• Menthol and flavoured cigarettes are widely available in low and middle-income countries (LMICs) many of which have high smoking rates
• LMICs have young populations – flavours appeal to young people, who may not understand the harms of flavoured tobacco
• Recently high-income countries have put bans in place; at the same time there has been marked growth of menthol market share in some LMICs
• There is a lack of regulation to reduce the appeal of flavours e.g. plain packs and advertising bans at point-of-sale or near schools
• Targets for new and improved bans include flavour capsules, and flavour references on packaging and cigarette sticks
• A ban on all flavourings may be easier and more effective in preventing product substitution
• A lack of data, especially in low-income countries, hinders the development of good regulation
• Multinational tobacco companies can threaten income from tobacco exports if governments attempt to put tobacco controls in place

This page covers flavoured tobacco, including menthol cigarettes, in low and middle-income countries (LMICs).¹²

Background

Flavoured tobacco products are available in various forms around the world, including products previously only used in particular regions or countries. For example in Indonesia, the vast majority of smokers use kretek, clove-flavoured cigarettes,³⁴ and they are now available in other countries.⁵⁶

Flavoured tobacco is used in waterpipe, a device which originated in middle-eastern countries and is increasingly popular elsewhere, including among young people.⁷

Here we focus on what are often called ‘conventional’ products, like cigarettes and cigarillos, which are sold by large transnational tobacco companies (TTCs): Philip Morris International (PMI), British American Tobacco (BAT), Imperial Brands (IMB, previously Imperial Tobacco) and Japan Tobacco International (JTI) (JTI also owns Nakhla in Egypt, which produces flavoured waterpipe) We summarise findings from Tobacco Control Research Group (TCRG) research on the extent of flavoured and menthol cigarette use in LMICs and the development of the market for ‘capsule’ products (cigarettes with flavour capsules in the filter).

We describe specific challenges for LMICs, including flavour regulation and evidence gathering. We then summarise flavour market evidence and research, first relating to LMICs in general and then by World Health Organization (WHO) region and individual countries (where available).

• For general background and evidence, including information on the global market, and details of specific bans and associated industry interference, see Flavoured and Menthol Tobacco.

For details of product regulation at country level, see the searchable database on the Tobacco Control Laws website, published by the Campaign for Tobacco Free Kids (CTFK). For countries that are parties to the WHO Framework Convention on Tobacco Control (FCTC) progress towards implementation of relevant articles, including newer products, is detailed in the FCTC implementation database

Specific challenges for LMICs

LMICs with no ban often have other major tobacco control policy gaps that are not necessarily menthol/flavour related but worsen the negative impact of menthol/flavours.⁸ One such policy is plain, or standardised, packaging,  which can include restrictions on flavour descriptors as well as colours on packaging which are known to signify flavour (e.g. green for menthol).⁹ However, plain packaging policies have yet to be implemented in many countries, including some high-income countries, so this would be a significant challenge in LMICs. Another relevant policy is the prohibition of marketing, especially near schools.¹⁰

Governments have more conflicts of interest in tobacco growing areas as they receive much needed foreign currency for tobacco exports,  and multinational companies can threaten this income stream if governments attempt to put tobacco controls in place.⁸¹¹  However, apart from rare exceptions the tobacco industry contributes little overall to the balance of payments.¹²¹³

Regulatory challenges

The WHO published brief guidance on the regulation of menthol and flavoured tobacco which summarised some regulatory options including restrictions on: the sale of menthol branded products,  the use of menthol at noticeable levels (giving a ‘characterising flavour’),  or banning any menthol ingredients.¹⁴  The report points to likely opposition from the tobacco industry in countries or regions with an established menthol market.¹⁴ This was the case with the European Union (EU) menthol ban which only came into full force in 2020, after the tobacco industry had successfully lobbied for a delay. Testing for characterising flavour is more difficult and expensive than a ban on ingredients; this makes banning menthol as an ingredient particularly efficient for LMICs.

The WHO noted that:

“A ban on all flavour agents that increase tobacco product attractiveness, rather than focusing on menthol exclusively, can provide an alternate route to restricting menthol, and may prevent the unwanted introduction of menthol substitutes.”¹⁴

Research and data

As of 2021, when TCRG researchers conducted a review of evidence on menthol/flavour in LMICs,¹⁵ there were very few research papers from countries in Eastern Europe, the Eastern Mediterranean region, and Africa.

