Phil Charlton is the anti illicit trade operations manager at JTI UK
We are only a few weeks away from the menthol & capsule cigarette ban which is set to come into force on 20 May. The ban will be one of the biggest changes the category has faced in recent years, but we know from experience that the tobacco category is extremely resilient. However, illicit tobacco remains a major issue for our industry and concerns are growing that the introduction of this legislation might tempt some customers to buy fake alternatives via illegal channels. But why is illicit tobacco a problem and what steps can wholesalers and retailers take to stop illicit tobacco in its tracks?
The scale of the problem
The scale of the problem is brought to light when looking at recent figures from HM Revenue & Customs (HMRC) which estimates that 9% of all cigarettes and 32% of roll your own tobacco products in the UK are illicit. The illegal trade in tobacco is responsible for £1.8bn in lost tax revenue in 2017/8, with a total revenue loss of £45.2bn since 2000/1[i].
The effects of the illicit trade are also felt beyond our industry. The Journal of Trading Standards recently reported that the illicit tobacco trade has strong links with organised crime and criminal gangs. Many of the smugglers involved in distributing and selling illicit tobacco are also involved in drug dealing, money laundering, people trafficking and even terrorism. What’s more, the Home Office organised crime strategy suggests that when consumers engage in the illegal trade, the perceived harm to others is negligible. In reality, illicit trade generates millions for organised crime who use those profits to exploit vulnerable people and communities.
Illicit tobacco and the menthol and capsule cigarette ban
There are growing concerns that the ban coming into effect from 20th May will tempt existing menthol and capsule smokers who can no longer buy their usual brand to look for those products on the black market. We are already aware of examples of counterfeit menthol products being seized in the UK so the risk is very much there and we know that counterfeiters will try and exploit the gap in the market left by the menthol and capsule cigarette ban.
Tobacco is still the number one FMCG category[ii] in the UK and therefore the illicit tobacco trade seriously undermines local businesses. If you price competitively and yet you notice an inexplicable and significant drop in tobacco sales in depot, it could mean that some unscrupulous retailers in your area are turning to the illicit trade. Likewise, consumers purchasing the illicit tobacco directly from criminals’ results in important revenue and profit being taken away from law-abiding retailers along with a decline in footfall. Not only this, but the illicit trade undermines efforts to stop children from having access to tobacco products, those who sell illicit tobacco don’t care who they sell to.
The most important thing we can do as an industry is to work together – retailers, wholesalers, manufacturers – to educate consumers of the dangers of illicit tobacco, to remain vigilant and to report any suspected illicit activity. Our concern is that the illicit trade could receive a boost as a direct result of the menthol and capsule cigarette ban, which makes this collaborative effort to combat it all the more important at this pivotal time.
What can we do about it now?
Illicit tobacco is unregulated, and some products have been found to contain asbestos, mould and dead flies. JTI has been active in shining a light on the dangerous contents of illegal tobacco, however, to help combat the illicit trade, we also need to make sure that the public are aware of how the sales of illegal tobacco funds organised crime and the negative impact this can have on communities.
Read more: JTI launches pouches into wholesale channel
Communication is crucial. It’s important that wholesalers play their part to raise awareness amongst their retail customers, and that retailers are having conversations with existing adult smokers who currently buy Menthol and Capsule products; informing them about the upcoming changes, the dangers of the illicit trade and the legitimate options available to them post the ban. A greater understanding of the genuine menthol alternatives and the negative effects of the illegal trade will be a powerful combination in helping to fight this issue.
JTI takes a strong stance against illicit tobacco and has previously taken decisive action against retailers convicted of selling illegal tobacco products by removing their tobacco gantries. In total, we’ve removed 43 gantries from retailers across the UK, sending a clear message to those selling, or tempted to sell illegal tobacco products, that if caught, they potentially face legal, financial and commercial consequences.
We also have our dedicated ‘Don’t Be Complicit In Illicit’ microsite – www.jtiadvance.co.uk/DontBeComplicit – and we encourage both wholesalers and retailers to visit the site to find out more information and report any instances of illegal trading via the sites anonymous report function.
If you are aware or come across anybody selling illicit tobacco, you should contact HM Revenue & Customs’ Fraud Hotline on 0800 788 887, Trading Standards on 03454 04 05 06 or the independent charity Crimestoppers anonymously on 0800 555 111.(i)Measuring tax gaps 2019 edition. Tax gap estimates for 2017-18. HMRC, June 2019
(ii) IGD Research – UK Grocery & Foodservice Wholesaling 2019 (Category Share of Sales 2018)