Islamabad, May 10, 2024: A new study by Ipsos Pakistan paints a concerning picture of the country’s cigarettes market, revealing a significant shift towards illicit brands.
The report, titled “Pakistan Cigarette Market Assessment 2024,” found that illicit cigarettes now hold a staggering 54% market share, compared to just 46% for legal brands. This alarming trend translates into a massive annual loss of Rs.300 billion for the national treasury.
The study, based on a comprehensive survey of over 1,000 retail outlets across Pakistan, highlights several factors contributing to the rise of illicit cigarettes. Easy availability of smuggled and tax-evaded cigarettes at lower prices, coupled with weak enforcement of regulations like Track & Trace and Minimum Legal Price (MLP), are creating an uneven playing field.
“The compliant cigarette industry is on its knees,” stated Abdul Sattar Babar, CEO & Managing Director of Ipsos Pakistan. The report projects a decline in the legal market share from 63% in 2022 to a projected 44% in 2024, a significant loss in just two years.
Further compounding the issue is the proliferation of untracked brands. The number of brands without mandatory Track & Trace stamps has jumped from 128 last year to a concerning 165 in 2024. Additionally, around 104 brands are selling below the minimum legal price, creating a price disparity that incentivizes consumers towards cheaper, illicit options.
The study also identifies a new trend: the emergence of 25 and 30 cigarette packs by some manufacturers. This tactic encourages single-stick sales, further benefiting retailers and undermining tax collection efforts.
“The failure to implement Track & Trace effectively is evident,” the report emphasizes. While six brands were added to the system in the past year, instances of these same brands being sold without stamps were prevalent. Even more concerning is the presence of 165 untracked brands altogether.
Price disparities further highlight the problem. The study found locally manufactured, tax-evaded brands selling for Rs.120, while a smuggled brand goes for Rs.165. In contrast, legal brands can cost between Rs.220 and Rs.550. This significant price difference makes illicit cigarettes an attractive option for many consumers.
The report predicts a bleak future if the trend continues. With consumers increasingly shifting towards illicit options, the study expects the illicit market share to reach 56% by June 2024. This translates to an estimated 2.5 billion cigarette packs evading taxes annually, causing a staggering Rs.300 billion loss to the government.
The findings of the Ipsos Pakistan study urge authorities to take immediate action. Strengthening enforcement of regulations, effectively implementing Track & Trace, and addressing price disparities are crucial steps towards curbing the illicit cigarette trade. Without decisive action, the government risks losing billions in revenue and facing the health consequences associated with widespread tobacco use.
