One of the great strengths of the European Union is its diversity: Even if this is not always universally perceived as such, diversity fosters progress more effectively than uniformity. This diversity also exists in the trade with tobacco products within the European Union. Notwithstanding the benefits, however, this diversity also renders the task of describing in brief the commercial structures which are organized differently in each of the 27 Member States more difficult. In the following therefore, I shall focus on the highly complex similarities and tasks which are either shared and/or performed by the 3,000 larger or smaller enterprises and their around 45,000 employees which are involved in the wholesale of tobacco products in the EU.
A total of 251 plants across the EU manufacture tobacco products. According to the Special Eurobarometer 332, Tobacco’, about one third of the EU citizens consumes tobacco products, such as cigarettes, cigars or pipe tobacco, i.e. around 160 million citizens. Due to their comparatively high price, in the overwhelming majority of cases, tobacco products are not purchased by consumers in bulk (as is the case with, for example, with detergents), but in very small quantities, e.g., a pack of cigarettes, 100 grams of pipe tobacco, 40 grams of fine cut. By virtue of this fact, the number of outlets offering tobacco products for sale is quite high, namely around 950,000 points of sale, which are augmented by another 650,000 machines (cigarette vending machines in most cases).
Ergo some 251 factories manufacturing tobacco products stand alongside approximately 1.6 million retail outlets where tobacco products are offered; these 1.6 million retail outlets are distributed more or less evenly across the 4.3 million square kilometres of the EU.
The role of the tobacco wholesale is to organize and handle the movement of goods and the cash flows between the 251 factories and 1.6 million retail outlets: Tobacco products must be dispatched in the correct assortment compilation, usually several times per week, from the shipping department of the factories to the warehouses of the wholesalers and transported from there to the individual outlets. The extent of these movements of goods is considerable: In total, products with a consumer sales value of 120 billion euro are shifted each year (figures for 2010) from the factories to the retail outlets, together with the corresponding return cash flow (included here are about 100 billion euro in tobacco duty and value-added tax).
In the transportation of the tobacco products from the factory to the point-of-sale, the wholesale trade ensures the availability of tobacco products from their own stocks through demand-based orders from the factories, takes the orders of each retail outlet supplied by them, and compiles and delivers the ordered consignments. In the opposite direction, the wholesale trade handles the transfer of funds for the payment of the tobacco products to the factories and the invoices to the sales outlets and their payment control. The taxes (which are usually paid by the factories to the state, in some cases also by the wholesale trade) are also included in the aggregate payment flow.
The entire system poses a substantial logistical and organizational challenge, especially bearing in mind that due to the high value of the traded products inaccuracies must not occur at any point in the chain.