54 pages, Nov 2016
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In 2015, one in every 12 cigarettes lit up in the world was illicit, down from one in 10 in 2014, valued collectively at around US$40 billion, with an equivalent tax loss to global governments. Illicit trade is a phenomenon that impacts tobacco manufacturers, governments and the tobacco control community, and which requires a coordinated international response. This briefing outlines the nature of illicit trade and assesses whether a common approach is possible.
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In 2015, the volume of duty-not-paid cigarettes consumed in the world was some 463 billion sticks with an estimated value of US$40 billion.
Global illicit trade fell by 3.9% with average penetration falling to 7.7%. However, as with all tobacco statistics, China skews the picture. Consumption of illegal cigarettes declined by 7.4% in China in 2015 meaning that, excluding it, world illicit trade fell by 2.6% with a penetration rate of 9.9%.
Price differentials remain the key driver of illicit trade on both the demand and supply sides helped by porous borders and weak governance. The Robin Hood complex - widespread consumer acceptance of illicit traders as benefactors rather than criminals - remains a central problem.
Western European share of illicit decreased more than any other region in 2015 suggesting some success in anti-illicit measures involving the EU and the tobacco companies and change in consumer attitudes helped by some easing of consumer perceptions of economic problems.
Illicit whites, cigarettes manufactured legally but with no legitimate destination market continue to gain share in Europe and Asia, benefiting from their higher quality and non-adherence to packaging requirements.
Every tobacco stakeholder is impacted by illicit trade. Major companies and states suffer financial loss, and public health policies are undermined. Public and private agencies need to act in concert to combat illicit trade. The EU not renewing its cooperative agreement with PMI in 2016 was perhaps surprising.
Gain competitive intelligence about market leaders. Track key industry trends, opportunities and threats. Inform your marketing, brand, strategy and market development, sales and supply functions.