The first report on illegal tobacco released since the introduction of cigarette plain packaging laws in Australia last year shows the problem has ‘worsened with the tobacco black market now booming with illicit cigarettes imported mainly from Asia and the Middle East.’
‘Illicit Tobacco in Australia’ is the title of a half-year report commissioned by three major players in the tobacco industry (British American Tobacco Australia (BATA), Philip Morris Limited and Imperial Tobacco Australia) from consultancy firm KPMG. It’s 79 pages long and is packed with data, both in terms of its outcomes and its approach.
KPMG states that in the twelve months to the end of June 2013, the level of illicit tobacco consumption grew from 11.8% to 13.3% of total consumption.
If all of this tobacco had been consumed in the legitimate market it would have represented an excise amount payable to Government of AU$ 1 Billion at current excise rates. The key driver of this growth has been a large increase in the consumption of illicit manufactured cigarettes, primarily in the form of contraband.
Counterfeiting also appears to have increased. The proportion of non-domestic cigarettes has increased from 4.3% of all manufactured cigarettes that were consumed in 2012 to 9.8% in 2013.
In essence, since the introduction of plain packaging, ‘illegal brands’ appear to have grown their market shares at the expense of registered trade mark owners.
The report states that tobacco consumption in Australia will rise this year for the first time since 2003. Demand for cheap counterfeit and contraband cigarettes is accelerating, driven by excise increases on legitimate tobacco.
The report estimates that 1433 tonnes of illegal tobacco has entered Australia in the last 12 months, an increase of 154%. It calculates that illicit tobacco is 13.3% of total Australian sales and getting towards a market share enjoyed here by the world’s biggest manufacturer, Imperial Tobacco.
The report further states that, for the first time since the implementation of Australia’s plain packaging experiment, there is now enough data to replace the predictions about its true impact. This data indicates that, since introduction, the black market has grown while consumption of tobacco overall has not declined. This report indicates that smugglers and counterfeiters have been the big winners in Australia since the implementation of plain packaging at a loss to the Treasury and legitimate brand owners.
What to think of this? Noting that the report was commissioned by major players in the tobacco industry, it’s still too soon to determine whether these results are truly a depiction of a trend.
However, if it turns out that plain packaging is not making smoking less appealing and is not persuading the public to quit for good, is there justification for persisting with it? I am sure many have a view on this question.
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