R.J. Reynolds Tobacco Company
Cigarette buy-down contract canceled after sales rep changed

R.J. Reynolds is the main distributor of smokeless tobacco and cigarettes for several brands. Wholesalers charge retailers full price, and each month R.J. Reynolds is supposed to reimburse part of that cost through a "buy-down" program based on the retailer's contract and sales volume. In exchange, retailers are required not to sell any competitor's cheaper cigarettes, which by itself seems unreasonable - you shouldn't be able to require a retailer not to sell a cheaper product just because your own product costs more. They also require a certain amount of shelf space, which shouldn't be their concern as long as the retailer is carrying the product at all.

I am a retail businessman and had this kind of buy-down contract with them, receiving reimbursements on a timely basis. But when my sales rep was replaced, the new rep canceled my contract, claiming I wasn't generating enough volume. Now I have to pay full price for their cigarettes and tobacco, which costs me more, and to stay in business I have to sell at a higher price. This has seriously hurt my business. I have contacted them many times to get the contract reinstated, but no one answers.

My store is in Ekron, KY, right next to a gas station, and it has been about a year since my contract was canceled. Since then I have had to pay more for my inventory than the gas station across the street, which puts me at a real disadvantage - it isn't fair to sell the same product at different prices at the same location.

In my view, R.J. Reynolds shouldn't hold retailers' money for a month before reimbursing it the following month - that is effectively a large amount of retailer cash they are holding onto, and it needs to stop. It would be more straightforward for them to just sell at the final, reimbursed price up front and let distributors charge whatever they want, rather than overcharging and reimbursing later.

Company: R.J. Reynolds Tobacco Company
Country: USA
Site: rjrt.com

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