Lack of data means that it is hard to monitor markets and company shares in specific countries.  Market research service Euromonitor (which receives project funding from Philip Morris International) includes no low-income countries and is proprietary, making it expensive and hard to access even for the middle-income countries which are included.

More research is needed on menthol and flavour in LMICs to help governments monitor the tobacco industry and its products, as recommended by the WHO: “An evidence base using data collected from the region of interest can provide more direct support for regulation.”¹⁴

Market in LMICs

Evidence suggests menthol and flavoured tobacco products are widely used in LMICs.  Data from the International Tobacco Control (ITC) Policy Evaluation Project suggests that menthol is smoked by more than 20% of smokers in several middle-income countries. Although the dates vary (see the note above on data challenges) this research gives an indication of the scale of the problem. The highest rates were found in Zambia (42% in 2014) and Thailand (35% in 2012). Kenya and India also had over 20% menthol smokers, with China just under just under that level.¹⁶

A study from Johns Hopkins University, between 2015 and 2017, found a range of flavoured and capsule cigarettes on the market in those LMICs with the highest number of smokers: Bangladesh, Brazil, China, India, Indonesia, Philippines, Russia, Thailand, and Vietnam.¹⁷

The main TTCs operating in these countries (PMI, JTI, and BAT) mostly sold menthol or mint flavours. China National Tobacco Corporation (CNTC) sold  a mix of flavours.¹⁷

There is also evidence from a number of studies that menthol and flavour tobacco use is rising, either as a proportion of the market or substantively.  Evidence from TCRG research shows that after the implementation of the European Union (EU) menthol ban in 2020, there was a marked increase in the share of menthol/flavoured products in some LMICs.¹⁵ A study of cigarette packs in Brazil, Indonesia, the Philippines, Russia, Thailand, and Vietnam, between 2013 and 2016, found that the number of flavour capsule variants on the market was growing.¹⁸ Most were mint and menthol flavour but with others the flavour was unclear from the product name.¹⁸

A number of studies have identified related marketing activities.  Marketing strategies for flavour capsules are likely driving their global growth particularly among young people in LMICs.¹⁹

TCRG’s review  of tobacco industry strategies underpinning the growth of menthol/flavoured tobacco use in LMICs  highlighted widespread marketing in stores (including retailers near schools), on billboards, on TV, online and via brand ambassadors. The packaging of flavoured and menthol products, legally displayed in stores, was  found to be colourful with non-conventional, appealing names for flavours.¹⁵

Tobacco companies also use symbols on cigarette sticks to indicate that they contain capsules.²⁰ Researchers studying this form of marketing in LMICs have described the space on a cigarette as “valuable communicative real estate” for tobacco companies, which could be better used to display public health messages.²⁰

Research and data from specific regions and countries is summarised below. We refer in many places to TCRG research based on 2019 cigarette market data from Euromonitor. In this data ‘high market share’ means 20% or more of the total cigarette market in that country in 2019. ‘High market share growth’ means that the share doubled between 2005-19 and was growing from 2017.¹⁵ We link to regional and country profile pages on TobaccoTactics, where available.

Africa

Nigeria has high menthol/flavour market share and high market share growth.¹⁵

Cameroon has high market share, the only other country in the region for which this data was available. (For Egypt see Eastern Mediterranean region below.)¹⁵

Tanzania

JTI sells a menthol cigarette called Sweet Menthol through its subsidiary in Tanzania. It describes this product as “the leading local mainstream menthol brand”.²¹

Zambia

JTI owned brand Sweet Menthol is the third most popular cigarette in Zambia.  It is cheap and is usually sold as single sticks.²²  On its webpage for Zambia, JTI describes itself  as a leaf farming company, and does not mention that it sells cigarettes in the country. A locally owned company, Roland Imperial,  also sells menthol cigarette brands.²³

ITC survey data showed a high prevalence of menthol smokers in Zambia, with 43% of smokers choosing the product.²⁴ Menthol was most commonly used among younger smokers, those with a middle income, and those that don’t smoke every day. Over a third of smokers indicated that they thought menthol cigarettes were less harmful than non-menthol.²⁴

Kenya

ITC survey data from Kenya also suggests a high prevalence of menthol smokers.²⁴²⁵ In 2018, 21% of smokers with a regular cigarette brand smoked menthol or sweet menthol (although Euromonitor estimates that only 7% of cigarette sales are menthol).¹⁵  More women smoke menthol than men in Kenya, and two thirds of smokers believed that menthol is less harmful than other cigarettes.²⁴²⁵

Ethiopia

In 2015, Ethiopia enacted a total flavour ban on all forms of tobacco.

