Study reveals surge in smuggled cigarette brands

A study has revealed that the share of smuggled cigarette brands is likely to reach 56% by June 2024, compared to 48% during the same period last year. Ipsos Pakistan launched its research study titled “Pakistan Cigarette Market Assessment 2024” in Islamabad. The report represented a comprehensive survey of over 1,000 retail outlets across all four provinces of Pakistan, covering both urban and rural areas.

The study highlighted that consumers are shifting from duty-paid to locally manufactured tax-evaded and smuggled cigarette brands, with the overall illicit share expected to rise to 56% by June 2024, from 48% recorded in last year’s Ipsos syndicated research.

Easy availability of low-priced smuggled and tax-non-paid cigarettes nationwide, non-compliance of the Track & Trace system, cigarette sales below the minimum legal price (MLP), and price disparities have negatively impacted the compliant cigarette industry, leading to an annual loss of Rs300 billion, the study revealed.

Furthermore, the failure to implement Track and Trace is evident, with 37 new brands, bringing the total to 165 brands in the market, lacking track and trace stamps. Around 104 cigarette brands are being sold below the MLP, while 45 smuggled brands are being sold above the MLP.

“Fifty-three percent of the cigarette brands available in the market are being sold below the MLP,” the study added. Highlighting market disparities, the study noted that a locally manufactured tax-evaded pack of a famous brand was being sold for Rs120, while a pack of a famous smuggled brand was priced at Rs165, both widely available across surveyed areas. In contrast, the most popular tax-paid brands were sold for Rs220 and Rs550 per pack, with nearly 95% of the cigarette market falling between Rs65 – Rs220 per pack.

The research also found that most locally manufactured tax-evaded brands were available in packs of 25 and 30 cigarettes, encouraging single-stick sales among retailers and providing them with financial benefits through discounting. The study revealed that cigarette companies in Pakistan are selling 79-81 billion sticks annually, leading to an approximate loss of Rs300 billion to the national exchequer due to tax evasion.

Published in The Express Tribune, May 11^th, 2024.

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