Ernst & Young (E&Y) recently released their report where they examined the downward trend in legal tobacco sales in three provinces since 2019 (BC, Newfoundland, and Ontario) compared with the rising growth in the underground contraband tobacco market. Let’s not be fooled as contraband is at record numbers in basically all provinces in Canada.
“Illegal cigarette’s (contraband) are sold, tax and duty free, and in many cases without any Health Canada regulations or inspections and retail for a fraction of legal tobacco prices,” said the Ernst and Yonge report.
- Retailers are seeing sales decline as more individuals ‘switch’ from legal to illegal tobacco products.
- Illicit tobacco also decreases traffic to legitimate businesses which, over time, can lead to closures, further harming consumers’ access to legal products.
- Contraband will continue to grow if unchecked.
- Illicit tobacco harms the public perception of the tobacco industry – people don’t make the connection between youth access and illicit trade; they just see people under 19 smoking.
Safety / Security Impacts
- Traffic declines can also result in increased security risks – stores which have less customer traffic are more attractive to criminals.
- Funds from the sale of illicit tobacco provide cash flow for organized crime – proceed support other illegal activities such as illegal drugs and guns.
- Smuggling creates border-security issues with the United States.
- Law enforcement is in danger from well-funded & well-armed tobacco smugglers.
- The Ontario market is off by +30% in total because of illegal tobacco activity.
- Contraband is worth somewhere between $2-$2.5 billion to Canadian taxpayers.
- Illicit tobacco encourages illegal activity at all levels of the supply chain.
- Illicit tobacco makes a lower priced-product available to consumers, which in turn encourages retailers & society in general to participate in a illegal activity.
- Street-corner sellers of illicit tobacco do not check for proper identification for selling to young people.
- Illicit tobacco is particularly attractive to minors due to both easy access and cheap prices.
- Government inaction / denial legitimizes public participation in illegal activities.
- Public Health is at an increased risk from illegal tobacco products – there is no testing or regulatory checks against product content like there are for legally produced tobacco.
These ideas and concepts have been discussed for years and we encourage governments to get serious about this ongoing illegal activity and work with retailers to find a solution the begins to curtail the illegal production and delivery of untaxed tobacco products to every community.
The recently released Ernst & Young report made five recommendations, including calling for tougher federal and provincial penalties for illegal tobacco trafficking, increasing police resources to combat contraband tobacco and making the issue a top priority of federal and provincial justice officials.
1) Get involved -call you local MPP and MP office to discuss the loss of business due to illegal sales ‘tell your story.’
2) Offer a larger line of sub value and value cigarettes to your clientele and discuss the merits of anyone purchasing contraband – How they affect you and the community.
3) Refrain from participating in any illegal tobacco sales -do not jeopardize your business!
4) Call you local media in your community and explain the issues around contraband to your family business.