• For details see Flavoured and Menthol Tobacco

This was a pre-emptive ban as flavour sales were low. However there has been a lack of enforcement at the retail level.⁸ Flavoured products are not made in Ethiopia and more collaboration with customs is needed to prevent illicit importation.⁸ There is also a lack of awareness that the ban includes waterpipe products.¹⁴

Since 2017, two years after the ban was enacted, JTI has owned 70%  the state owned tobacco company, NTE.²⁶

Latin America

Menthol cigarettes are popular in Latin America, and increasingly so in some countries.¹⁵ Guatemala and Peru have high market share and high market share growth. There is high market share in Columbia and the Dominican Republic, and high market share growth in Argentina, Bolivia and Costa Rica.¹⁵

Use of flavour capsule cigarettes is particularly high in Chile and Mexico.²⁷  According to BAT’s annual report in 2014,  sales of  flavour capsule cigarettes had increased in the region despite price rises, while overall cigarette sales were down.²⁸

A study of over 1,000 retailers located close to schools in Latin American cities (Argentina, Bolivia, Brazil, Chile and Peru) found that the majority (85%) sold flavoured cigarettes, and most (71%) sold capsule versions.¹⁰ (Similar findings were reported in Uruguay, a high income country, immediately before the implementation of plain pack regulations in 2020.)²⁹

These products were frequently displayed near the point of sale, or confectionary. Some stores also had advertisements and price promotions.¹⁰ Unconventional flavour descriptors such as “fusion blast” and “ruby ice” were very common.³⁰

Brazil

Survey data from 2016-2017 among adult smokers in Brazil found that over 50% supported a ban on menthol and over 60% supported a ban on all additives.³¹ Support did not vary across sociodemographic groups. When menthol smokers were asked what they would do if menthol cigarettes were banned, a third reported they would quit, around 20% would reduce the amount they smoked and a similar number would switch to non-menthol cigarettes. Slightly fewer said they would still find a way to get menthol cigarettes.³¹

ITC survey data from the same period suggested that 8% of smokers with a regular cigarette brand smoked menthol.³² 13% believed that menthol cigarettes were less harmful than non-menthol cigarettes, and over a third reported that they were smoother on the throat and chest.  Nearly two thirds  of surveyed smokers supported a complete ban on all cigarette additives, including flavourings.³²

An online sample of women aged 16- 26 (smokers and non-smokers) preferred packs with flavour descriptors.³³

• The tobacco industry has used a range to tactics to undermine and delay Brazil’s menthol ban. For details see Flavoured and Menthol Tobacco

Chile

In 2013, Chile sought to implement a law banning substances that cause higher levels of addiction, harm or risk, leading to tobacco industry resistance and interference.¹⁴

• For details see Flavoured and Menthol Tobacco

Mexico

Studies of retailers in Mexican cities, found that the majority sold menthol and flavoured products, and more than half of stores situated near schools sold flavour capsule cigarettes.³⁴³⁵ Many flavoured cigarettes have descriptors which suggest there is a flavour, but the type of flavour is unclear: chemical analysis of dual flavoured cigarettes suggested flavours were menthol and another flavour, for example fruit.³⁶

A study in Mexico City found that colour and flavour descriptors on cigarette packs made the products more appealing, and some smokers believed they would taste better.³⁷

Guatemala

A study of convenience store retailers in Guatemala found that all sold flavoured tobacco products.³⁸

The majority (88%) of indoor tobacco advertisements in Guatemala were found to be for capsule cigarettes.³⁸

South East Asia & Western Pacific

There is high market share of menthol/flavour in India, Malaysia, Philippines and Thailand, and high market share growth in Vietnam.¹⁵  A 2010 study noted that governments in the region had no legislation banning exotic flavours of cigarettes and cigarettes with new flavours had appeared in Cambodia, Indonesia, Malaysia and the Philippines.³⁹

