October 3, 2024
Minister Horner,
On behalf of the Convenience Industry Council of Canada, (CICC) please take into consideration our priorities for the upcoming 2025 Alberta budget.
We are a national, not-for-profit council that represents more than 22,000 convenience retailers nationwide. Our sector employs more than 200,000 Canadians and generates an estimated $53 billion in sales. Together with convenience store distributors, the three major ones headquartered in Alberta, our industry makes a significant economic impact from coast to coast to coast.
Convenience in Alberta
In Alberta, the CICC represents over 2,400 retail locations, directly employs 20,000 people, evenly split between full and part-time, and collects over $1.4 billion in provincial taxation annually. Alberta is also home to many head offices for our members such as Parkland Fuel Corporation, Petro-Canada and Shell Canada. It is also where distributors like Core-Mark and Sobeys Wholesale are based. Our members are active in the community and are essential to healthy neighbourhoods.
Recommendation 1: Contraband Tobacco
The Alberta Gaming, Liquor and Cannabis (AGLC) Investigations Branch is a small but effective team in the fight against contraband tobacco, as evidenced by this past year’s high-profile seizures. We welcomed Budget 2024’s commitment to establishing a new multi-ministry task force headed by Treasury Board and Finance to address contraband tobacco.
Last year, CICC contracted Ernst & Young (EY) to conduct an analysis of the contraband tobacco markets in Ontario, BC and Newfoundland (Report here). The estimated size of the illegal markets in these provinces were astounding between 32 and 50% of the cigarette market. This year, EY focused on Alberta, Manitoba, Quebec, Nova Scotia and New Brunswick. The final numbers are still being finalized but the initial findings are equally shocking, particularly in Alberta. EY estimates that in 2019, the contraband tobacco market in Alberta was about 13.5% but the growth rate has been remarkable. In just four years, illicit tobacco now accounts for approximately 43% of the market. The province of Alberta lost $365 million in taxation revenues from the contraband market in just the past three years. We look forward to discussing the EY Report with you and officials when it is finalized.
Contraband tobacco is a serious criminal, financial and sophisticated enterprise in the province of Alberta. The government needs to take swift, comprehensive and effective action to stop the massive proliferation of illegal tobacco in this province.
Even now, the sheer volume and the trafficking networks are outpacing enforcement efforts. According to recent Alberta Revenue figures, tobacco tax revenue was $911 million in 2017/8 to just $469 million forecast in the 2024 budget (down from $522 million the previous year). That’s a 48.5% decline in revenues in just seven years. Further, during that time tobacco taxes increased as did the smoking rates in Alberta from 10 to 12 percent. By all measures, the revenues should have been increasing. Contraband tobacco sales and trafficking are having a dramatic impact on our stores and the Alberta treasury. We encourage the Government of Alberta not to further hike tobacco taxes in 2025 following the decision to increase them in 2024.
Recommendation Actions:
The CICC has held extensive consultations with stakeholders, law enforcement, our retailers, distributors as well as the AGLC to develop specific recommendations to effectively tackle the burgeoning contraband tobacco trade in Alberta.
- Identify Contraband Tobacco as a financial, public safety and health problem.
- Moratorium on new tobacco taxes.
- Double the size of the Investigations Branch of the AGLC to investigate, arrest and prosecute offenders.
- Assign a dedicated Crown Prosecutor for contraband tobacco offences and crimes.
- Increase fines for offences to be commensurate with those that apply to retail licensees.
- Enable Investigators to retain proceeds of crime to fund further enforcement activities.
- Apply external assessment authorities for those arrested for such offences.
- AGLC Awareness Campaign: Know the Difference, Know the Risks.
- Letter to the Ontario government: manufacturing and trafficking centre.
