The market of illegal tobacco products in Ukraine is growing

30/ 06/ 2023

This week, the international consulting company KPMG presented its research on the market of illegal tobacco products in Ukraine. The study focuses on the results of 2022 and the overall dynamics over the past five years. In short, the trend is highly negative, with the shadow market growing annually. According to the research findings, the shadow tobacco market has reached 19.9% of the overall market. Unfortunately, the negative trend over the past five years has been intensifying. In 2018, the shadow indicator stood at 4.7%; in 2019 - 6.9%; in 2020 - 9.9%; and in 2021 - 17.2%. The percentage ratio of the legal and illegal levels remains alarming, with every fifth pack of cigarettes being counterfeit. A significant portion of the scheme involving goods supposedly intended for Duty-Free sales is responsible for 7.35 billion counterfeit products. In 2022, the volume of such products reached 4.31 billion cigarettes, accounting for approximately 58.6% of the shadow market. Counterfeit cigarettes reached 2.45 billion, with an additional 0.59 billion attributed to smuggling. The overall trend and numerical values are similar to the research conducted by Kantar Ukraine on the illegal tobacco market in Ukraine, which indicates a high level of accuracy and highlights the significant issue of the shadow market in our country. According to that study, the level of illegal tobacco products reached 20.2% in February 2023. In addition to the domestic problem, such a significant level of shadow market undermines our international image, as illegal products also find their way into EU markets, primarily Poland (0.22 billion cigarettes) and France (0.18 billion). Overall, in 2022, Ukraine exported 0.71 billion cigarettes to other countries. On a positive note, there has been progress in this indicator. For example, in 2018, Ukraine exported 4.43 billion products, while in 2021, the figure dropped to 0.87 billion. From the perspective of the European Business Association, we once again emphasize that with such critical indicators of the shadow market, law enforcement agencies need to be highly proactive and make every effort to improve the situation in the country. There is a need for maximum consolidation of efforts and actions from all responsible law enforcement agencies to address this significant problem. It is also worth noting that not only the excisable goods market requires attention. The country needs a comprehensive strategy to combat the shadow economy in all industries. On our part, the legal business still holds hope for coordination in combating the shadow market at the highest state level, as it directly impacts the countrys reputation. Under no circumstances should we allow the situation to continue deteriorating, as the world is currently paying close attention to us as a country.

According to the research findings, the shadow tobacco market has reached 19.9% of the overall market. Unfortunately, the negative trend over the past five years has been intensifying. In 2018, the shadow indicator stood at 4.7%; in 2019 – 6.9%; in 2020 – 9.9%; and in 2021 – 17.2%.

The percentage ratio of the legal and illegal levels remains alarming, with every fifth pack of cigarettes being counterfeit. A significant portion of the scheme involving goods supposedly intended for “Duty-Free” sales is responsible for 7.35 billion counterfeit products. In 2022, the volume of such products reached 4.31 billion cigarettes, accounting for approximately 58.6% of the shadow market. Counterfeit cigarettes reached 2.45 billion, with an additional 0.59 billion attributed to smuggling.

The overall trend and numerical values are similar to the research conducted by Kantar Ukraine on the illegal tobacco market in Ukraine, which indicates a high level of accuracy and highlights the significant issue of the shadow market in our country. According to that study, the level of illegal tobacco products reached 20.2% in February 2023.

In addition to the domestic problem, such a significant level of shadow market undermines our international image, as illegal products also find their way into EU markets, primarily Poland (0.22 billion cigarettes) and France (0.18 billion). Overall, in 2022, Ukraine exported 0.71 billion cigarettes to other countries. On a positive note, there has been progress in this indicator. For example, in 2018, Ukraine “exported” 4.43 billion products, while in 2021, the figure dropped to 0.87 billion.

From the perspective of the European Business Association, we once again emphasize that with such critical indicators of the shadow market, law enforcement agencies need to be highly proactive and make every effort to improve the situation in the country. There is a need for maximum consolidation of efforts and actions from all responsible law enforcement agencies to address this significant problem. It is also worth noting that not only the excisable goods market requires attention. The country needs a comprehensive strategy to combat the shadow economy in all industries.

On our part, the legal business still holds hope for coordination in combating the shadow market at the highest state level, as it directly impacts the country’s reputation. Under no circumstances should we allow the situation to continue deteriorating, as the world is currently paying close attention to us as a country.