Philippines

Menthol has been advertised to appeal to young women in the Philippines since the 1970s with menthol brands common for many decades.⁴⁰ PMI, JTI, BAT and Korea Tobacco & Ginseng (KT&G) all sell flavoured capsule cigarettes in the Philippines.⁴¹

Menthol packs studied in the Philippines were harder than non-menthol (for capsule protection) giving a quality feel. Flavoured capsule brands had a greater technological appeal,⁴¹ and packs were rated as more attractive by young adults.⁴²

Blue and white packs were perceived to be less harmful than other colours, as were the descriptors ‘light’ and ‘cool’, whereas the term ‘strong’ was perceived as more harmful.⁴²  Researchers called for greater action and support for banning flavour additives.

Malaysia

In Malaysia, menthol cigarette marketing has been aimed at young people and women.  In the 1980s Brown and Williamson’s Newport menthol cigarettes were marketed in Malaysia with youthful American images and were sold at a cheap price point.⁴³ An internal document from 1993 reveals how the company was developing sweet and fruit flavours for the Malaysian market. ⁴³⁴⁴ A 2003 study noted that the menthol variant of Cartier Vendome (a BAT brand at the time) was described as ‘pearl tipped’ so likely to appeal to women.⁴⁵

In 2013, vanilla, mint and fruit flavoured cigarettes were on sale, and strawberry cigarette packs with pink packaging were documented.⁴⁶

China

In China ‘flavour capsule’ was found to be one of the most common cigarette terms used in online tobacco marketing.  One website explicitly linked flavour capsules with female smokers.⁴⁷

Indonesia

In Indonesia the dominant cigarettes are kreteks which are flavoured with cloves.  Industry attempts to introduce their own cloved flavoured products had failed at least to 2004.⁴⁸  In 2009 PMI and BAT acquired two domestic manufacturers which allowed them access to the kretek market.⁴⁹ In 2009 PMI launched the first super slims kretek for women and Marlboro black menthol for young men.  By 2012 BAT had launched several kretek brands. Both companies were aware that kreteks  are particularly carcinogenic due to the presence of toxic chemical compounds: Anethole, Coumarin and Eugenol.⁴⁹

In Indonesia the flip lid of the cigarette packet was used by Esse (owned by Korean Tobacco & Ginseng, KT&G) to promote the brand with phrases evoking flavour, like “sweet surprise” and “its honey”.  Research found seven cigarette brands with capsules.  Flavours included mint, menthol, berry and honey.⁵⁰

Eastern Mediterranean

There is high market share growth in in Pakistan and Egypt .¹⁵

• See also Waterpipe for information on the role of flavours in promoting these products.

Eastern Europe

Data shows that in Russia menthol/flavour has both a high market share and high market share growth.¹⁵

Other LMICs in the region with high market share growth are Ukraine, Bosnia Herzegovina, Belarus, Azerbaijan, Kazakhstan and Uzbekistan.¹⁵

Relevant Links

WHO Advisory note: banning menthol in tobacco products (2016)

WHO Case studies for regulatory approaches to tobacco products: menthol in tobacco products (2018)

WHO FCTC decision on banning waterpipe flavour (2016)

A global map of menthol bans is available on Tobacco Atlas: Product Sales

TobaccoTactics Resources

• Flavoured and Menthol Tobacco
• Menthol Cigarettes: Industry Interference in the EU and UK

TCRG Research

A growing menace: menthol and flavoured tobacco products in LMIC, M. Zatonski, K. Silver, S. Plummer, R. Hiscock, Tobacco Induced Diseases, 2022;20(April):39, doi:10.18332/tid/146366
STOP research summary (May 2022)

Marketing of flavour capsule cigarettes: a systematic review, C. Kyriakos, M. Zatonski, F. Filippidis, Tobacco Control, Published Online First: 18 January 2022, doi: 10.1136/tobaccocontrol-2021-057082[/ref]

Flavour capsule cigarette use and perceptions: a systematic review, C.N. Kyriakos, M.Z. Zatoński, F.T. Filippidis, Tobacco Control, Published Online First: 04 October 2021, doi: 10.1136/tobaccocontrol-2021-056837

For a comprehensive list of all TCRG publications, including research that evaluates the impact of public health policy, go to TCRG publications.

