An inconvenient truth

Black-market smokes threaten to snuff out 'the dep'

Montreal — The Globe and Mail

(John Morstad)

There was always a grim math to owning one of Quebec's iconic dépanneurs , the ubiquitous corner store that rewarded mom-and-pop owners with long hours and small profits.

But the dep, as the stores are often called in Quebec English, survived in the 1970s and '80s as customers fled to the suburbs and, in the 1990s, as mega-supermarkets and 24-hour chain stores mushroomed.

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Dep owners say cut-rate illegal cigarettes from Mohawk reserves are driving them toward insolvency faster than Wal-Mart or Couche-Tard ever managed.

Jun Guo doesn't need the abacus beneath his register to make the calculation: He's open seven days a week from 8 a.m. until 10:30 p.m. He is the enterprise's sole full-time worker, although his wife and oldest son occasionally help out. Bought for $160,000, the store nets about $25,000 a year.

Mr. Guo, 43, works most of the 101 hours a week his store is open. His profit works out to $4.76 an hour.

Forty per cent of his business came from cigarettes when he started out three years ago. That number has been cut in half. His $9 packs are no match for the contraband selling on the street for $1 a pack. And his story is typical.

"I can still eat and put a roof over our heads, but barely," said Mr. Guo, who is married with two sons.

A convenience store industry group estimates some 40 per cent of Quebec's cigarette sales are now black market. In Ontario, the figure is closer to half. The Canadian Convenience Store Association is urging the government to cut taxes on legal cigarettes to reduce the competitive advantage of illegal smokes.

Quebec has about 6,000 dépanneurs , down from 7,200 four years ago. Michel Gadbois, a vice-president of the Quebec dépanneurs association, said the explosion of cheap cigarettes took $260-million in profits out of Canadian convenience stores in 2008, mainly in Quebec and Ontario.

"We are losing one dépanneur a day now in Quebec, and it's no coincidence that the contraband cigarette market went from negligible to 50 per cent of the market in four years," Mr. Gadbois said. "It's easily 80 per cent of the problem."

Cigarette prices undercut by criminal distribution networks are not the only challenge facing owners, who often buy the tiny stores to create their own employment upon arriving in Canada.

A few years ago, Quebec eliminated a law that restricted supermarket operations on evenings and weekends.

More recently, those same supermarkets have started offering constant deep discounts on beer - the second sinful pillar of the dépanneur .

Supermarkets often charge Quebec's $22.83 legal minimum for a case of 24 beers, a price convenience store owners can't match. They've asked the province to boost the minimum price.

Then there are the ever-present challenges of life in retail.

"I get ripped off just about every day," said Xavier Shi, who has owned his small tobacco and magazine shop in a poor neighbourhood of east-end Montreal for eight years.

"The police don't even want to talk to you for theft under $10. Almost all of my products are under $10."

About one-third of Quebec's 6,000 dépanneurs are in Montreal, and an estimated 70 per cent of those are run by recent immigrants from Asia. Mr. Guo came from China three years ago. Like many store owners, Mr. Guo is an educated man. He has a degree in mechanical engineering and a few years ago invented a device to increase engine efficiency. It's patented in China.

"My English and French [are]no good," Mr. Guo said, adding that his Chinese engineering diploma is no good in Canada, either.

Wen Bo Li, Mr. Guo's friend, is a chemical engineer. He runs a dépanneur on Beaubien Street that is wedged between a giant chain pharmacy and a 24-hour chain convenience store.

His wife, Wen Bo Yin, is studying French in university. His English is passable but he speaks little French.

"It's hard to find a good job with these language problems," he said. "This is OK to start, but all we do is work."

Dawson Lee just sold his store after 15 years. The head of Montreal's Chinese dep owner association, Mr. Lee arrived at a meeting yesterday impeccably turned out in a pinstripe suit.

"I sell real estate now," he said. "Like for most people, the dépanneur is a first step. We come here, learn English, French. And in the meantime we do what we can do."

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