Contraband

Published on November 30th, 2016 | by OCSA

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Contraband Tobaccoo Usage Rises Even Higher in 2016

illegal tobacco in Ontario on the rise

Illegal Tobacco Use in Ontario Surpasses 30%

New regulations on legal tobacco products could see contraband rate increase further

The Ontario Convenience Store Association (OCSA), has released an updated study on illegal tobacco use across Ontario. For the third year in a row, the use of illegal tobacco has increased in most surveyed locations, and retailers warn that new regulations on flavoured tobacco as well as plain-packaging of tobacco products could see this number climb even higher.

The survey, conducted by WrightOn Field Marketing, collected 19,934 discarded cigarette ‘butts” at 134 sites across Ontario in September 2016 to understand the market share of un-taxed cigarettes in the province. The study found that, of samples collected, 32.8% of cigarette butts were from illegal sources – an 8%+ share change (24-32.8%) from the 2015 contraband study. Surveyed sites included educational facilities, office & government buildings, retail & food service locations, hospitals & healthcare facilities, recreational facilities and transportation terminals. Sample sizes at survey locations ranged from 110-200 cigarette butts per site. Incomplete surveys resulting in no butts, inadequate samples or closed site locations were excluded from these results.

The study shows large fluctuations in prevalence of illegal tobacco in certain regions throughout the province.

  • Eastern Ontario: 29.3% (up from 26.8% in 2015)
  • Greater Toronto Area (GTA): 21% (up from 15.3% in 2015)
  • South Western Ontario: 26% (up from 18.9% in 2015)
  • Northern Ontario: 54.2% (up from 28.4% in 2015)

While the survey provides only a momentary snapshot of contraband use, the apparent increase in use across the province is a cause for concern.

“We are deeply concerned about the continued use of contraband tobacco products in Ontario, and particularly troubled by persistently high rates of illegal tobacco use at schools and hospitals,” said Dave Bryans, CEO of the OCSA. “Far too many young people still have access to these adult products through illegal channels,” said Bryans.convenience store test on contraband tobacco

Jeff Wright, owner of WrightOn Field Marketing, noted that a number of factors such as price point and availability can contribute to illegal tobacco use. “Cost to consumers, financial hardship as well as proximity to contraband smoke shacks are all elements to consider when looking at Ontario’s contraband tobacco problem,” said Wright.

The federal government’s proposed changes to plain and standardized packaging for tobacco products may further increase illicit tobacco use in the province, said Bryans. “These packages are very easy for sophisticated traffickers to replicate, which will make it extremely difficult for enforcement officials, retailers and consumers to distinguish legal products from contraband.”

Convenience store retailers are also worried that new regulations restricting the legal sale of flavoured tobacco products (including menthol) will result in increased contraband and counterfeit tobacco entering the market.  “We already know that there are 30+ types of menthol cigarettes available illegally in the province,” said Bryans. “Once these products are banned from our shelves, consumers will turn to the illegal market to find them.”

Retailers are encouraging all levels of government to consider the impact these regulations will have on the illegal tobacco market, and dedicate appropriate resources to enforcement to ensure there is no spike in illegal tobacco trafficking. They are also asking that the government consider implementing a possession, purchase and tobacco consumption ban for youth.

“What this study tells us is that there is virtually no location in Ontario where contraband tobacco traffickers don’t have some footprint,” said Bryans. “Banning the possession, purchase and consumption of tobacco by minors the way we do alcohol would go a long way reducing the reach of these criminal networks.”

Retailers remain vigilant in restricting access to youth and acting as a partner in enforcing the Smoke-Free Act, while collecting tax revenue for the Ontario government that fund infrastructure, hospitals and schools.

Backgrounder – Contraband Tobacco in Ontario

What is Contraband Tobacco?

  • Illegal cigarettes, often referred to as contraband tobacco, are products that do not comply with Canada’s tobacco regulations –specifically those regarding packaging, importation, stamping, manufacturing, distribution and taxation.
  • Contraband cigarettes are typically manufactured in illegal facilities on reserves in both Canada and the US. These products are sold and distributed via 350 smoke shacks in Ontario / Quebec, which sell baggies of 200 contraband cigarettes for as little as $10 – $15 per baggie.

What are the negative effects of contraband on communities and youth?