References

The post Flavoured and Menthol Tobacco in LMICs appeared first on TobaccoTactics.

Background

TRACIT was established in April 2017 and formally launched in New York in September 2017. It received endorsements from representatives of the American Department of Homeland Security, the UN Office of Drugs and Crime and the OECD.⁵¹

Its first public event appears to have been a two-day conference in London on combatting illicit trade sponsored by the Financial Times and the Philip Morris campaign on illegal trade Impact.⁵² As well as Tracit Director General Jeffery Hardy, the were several members of the PMI Impact panel: Suzanne Hayden, Alain Juillet, Paul Makin, Luis Moreno Ocompo, Navi Pillay and Jurgen Storbeck. PMI CEO Andre Calantzopoulos was also a guest speaker.

Membership

TRACIT’s website has fluctuated between disclosing and not disclosing its membership. As of July 2021, TRACIT’s membership page listed Philip Morris International (PMI) while British American Tobacco (BAT) and Japan Tobacco International (JTI) have been listed as members on a previous version of the webpage. Also previously listed as a project partner is Crime Stoppers International, which has tobacco company support.⁵³⁵⁴

Partners

TRACIT is partnered with several other similar organisations including the Anti-Counterfeiting Group and is part of the UN Global Compact (UNGC).⁵⁵

Activities

Overview and tobacco funding

The organisation breaks its focus down into 12 sectors, of which one is tobacco. It says:

“Overall, for the tobacco industry the illicit trade in cigarettes results in lost revenue, reputational damage and loss of consumer trust, and increased costs in supply chain monitoring and the implementation of technologies that enable companies to track and trace their products.”⁵⁶

TRACIT accepts sponsorship from tobacco companies to help in the production of reports and quotes uncritically from industry documents as part of its analysis. In its lobbying it will often share platforms with industry officials and their allies. For instance, in its introductory analysis of the the tobacco sector, TRACIT quotes from a KPMG report called Project Sun which was produced in 2015 and looks at the illicit cigarette market in the European Union, Norway and Switzerland. The report was produced on behalf of BAT, Imperial, JTI and PMI.⁵⁷ Nowhere does TRACIT reference the multiple reports, supported by evidence, of the involvement of tobacco companies in the illicit trade.

In March 2019 TRACIT was awarded funding from PMI IMPACT – a $100 million initiative from Philip Morris International to support projects against smuggling. The award, one of 31 in a second round of funding worth $21 million in total, was for the:

“Development of a Global Illicit Trade Business Report, drawing upon private sector experiences and identifying solutions to supply chain vulnerabilities common to all forms of illicit trade. It examines transportation modalities, customs, free trade zones, human trafficking, criminal activity, financial fraud, and regulatory gaps. Findings will be shared with all stakeholders in response to their calls to significantly upgrade the availability and exchange of information.”⁵⁸⁵⁹

Work programmes

Global Illicit Trade Environment Index

The Global Illicit Trade Environment Index, released in June 2018, was produced by the Economist Intelligence Unit and evaluates 84 countries on their “structural capability to guard against illicit trade, highlighting specific strengths and weaknesses”. The objective is “to improve the knowledge and understanding of the regulatory environment and economic circumstances that enable illicit trade.⁶⁰ It is a key report which, with its regional and country subsets and recommendations, is the foundation for TRACIT policy proposals and lobbying. The report’s sponsors include Philip Morris International (platinum sponsor), British American Tobacco, Japan Tobacco International and Crime Stoppers International (bronze sponsors).

Mapping impact of illicit trade and sustainable development goals

In an area which has seen increasing interest by tobacco companies, TRACIT maps the impact of illicit trade against the UN sustainable development goals. It released a report in July 2019.

