The wholesaling industry is on the verge of a massive shakeup that many firms may fail to live through, one of the sector's top players has warned. The reason? The government's decision to end forestalling ­ where cigarettes and tobacco are stockpiled before Budget duty hikes are imposed. And Christopher Adams, chairman of Palmer & Harvey McLane, claims wholesalers must start looking at new income streams if they are to survive the change, which comes into force next year. "Logic says that it will lead to further consolidation and there will be a restructuring of the selling price of tobacco, " said Adams. "It's inconceivable that cash and carries can continue to sell tobacco at cost when their profit comes from forestalling. There's got to be a margin change," Adams told The Grocer. Many wholesalers make enough profit by forestalling to finance selling tobacco at cost for the rest of the year. But with their profit effectively being wiped out in one hit, Adams believes the industry will have little choice but to change prices. And that could mean price hikes of up to 16p on a pack of 20 cigarettes. Adams said: "There needs to be a market readjustment but it cannot happen overnight because too many of our customers would go bust. "But there will be quite a shakeup in the UK. That's bound to lead to consolidation and P&H would be happy to participate in that," said Adams. The search for new revenue streams is well under way at P&H, he claims. In the past year, he said, P&H had bought Booker's delivered wholesale business, Winerite, YP Electronics and KP's van sales operation. And the business is being reorganised to reflect the opportunities offered by the acquisitions (see page 6). - The Federation of Wholesale Distributors is in contact with the Tobacco Manufacturers' Association on the issue of arrangements ahead of the 2001 Budget and is awaiting a response. {{NEWS }}

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