The robbery at Halfway Bush and the theft of $40,000 of tobacco and cigarettes from a Palmerston shop early on Monday contributed to his decision.
"Certainly, we are concerned about how it will economically impact the shop, but it's just not worth taking the risk anymore."
While it was a difficult decision to stop selling the "major" revenue product, the father-of-three was relieved staff no longer had to "wait until this [robbery] happens to them".
About $20,000 worth of cigarettes and tobacco had been stocked at the store during summer and $10,000 worth during quiet periods.
The cost of the stock was "huge", he said.
Originally from Munster, Germany, he and his wife had owned the shop for about a year.
The risks associated with stocking tobacco in New Zealand were unheard of in Germany, he said.
A sign outside the shop yesterday advised customers the products would no longer be sold there.
Feedback from customers had largely been positive, Mr Schroeder said.
However, other Dunedin shop owners approached for comment said they had no choice but to continue stocking tobacco despite the risk of robbery and theft.
Highgate Dairy owner Terry Gao said his store had been targeted four times in his five years of ownership, including two armed incidents last year.
"As long as the cigarette price keeps going up, this kind of thing will continue to happen. Cigarettes and cash, that's the easy targets."
The robberies had left him suspicious of every customer who came into the shop, particularly during the evening.
"I feel pretty nervous every day," he said.
Living on the premises, as many owners did, added to his anxiety.
"We are inches away from the shop. If anything happens to the shop, we have to confront them."
The margins were not significant but without tobacco the business would be unsustainable and many customers would go elsewhere.
"We don't make that much, but it still counts - a dollar is a dollar," he said.
Another dairy owner, who was also the subject of an aggravated robbery targeting cigarettes, said about half the store's turnover was in tobacco.
"If we don't stock them, we don't make enough money," the woman, who did not wish to be identified, said.
The robbery, which came after this year's 10% tax hike on tobacco products, was the first she had suffered in her five years of ownership.
She expected they would become more common as tobacco prices continued to climb.
"I hope we can make a team in the community to stop these things. Hopefully, all the dairies can become a union and help each other with more security."
Detective Sergeant Dave Nelson, of Dunedin CIB, said police were working to crack down on black market tobacco.
"Our inquiries have shown so far that the unlawful and unregulated sale of stolen tobacco is a significant issue in the community and police want to warn those who purchase stolen or cut-price tobacco that they may be committing a criminal offence and are liable for prosecution if identified.
"Selling and receiving stolen items carries with it serious charges if proven."
Anyone aware of underground trade in tobacco could approach the police in confidence. In the Dunedin District Court earlier this year, Kale Wetere was sentenced to community work after pleading guilty to receiving cigarettes and a shop till drawer stolen during two ram raids on BP service stations in January.
Police were alerted to the 22-year-old after he attempted to offload the goods through Facebook.
Two men linked to the ram raids will be sentenced later this year.
Police were actively investigating several other thefts targeting cigarettes.
Police were investigating 10 commercial burglaries that had occurred since last October, Det Sgt Nelson said.
"Many of these burglars targeted cigarettes and these commercial premises ranged from dairies, grocery stores, hotels and service stations."
Dunedin police (03) 471-4800, Crimestoppers 0800 555-111.
