The latest independent research from KPMG into black market tobacco consumption in Australia shows that illegal tobacco represented 14.5% of total consumption last year, with nearly 2.6 million kilograms consumed, which the Australasian Association of Convenience Stores (AACS)* says is robbing honest retailers of legal tobacco sales.
AACS CEO Jeff Rogut said that responsible retailers of legal tobacco are bearing the brunt while the illegal tobacco market has grown almost 30% in two years, costing the Government an estimated $1.35 billion in lost tax revenue last year alone.
“Endless excise increases on legal tobacco and ill-advised policies like plain packaging have laid the platform for the massive growth of the illegal market, robbing honest retailers of legitimate sales,” Rogut said. “It’s a disturbing figure that demonstrates the unintended consequences of poorly planned Government policy, as the criminals who supply these illegal tobacco products don’t care if it ends up in the hands of minors. There are also no quality checks on what is actually in the products.
“The Australian regulatory environment continues to contribute to our growing reputation as one of the world’s most lucrative markets for illegal tobacco.”
Rogut said legal tobacco remains a very important product category for convenience stores, accounting for approximately 37% of a typical store’s sales, according to the 2014 AACS State of the Industry Report to be launch this week.
“Tobacco remains an important product for these small businesses and the more the market for illicit tobacco expands, the more these small businesses will suffer. Australia needs a smarter approach to the responsible consumption of legal, or else the black market will continue to flourish and criminals will profit,” Rogut said.
The awareness of illicit tobacco products is very high among small retailers, and both the perceived impact on business and the actual incidence of customers enquiring about purchasing illicit tobacco are cause for concern.
Research from leading international research company Roy Morgan released shows that 33% of small retailers have reported customers enquiring about purchasing illicit tobacco since the introduction of plain packaging and 43% believe that the illicit trade of tobacco has negatively impacted their business.
*The AACS is not an arm of, nor does it lobby on behalf of, the tobacco industry. It is the peak body for the convenience industry in Australia, representing the interests of over 6,000 stores.