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Strategy Briefing

Illicit Trade in Tobacco Products

60 pages, Feb 2018

US$1,325

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About This Report

New Report Guarantee

If you purchase a report that is updated in the next 60 days, we will send you the new edition and data extract FREE!

In 2016 approximately one in every 13 cigarettes lit across the world was illicit, down from one in 12 in 2011. Valued collectively at more than USD35 billion, illicit sales cause substantial tax losses to global governments. Illicit trade is a phenomenon that impacts tobacco manufacturers, governments, and the tobacco control community, and requires a coordinated international response. This briefing outlines the nature of illicit trade, and shows the latest global and regional trends.

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Overview

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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.

488 billion-stick market

In 2016 the volume of duty-not-paid cigarettes consumed around the world was 488 billion sticks, with an estimated value of at least USD35 billion.

Illicit trade penetration is growing

Global illicit trade volumes fell by 0.9% in 2016, while the average penetration grew to 7.9%, from 7.8% in 2015. However, as with all tobacco statistics, China skews the picture. Consumption of illegal cigarettes in China declined by 7% in 2016, meaning that, excluding that country world illicit trade grew by 1.1%, with 10.6% penetration.

Price differentials remain the key driver of illicit

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.

Illicit trade is growing in Eastern Europe

In Eastern Europe the decline in illicit trade volumes that occurred in 2014 and 2015 was reversed in 2016. Russia, with consumers’ falling purchasing power and excise tax hikes, is the main contributor to this development. Considerable growth in illicit trade levels was also registered in Poland and Romania.

Cheap whites on the increase

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.

A problem in common needs a common approach

Every tobacco stakeholder is impacted by illicit trade. Companies and states suffer financial loss, while public health policies are undermined. Public and private agencies need to act together to combat the problem. The recently adopted EU track and trace legislation, however, makes this cooperation difficult once again.

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Introduction

Scope

What is Illicit Trade?

What is illicit trade?

Illicit trade: Key findings

Regional trends in illicit trade: Historic

Regional trends in illicit trade: Forecast

Drivers of Illicit: Demand and Supply

Overview of illicit drivers: Supply and demand

Key demand driver: Price

Demand enabler: Taxation

Do price increases always lead to increases in illicit trade?

Demand enabler: Regulation

Key supply driver: Financial gain

Supply enabler: Weak governance

Supply enabler: Inadequate sanctions

Logistics of Illicit

Main illicit tobacco routes in 2016

Transportation and category trends 2016

Major illicit white source countries: Belarus and Paraguay

Distance selling of bulk tobacco: On the rise in Eastern Europe

Geographic Analysis

Illicit trade penetration in 2016

Difference in illicit trade penetration 2011-2016

Illicit trade: Regional overview

Western Europe: Illicit trade is on the rise

Spain: Growth in illegal factories within the country

Eastern Europe: Growth in illicit trading mainly driven by Russia

Bulgaria: Historic drop in illicit penetration

Latin America: A region still plagued by illicit trade

Brazil: Illicit penetration continues to grow at an alarming rate

North America: Differing levels and causes of illicit trade

North America: First Nations and Native Americans in illicit trade

Middle East and Africa: Overall decline but problems remain

Iraq: At the centre of illicit cigarette trade in the region

Asia Pacific: A mixture of good and bad examples

India: Illicit penetration continues to rise

Uzbekistan: Significant reduction in illicit penetration

Australasia: Illicit is growing in Australia; low in New Zealand

Australia: Plain packaging discussions still dominate the market

Illicit Fine Cut Tobacco

Domestic, non-domestic and unbranded: Major regional differences

Non-domestic fine cut level in the UK: Underestimated by smokers

Unbranded/bulk tobacco smuggling is on the rise in the Balkans

Main non-domestic brands in selected European markets

Responding to Illicit Trade

Who is responsible for combating illicit trade in tobacco?

What the tobacco companies are doing

EU’s new strategy: Separating government and tobacco companies

Why illicit matters to tobacco manufacturers

Why illicit matters to government and public health

Difficulties of a common approach: Sizing the issue

Difficulties of a common approach: The FCTC

The international legal framework

Varying obligations in the Illicit Trade Protocol

Further key aspects of the Protocol: Cooperation and criminalisation

Fighting illicit trade: Available technology

EUTPD II Track & Trace (Article 15): Key events

Track & Trace: Growing alienation between the EU and the industry

Rising awareness to dampen consumer demand

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Megatrends

Strategy Briefing

Illicit Trade in Tobacco Products

New Report Guarantee

About This Report

New Report Guarantee

Overview

Why buy this report?

488 billion-stick market

Illicit trade penetration is growing

Price differentials remain the key driver of illicit

Illicit trade is growing in Eastern Europe

Cheap whites on the increase

A problem in common needs a common approach

Want to find out more about this report?

Table of Contents

Introduction

Scope

What is Illicit Trade?

What is illicit trade?

Illicit trade: Key findings

Regional trends in illicit trade: Historic

Regional trends in illicit trade: Forecast

Drivers of Illicit: Demand and Supply

Overview of illicit drivers: Supply and demand

Key demand driver: Price

Demand enabler: Taxation

Do price increases always lead to increases in illicit trade?

Demand enabler: Regulation

Key supply driver: Financial gain

Supply enabler: Weak governance

Supply enabler: Inadequate sanctions

Logistics of Illicit

Main illicit tobacco routes in 2016

Transportation and category trends 2016

Major illicit white source countries: Belarus and Paraguay

Distance selling of bulk tobacco: On the rise in Eastern Europe

Geographic Analysis

Illicit trade penetration in 2016

Difference in illicit trade penetration 2011-2016

Illicit trade: Regional overview

Western Europe: Illicit trade is on the rise

Spain: Growth in illegal factories within the country

Eastern Europe: Growth in illicit trading mainly driven by Russia

Bulgaria: Historic drop in illicit penetration

Latin America: A region still plagued by illicit trade

Brazil: Illicit penetration continues to grow at an alarming rate

North America: Differing levels and causes of illicit trade

North America: First Nations and Native Americans in illicit trade

Middle East and Africa: Overall decline but problems remain

Iraq: At the centre of illicit cigarette trade in the region

Asia Pacific: A mixture of good and bad examples

India: Illicit penetration continues to rise

Uzbekistan: Significant reduction in illicit penetration

Australasia: Illicit is growing in Australia; low in New Zealand

Australia: Plain packaging discussions still dominate the market

Illicit Fine Cut Tobacco

Domestic, non-domestic and unbranded: Major regional differences

Non-domestic fine cut level in the UK: Underestimated by smokers

Unbranded/bulk tobacco smuggling is on the rise in the Balkans

Main non-domestic brands in selected European markets

Responding to Illicit Trade

Who is responsible for combating illicit trade in tobacco?

What the tobacco companies are doing

EU’s new strategy: Separating government and tobacco companies

Why illicit matters to tobacco manufacturers

Why illicit matters to government and public health

Difficulties of a common approach: Sizing the issue

Difficulties of a common approach: The FCTC

The international legal framework

Varying obligations in the Illicit Trade Protocol

Further key aspects of the Protocol: Cooperation and criminalisation

Fighting illicit trade: Available technology

EUTPD II Track & Trace (Article 15): Key events

Track & Trace: Growing alienation between the EU and the industry

Rising awareness to dampen consumer demand

Why buy this report?

Want to find out more about this report?

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