Imperial Tobacco moves to in-house distribution, creating 1,000 jobs

Imperial Tobacco Canada is moving its distribution system in-house in an attempt toimprove its efficiency in a declining market, the company said Tuesday.

The move will create close to 300 jobs at the Montreal-based company and a further 700 at suppliers and subcontractors. It wasn't clear whether jobs would be lost among the outside contractors and business partners, but Imperial Tobacco said it intended to continue with its network of 90 licensed wholesalers.

The tobacco company said it intends to move to the new distribution system in late August, following the lead of many companies in the snack food and beverage industry.

Direct-to-store delivery (DSD) is widely used by tobacco companies around the world, but Imperial will be the first Canadian tobacco company to employ the system.

"At this time in our history, this important initiative makes good business sense for Imperial Tobacco Canada," said Benjamin Kemball, president and chief executive. "In recent years, we have undertaken measures to become more efficient in an increasingly competitive and challenging environment."

Kemball added that "direct-to-store delivery is the logical next step" for Imperial Tobaccobecause it will enable the company to manage the flow of products from manufacture to delivery more efficiently.

Closing plants costs jobs

The company has been cutting back for years in a falling market for cigarettes and cigars. It is closing two Ontario plants this year, with the loss of more than 600 manufacturing jobs.

It blamed those cuts on a slump in tobacco sales. It sold 20.5 billion cigarettes in 2005, down from 32.7 billion in 1994.

At its most basic level, DSD turns the clock back on the move to contracting out distribution jobs. In recent decades, many companies have laid off their internal distribution networks and moved to outside contractors, licensed agents and a variety of independent businessmen.

Imperial Tobacco has followed this trend. It currently ships its tobacco products to retail outlets through a network of licensed wholesalers.

The company intends to reverse this trend in the interests of efficiency and tighter controls over its distribution network.

Retailers will eventually order directly from a beefed up central department, which will electronically send the form to a local delivery hub and load the goods on a truck for next day delivery.

Imperial Tobacco's share price fell 68 cents or three per cent Tuesday on the Toronto Stock Exchange, to close at $21.61.