 

  • More Accessible to Young People: Contraband products are sold without age verification checks, making them far more accessible to young people to whom they are sold without mandated health warnings.
  • Supports organized crime, putting communities at risk: The spread of contraband results in the growth of an underground, illegal economy. The RCMP has identified dozens of organized crime groups involved in the contraband trade. Revenue from contraband tobacco sales also support other illegal industries – most recently, the sale of contraband fuel on reserve which hurts our small businesses further. In some incidents, contraband trafficking is also accompanied by the trafficking of illegal weapons and narcotics.
  • Lost Revenue for Government: Contraband products are not subject to all levels of taxation and can be purchased at a much lower cost to consumers than legal products, resulting in millions of dollars in lost revenue.

About the Contraband Tobacco StudyOntario Butt Study - collection

Between September 1st and September 19th 2015, WrightOn Marketing anonymously collected cigarettes samples at 134 previously identified (observed) smoking locations around specific sites like hospitals, office buildings, high schools and other public locations. In total, 19,934 samples were collected in the province, and while the results are not scientific, they are an important indicator of illegal tobacco presence and usage in Ontario.

The study found a large fluctuation in contraband rates across the province, noting a provincial average of 32.8%. The prevalence of contraband products is highest in Northern and Eastern Ontario.

How can we stop Contraband Tobacco?

  • No additional tax increases on legal tobacco products.
  • An awareness campaign aimed at communicating the consequences of purchasing contraband tobacco products, and how this activity fuels the underground economy.
  • Penalties for youth who are found to possess, purchase, or consume tobacco products, just as exists for alcohol under the Liquor Control Act.
  • Dedicating resources to fight illegal tobacco in light of new flavour and packaging regulations.

 Illegal Tobacco Rates – 2015/2016 Municipality Comparison

Top Municipalities (By % of Contraband)

Municipality 2015 Illegal Tobacco Rate 2016 Illegal Tobacco Rate
Sault Ste. Marie 20.6% 75.5%
North Bay 18.1% 66.3%
Orillia 30.4% 57.0%
Huntsville 24.7% 52.4%
Sudbury 32.7% 50.1%
Kingston 28.4% 46.3%
Belleville 26.8% 45.8%
Thunder Bay 20.7% 45.3%
Brockville 24.5% 39.1%
Brantford 20.4% 35.8%

Top Municipalities (By Growth in Contraband Indexed over 2015 Results)

Municipality 2015 Illegal Tobacco Rate 2016 Illegal Tobacco Rate Index 2016 vs. 2015
Sault Ste. Marie 20.6% 75.5% 367
North Bay 18.1% 66.3% 366
Durham 12.2% 35.4% 290
Oshawa 13.2% 32.4% 245
Thunder Bay 20.7% 45.3% 219
Huntsville 24.7% 52.4% 212
Orillia 30.4% 57.0% 188
Brantford 20.4% 35.8% 175
Guelph 17.3% 30.3% 175
Belleville 26.8% 45.8% 171

 

Top Sites for Illegal Tobacco Use (2016)

Name of Site Municipality Percentage of Contraband (2016)
Whitby City Hall Durham 92.00%
The Station Mall Sault Ste. Marie 90.70%
St Joseph-Scollard Hall School North Bay 82.80%
Wellington Square Mall Sault Ste. Marie 75.00%
OLG Head office Sault Ste. Marie 74.90%
Orillia Square Mall Orillia 73.00%
Cambrian Mall Sault Ste. Marie 73.00%
Chippewa Secondary School North Bay 67.90%
Providence Continuing Care Centre Kingston 64.70%
Huntsville High School Huntsville 62.90%

 

ABOUT Ontario’s Convenience stores

  • Contributes $5.5 billion annually to the province
  • Over 2.7 million customers visit a convenience store every day in Ontario
  • A viable business ownership option for many new Canadians
  • Enhances “community” in regions all across the province (urban and rural)

WE EXPECT ID PROGRAM

  • In 2007, the OCSA launched the most comprehensive training program for age verification in Canada – “We Expect I.D.”
  • “WE ID” was fully administered by the OCSA and included training materials in all formats and in three languages (English, French, Korean)
  • Due to financial realities, the OCSA had to REDUCE the program for its members in 2012. THE ASSOCIATION WOULD LIKE TO WORK WITH THE GOVERNMENT TO PROVIDE A MANDATED CERTIFICATION PROGRAM SIMILAR TO SMART SERVE FOR ALCOHOL.
  • Store owners are worried that infractions and resulting prohibitions on their stores will go up.

 


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