three months in 2024, while Coles sold 30 per cent less tobacco across the past financial year.

Sales at wholesalers Metcash are down almost half compared with four years ago, a drop of $1.3 billion that now has tobacco representing just 17 per cent of sales.

Viva Energy, which operates 1000 petrol stations nationwide, revealed this week sales had plunged 12.5 per cent in the last quarter, blaming the latest set of packaging law changes from the federal government.

Those changes include new anti-smoking messages both inside and outside packets, coupled with excise hikes which now amount to $1.50 per cigarette stick.

Lower sales might be celebrated as a public health success if it weren't for the soaring underground cut-price tobacco industry.

The under-the-counter trade accounts for 39 per cent of sales, according to a consultant's report prepared for the tobacco industry, showing Australians have no qualms in buying cheaper unregulated product.

Some studies - including in Western Australia - are proving what many anti-smoking advocates are feeling to be the case anecdotally, that cheap cigarettes are producing the first rise in smoking rates in a generation.

Police link the illegal tobacco trade to multinational crime syndicates.

Fred Harrison, the chief executive of the IGA-aligned Ritchies supermarket group - including 82 grocery shops and 72 liquor stores across three states - is witnessing the collapse.

"We've seen over the last four years our tobacco sales decline from $300 million, we're on track this financial year to hit around $60 million," he said.

"If people have stopped smoking and moved away from tobacco, we'll wear that on the chin.

"However, we know that smoking is dramatically up ... and it's all going to the illicit (trade) and it makes me extremely upset."

Mr Harrison - a 50-year veteran of the industry - said he had begun taking cigarettes off his liquor store shelves and would next consider doing so from supermarkets.

"We have exited from 25 of our 72 liquor stores ... the sales just don't warrant it when you've got $25,000 (in stock) sitting there and you've got $300 in sales a week," he said.

"We are going to review a number of supermarkets in the new year. There's probably six to 10 where we're saying it shouldn't be part of our offer.

"That's frustrating when it's a legal product and you're sick to death of letting the bad guys win."

Mr Harrison is savage on the Victorian government for not joining other states to legislate specific anti-illicit tobacco laws which target landlords of illegal tobacco sellers, threatening businesses with closure and fines.

At the Metcash AGM this year, chief executive Doug Jones also lashed "the effectiveness of the various law enforcement initiatives" as "disappointing to say the least".

IGA stores are also joining the lobbying effort for bigger fines - as NSW and Queensland have legislated - to landlords housing illegal tobacconists.

While Ritchies has begun to phase out tobacco, it's unclear whether the supermarket duopoly will follow.

In response to questions from AAP, Woolworths said it was yet to do so, while Coles did not respond.

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Friday, 7th January 2028

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