The tobacco industry is especially exposed to counterfeiting due to high profit margins caused by high tax rates on tobacco. This combined with cigarettes being relatively easy to copy/produce, leaves huge opportunities for fraudsters to make a large profit in a short time.
Different reports estimates that around 10-20% of all tobacco is sold illicit, which corresponds to 600-650 Billion cigarettes. Thomas Schmid from TobaccoAsia, says about the problem:
“When it comes to counterfeit cigarettes, it is not only about lost revenues, damaging brand values, and misleading consumers. Counterfeit cigarettes are produced outside of any regulatory environment, they more often than not may contain low quality ingredients, unusually high levels of tar and nicotine and, in some cases even dangerous substances (e.g. chemical residues) that do not comply with government regulations.”
Source: www.tobaccoasia.com , 2017
The problem is indisputable and companies need to react in order to reduce the losses caused by counterfeits. Otherwise people’s lives are at risk, billions will be lost and brand value will erode.