The organisation says plans for a ban by the Scottish Executive would cost individual convenience stores as much as £10,000 in alterations and bring little benefit to public health.
Chief executive John Drummond said: “The SGF agrees with the government that young people should not smoke and should be actively discouraged from doing so.
“However, we believe there are better ways of achieving this than banning the display of tobacco in small shops.
“Experience from countries which have implemented a display ban demonstrate the benefits of a ban are not proven.
“SGF is concerned a ban is more likely to demonise and mystify tobacco, increasing its fascination for young people and could encourage smokers, who do not see tobacco on display in legitimate stores, to buy from rogue traders who are prepared to sell illicit products.”
Drummond said there was a need for “effective deterrents against adults who give children cigarettes or allow them to be taken, education of young people and properly resourced policing of the black market”.