Tracing contraband tobacco from the street to the boardroom: a case study in Europe

Introduction:
Tobacco companies over-supply low-excise tax markets in the knowledge that products will be smuggled to higher-excise countries, but there has been limited research on how this process operates. This study follows a specific product from the streets of Northern England where it is consumed by the poorest and most vulnerable smokers, back to the industry boardroom where they are targeted.

Material and Methods:
This study used a unique bottom-up, case study methodology, starting with qualitative interview data with smokers in deprived areas, before working up to illicit tobacco seizure data and analysis of tobacco industry documents to document how a specific tobacco company has built up its illicit market in one region of the UK.

Results:
The illicit tobacco product considered has dominated the illicit market in the North East of Englandfor decades. It was the main product seen in these areas, most smokers used it and younger smokers grew up with it. Seizure data confirmed that this was the dominant brand. Industry documents showed that the company designed this product to appeal to British smokers, targeting it first at legal outlets on the Belgian coast popular with tobacco tourists, before directing most of their production to the Luxembourg market. The lack of tax harmonisation between Luxembourg and neighbouring countries appears to have helped create the conditions for organised smuggling of this product.

Conclusions:
Tobacco companies use a range of strategies to disseminate their product, including taking advantage of differences in tax regimes. This case study shows how individual companies build up specific illegal markets alongside, or replacing legal markets. We call for 1) swifter progress towards excise tax harmonisation in Europe to address tobacco industry profiteering and 2) effective use of track & trace data to investigate and prosecute specific cases such as this one.