The report has chapters for each of its sectors and how illicit trade has a negative impact on specific goals. For tobacco it lists the goals of good health and well-being; decent work and economic growth; peace, justice and strong institutions and partnerships for goals as being affected. Again, no mention is made in the chapter on any culpability that tobacco companies have for the illicit trade.⁶¹

Involvement with UNCTAD

In July 2019, as part of its launch on the report, TRACIT co-hosted a meeting on illicit trade and the UN’s Sustainable Development Goals (SDG) in partnership with the United Nations Conference on Trade and Development (UNCTAD).⁶² TRACIT Director General Jeffrey Hardy addressed the meeting with contributions from UN officials.⁶³TRACIT’s engagement with the UN organisation reflects the attempts of tobacco companies to use third parties to ingratiate themselves with governments as partners in reducing illicit trade. Other UN organisations have been targeted by groups with close tobacco company affiliations such as Concordia and the International Chamber of Commerce.⁶⁴

Regional and Country Activities

TRACIT has been active in a number of countries representing industry interests at governmental level backed by its own reports. The principal report is the Illicit Trade Environment Index from which various regional versions have been produced.

Asia

• Produced regional policy recommendations in 2018 for the region which in summary were: ⁶⁵
• Association of Southeast Asian Nations (ASEAN) and Asia Pacific Economic Cooperation (APEC) play leadership roles on combatting illicit trade
• Establishing an antic-illicit trade coordinator and inter-agency task force
• partnerships with the private sector
• Protect Free Trade Zones from illicit traders
• Launch public awareness campaigns
• “rationalize tax policies and subsidies to ensure that they do not incentivize illicit trade, smuggling, adulteration and theft, by adopting simple, single tier specific tax structures, and accounting for various demand-related factors including overall consumption, price, income levels and the ensuing affordability of products.”⁶⁵ The tobacco industry often uses these types of arguments regarding taxes, to prevent raises and further regulations. See Tobacco Tactics Price and Tax for more details on this aspect.
• Establish joint investigations on illicit trade/trafficking and criminal organisations
• Study the patterns of illicit trade flows
• Produced a regional version of its Global Illicit Trade Index.⁶⁵ Among those who were interviewed for the Asia report were:
• Ali Salman, director of research, at Institute for Democracy and Economic Affairs (IDEA). The Malaysia-based think tank has lobbied against tobacco control measures and has received funding from tobacco companies
• Etienne Sanz de Acedo, CEO, International Trademark Association, which has Barry Gerber from Philip Morris International on its board.⁶⁶
• Seth Hays, chief representative—Asia-Pacific, International Trademark Association

Myanmar

• Produced regional policy recommendations in 2018:⁶⁷ The recommendations were similar to the report for Asia but also included:
• Tackle pervasive corrupt practices
• “Increase effectiveness of customs procedures to block the flow of illicit and parallel (grey) market products”
• Partnerships with international organisations such as World Customs Organization, Interpol and the European Anti-Fraud Office.
• Produced a regional version of its Global Illicit Trade Index.⁶⁸

Latin America

• Produced regional policy recommendations in 2018:⁶⁹. The recommendations were similar to the report for Asia but also included:
• Pursue law enforcement and customs cooperation through expanding the Pacific Alliance (Alianza del Pacifico) or “through projects sponsored by Ameripol, the InterAmerican Development Bank (IDB) or the World Customs Organization (WCO).”
• Intensify public-private coordination and uses examples from Argentina and Costa Rica (see below)
• Strengthen copyright protection enforcement
• fully adopt anti-money laundering regulations
• raise public awareness about the threat of illicit trade “to help shift public perception … that contraband is not a minor issue but a national security problem, with links to organized crime.”⁶⁹
• In September 2019 TRACIT participated in the 7th INTERPOL Global Conference on Human Trafficking and Migrant Smuggling, in Buenos Aires.⁷⁰ This had 750 people attending from 97 countries.
• In June 2019 TRACIT was in Buenos Aires at the Regional Summit on Security and Illicit Trade hosted by the business newspaper’ “El Cronista”. The panels included discussions on public-private cooperation and the vulnerabilities of Free Trade Zones.⁷¹ Director-General Jeffrey Hardy particularly highlighted the need to curb illicit trade in Free Trade Zones. Philip Morris International had a strong presence at the event with representatives from its PMI Impact anti-illicit project as well as providing media support.⁷²

Argentina

• In June 2019 TRACIT highlighted how fighting illicit trade is essential for attracting investment and creating growth opportunities during a National Roundtable for Fair Trade hosted by the Argentina Medium Business Confederation (CAME). A press release from TRACIT said that Director-General Jeffrey Hardy “called on Latin American governments to rationalize tax policies that can incentivize illicit trade”.⁷³

Colombia

• Produced policy recommendations which repeated many of those from the Latin American policy report (see above).⁷⁴ In particular it says “Colombia should simplify its current structure following OECD standards + VAT and reduce the tax burden to decrease the current high incentives for the illicit market.”⁷⁴

The Ministry of Health of Brazil and the National Commission overseeing the implementation of the Framework Convention on Tobacco Control have provided solid arguments on this issue of taxation and these have become useful for the rest of the countries in the region, as well as Colombia.