Premier Smith’s Election Commitment
During the 2023 provincial election, the CICC submitted a survey to party leaders on issues important to our industry. On May 11, in an email response Premier Smith captured the problem succinctly stating:
We’re concerned about the increasing levels of contraband tobacco entering our province. It’s sold to kids and youth with no regulation or oversight, and it cheats taxpayers by displacing legal products from companies that pay taxes. But worst of all, it finances organized crime, and fuels gang violence and disorder. Albertans deserve safe streets and safe communities, and we’re increasing funding for police to deliver them.
Recommendation 2: Stand Against Federal Overreach
Last year’s Bill C-69 allows the federal Minister of Health to dictate how, where and under what circumstances therapeutic products are sold. The federal Minister of Health has indicated that these new powers are being used to remove Nicotine Replacement Therapies (NRT, including nicotine pouches like Zonnic) from convenience stores, and sell them exclusively in pharmacies.
We encourage the Government of Alberta to stand against this jurisdictional overreach that will make smoking cessation harder for Albertans while hurting convenience retailers.
Removing these products from convenience stores would have several adverse consequences:
- Adult customers won’t be able to purchase reduced-risk products, like nicotine pouches where they buy their traditional tobacco, meaning a switch to this product for cessation is less likely.
- It ignores our track record of retailing age-restricted products like tobacco, lottery and in some places alcohol, and negatively impacts our reputation as responsible retailers.
- Youth will continue to get nicotine products from the online contraband market which sells illegal pouches to them, without age verification. In fact, the attached document shows close to 100 websites that illegally sell these products to youth.
- We anticipate our stores will lose significant revenue, including forgone tax revenue should we not sell these products to adult customers. That will mean fewer investments in our stores and employees.
As you know, regulated convenience store retailers have long been trusted by federal and provincial governments to responsibly retail age-restricted products. We want to underscore that we are in favour of regulation that would see the product treated similarly to tobacco. In fact, our member retailers have adopted stringent guidelines on the retail sale of these products including keeping NRTs (including nicotine pouches) behind the counter, age gating like tobacco while taking efforts to reduce exposure to marketing – even though none of this is required by law at present.
Recommended Actions: Engage directly with the federal government regarding the broad and sweeping powers Bill 69 provides to the federal Health Minister.
Recommendation 3: Retail Safety
In many urban centres public safety has become an increasing problem. The causes of this issue are no doubt complex as are the solutions. The impact on our members, however, has been challenging. Our paramount concern as employers is to first ensure the safety and security of our employees. The conditions that lead to increased homelessness, mental health and addiction issues on the streets often spread into our retail operations. It creates a precarious situation for our staff and our patrons. We welcomed the investment of provincial resources announced in Budget 2024 and ask the that the Government of Alberta continue to work with local law enforcement agencies to ensure improved public safety. We ask that the Government of Alberta to continue to take proactive steps to ensure retail businesses can operate without fear of violence, theft and disruption.
Recommended Actions: Consult with local retail owners on their needs to keep their employees, products and premises safe and open for business. There is no response, penalty or deterrence for retail theft or vandalism offences. We recommend a pilot “Retail Response Unit” be established in both Edmonton and Calgary that will work with retailers to stop the pervasive lawlessness in urban areas.
Recommendation 4: Beverage Alcohol Sales in Convenience Stores
CICC was extremely disappointed to learn the Government of Alberta decided to backtrack on changes to the current beverage alcohol sales model. Our members are widely respected as responsible retailers with age gaited products like lottery and cigarettes. It is unfair the government should pick winners and losers with the retail sale of beverage alcohol.
On behalf of the 2,400 stores and 20,000 employees in the convenience industry in Alberta, we urge the government to reconsider it’s recent decision to maintain a protected market. The success in Ontario clearly demonstrates that consumers and retailers are benefitting from the increased convenience. There is a path forward that supports the convenience industry, a free market, level playing field and safety and convenience for residents.
We look forward to continuing to work with you,
Regards,
Sara MacIntyre
VP, Western Canada
Convenience Industry Council of Canada (CICC)
647 334 8054