Will wholesaler registration dent the black-market?

illicit trade

Should tobacco be added to any potential registration scheme? Stefan Appleby investigates.

For the first time ever, councils are spending more of their time and energy on tackling illicit tobacco than on underage sales. The Trading Standards Institute’s (TSI) latest Tobacco Control Survey shows that between April 2013 and March 2014, more than 90% of all councils carried out activity in relation to illicit tobacco products – including working with HMRC.

The change in priority is key, according to TSI’s lead officer on tobacco Jane MacGregor. “Tackling the illicit trade is important because it undermines everything else we do in terms of reducing underage sales,” she said.

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Fast tobacco facts

The Trading Standards Institute’s latest Tobacco Control Survey:

  • 40% of complaints made to councils were regarding independent retailers
  • 37 councils seized “illicit white” brands such as Jin Ling and Palace
  • £3-£4 average intended price of illicit cigarettes seized
  • 47% of councils undertook legal action around illicit tobacco products

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Almost 80% of all councils had dealt with complaints and enquiries about illicit tobacco products – a total of 2,633 complaints and enquiries.

If this figure is representative for all councils, it would mean there were about 3,000 complaints and enquiries about illicit tobacco products in England alone in 2013/14.

While illicit tobacco takes up a larger percentage of the time of the TSI, its budget is becoming more constrained. In April this year, CEO Leon Livermore warned that by 2016, most trading standards services in England and Wales will have been cut by an average of 40% since 2010.

The Smoke Them Out campaign by Better Wholesaling’s sister title Retail Express has drawn an unprecedented retailer response. In just one month, more than 40 retailers have called in to report stores close to their own selling illicit or counterfeit tobacco. The average retailer has reported that their trade is down by 50% and that other retailers are selling products for half their RRP.

“You never see these guys in the cash & carry,” said one. “It’s all sales through white van men.”

Another added: “I’ve spoken to other local retailers in my local depot and they’re as frustrated as me.”

The majority of retailers were clear that those selling illicit tobacco products were also selling illegal alcohol.

Last month, FWD chief executive James Bielby joined Association of Convenience Stores chief James Lowman in calling for more action to tackle duty fraud and the illicit trade in alcohol and tobacco. The duo met with Exchequer Secretary Priti Patel MP at the start of October and impressed on her the importance of the registration scheme for alcohol wholesalers, which comes into effect next year.

Under the scheme, further details of which will be revealed shortly, retailers will have to provide documents proving that any alcohol they are selling has been bought from a legitimate source. If they can’t prove it, then they face the threat of increased sanctions. .

“This is an HMRC scheme, and the full weight of the law will be brought down on retailers who don’t comply,” Bielby said.

HMRC’s Measuring Gaps report shows the estimated market share of illegal tobacco has increased to 14% on cigarettes and 43% on hand-rolling tobacco.

Add to this TSI’s change of focus and the helplessness retailers around the country are feeling, and it seems clear that tobacco would be a necessary addition to any registration scheme.

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As head of digital at Newtrade and editor in chief of Retail Express, Stefan sees, first-hand, all the newest product launches and developments and gets to talk to everyone across the retail sector, from independent retailers to managing directors. Stefan can be found on Twitter at @Stefan_Appleby

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