“There is solid evidence that reducing tobacco tax is an inappropriate initiative to reduce illicit trade. Studies, including a recent World Bank review, point out that the main determinant of the illegal tobacco product market is not the difference in taxation of tobacco products between countries but the dominance of this market by organized crime factions, attracted by profitability and impunity, resulting from the soft penalties applied to this offense. In addition, countries that have reduced tobacco taxes to try to reduce illicit trade have experienced reduced tax collection, smoking growth, especially among young people, and no positive effect on smuggling. This was the case of Canada and Sweden in the 1990s. In Brazil, also in the 1990s, the Federal Revenue Service lowered taxes on cigarettes to limit smuggling. However, tax revenues fell, and illicit trade continued to grow”⁷⁵

• In October 2018 at a meeting in Bogota, TRACIT urged Colombia to work with the private sector to develop a comprehensive and effective anti-illicit trade program to curb illicit goods that harm legitimate businesses, workers, consumers and governments. Colombia ranks 43 out of 84 on TRACIT’s Global Illicit Trade Environment Index, primarily because of issues around transparency and governance of its Free Trade Zones (FTZs).⁷⁶

Costa Rica

• Produced policy recommendations which repeated many of those from the Latin American policy report (see above).⁷⁷ In addition it recommends strengthening the Comision Mixta de Lucha Contra el Comercio Ilicito, composed by representatives from the Ministries of Health, of Finance, of Home Affairs, from the Customs Office and the Police force. This Commission was created in 2014 and later on, representatives from the chambers of commerce and industry were added as members as well. ⁷⁸ Costa Rican Civil Society have exposed the conflict of interest of this Commission and made a formal claim to the government in 2016, given that the representatives of the industry come from the Costa Rican-American Chamber of Commerce (AmCham), whose members include British American Tobacco and Philip Morris International.⁷⁹
• In August 2018 TRACIT addressed government officials and industry stakeholders during a conference on Illicit trade, hosted by AmCham, which has tobacco industry members.⁸⁰ The conference featured a presentation on TRACIT’s Global Illicit Trade Environment Index, which ranks Costa Rica 46th of 84 countries evaluated on the extent they enable or prevent illicit trade. Gerardo Lizano, AmCham’s representative to the Comision Mixta de Lucha Contra el Comercio Ilicito, and Nogui Acosta, vice minister of income in the Ministry of Finance, spoke at the event.⁸¹

Dominican Republic

• Produced a country briefing based on its Global Illicit Trade Environment Index (see above).⁸² The report quoted Manuel Cabral as an expert on local markets for alcohol and tobacco products as saying “frequent and piecemeal changes in tax policy create distortions that ultimately the use of illegal products”. Cabral worked for Philip Morris International from the country from 2011 to 2017, ending up as director of corporate affairs for the Dominican Republic and Caribbean⁸³ Among those listed as sponsors and contributors to the country report were British American Tobacco, Crime Stoppers International, Japan Tobacco International, and Philip Morris International
• Produced policy recommendations which repeated many of those from the Latin American policy report (see above).⁸⁴
• In May 2019 TRACIT addressed government officials and industry stakeholders during a conference on Illicit trade. It was hosted by the Association of Industries of the Dominican Republic, the British Embassy and the British Chamber of Commerce of the Dominican Republic. The Chamber of Commerce has BAT subsidiary BAT Republica Dominicana and Imperial Tobacco subsidiary Tabacalera De Garcias.⁸⁵
• TRACIT’s Director-General, Jeffrey Hardy, called for more public-private partnerships saying they are “essential to the design and implementation of effective programs to prevent illicit, contraband and counterfeit products.”⁸⁶ Such partnerships could provide a means for tobacco companies to engage with governments and circumvent the Framework Convention on Tobacco Control article 5.3.

Ecuador

• Produced policy recommendations which repeated many of those from the Latin American policy report (see above).⁸⁷ It highlighted the need for “strong and proactive measures” in strengthening the protection of Free Trade Zones
• In November 2018, TRACIT addressed government officials and industry stakeholders during a conference on Illicit trade, hosted by Cámara de Industrias y Producción (CIP). The current vice- president of CIP worked previously as Corporate Affairs Director for Ecuador and Peru at Philip Morris International for 2 and a half years, before taking on her current position at CIP. ⁸⁸ The conference featured a presentation on TRACIT’s Global Illicit Trade Environment Index, which ranks Ecuador 60th of 84 countries evaluated on the extent they enable or prevent illicit trade. “The country serves as a major transit point for illicit goods in the region, including … illicit trade in tobacco…”⁸⁹

Panama

• In 2017, Ulrike Bonnier from TRACIT participated in a session exploring actions to combat human trafficking and other forms of illicit trades at the 38th Annual Crime Stoppers International Conference.⁹⁰ Crime Stoppers International regularly engages with the tobacco industry. Among the speakers at the Panama conference were Nicholas Otte and Arturo Fernandez from Philip Morris’s Illicit Trade Strategies and Prevention for Latin America and Canada region. The silver sponsor for the event was British American Tobacco.⁹¹

Europe

• Produced a regional briefing based on its Global Illicit Trade Environment Index (see above).⁹² Among those listed as sponsors and contributors to the country report were British American Tobacco, Crime Stoppers International, Japan Tobacco International, and Philip Morris International
• Produced policy recommendations for the region including rationalising tax policies, subsidies and tax exemptions, encouraging partnerships with companies and have stronger criminal penalties. It highlighted the 2016 Administrative Cooperation Arrangement between the European Anti-Fraud Office (OLAF) and the State Customs Committee of Belarus aimed at helping investigative cooperation between them, specifically on the illicit trade in tobacco products.⁹³

Serbia, Bosnia and Montenegro

• Produced a regional briefing based on its Global Illicit Trade Environment Index (see above).⁹⁴ Among those listed as sponsors and contributors to the country report were British American Tobacco, Crime Stoppers International, Japan Tobacco International, and Philip Morris International
• Produced policy recommendations for the region which echoed much of those in the Europe report (see above).⁹⁵

Middle East

• Produced a country briefing based on its Global Illicit Trade Environment Index (see above).⁹⁶ The report says:
  

  “illicit tobacco trade has steeply increased due to high excise taxes (accounting for about 27% of the market) and new regulations that standardize tobacco packaging can further increase the demand for counterfeit and illicit products.”

  This echoes industry arguments against plain packaging and tax increases. The evidence used to support this is a news story which is itself based on a PMI-funded study.⁹⁷

• Produced policy recommendations for the region which echoed much of those in the Europe report (see above).⁹⁸

United Arab Emirates

• Produced a country briefing based on its Global Illicit Trade Environment Index (see above).⁹⁹The report recommends the UAE sign and ratify the five illicit trade treaties including the WHO Protocol to Eliminate Illicit Trade in Tobacco Products. Among those listed as sponsors and contributors to the country report were British American Tobacco, Crime Stoppers International, Japan Tobacco International, and Philip Morris International
• Produced policy recommendations for the region including strengthening co-operation in the region, having tougher oversight of free trade zones, rationalising tax policies and subsidies and improving public awareness. ⁹⁹

Africa

Tunisia

• Produced a country briefing based on its Global Illicit Trade Environment Index (see above).¹⁰⁰The report says
  

  “Stopping tobacco smuggling, in particular, must be a top priority for policy makers given the significant fiscal leakages and the large profits that organized crime and armed militias in the region amass from the illicit tobacco trade.”

• Produced policy recommendations for the region including strengthening co-operation in the region, having tougher oversight of free trade zones, rationalising tax policies and subsidies and improving public awareness. On the issue of taxation the report says:
  

  “excessive tax levels can reduce affordability of legitimate products and drive demand for illicit substitutes. Organized crime groups also may practice “tax arbitrage” to gain profits by smuggling products from relatively lower to higher taxed markets.”¹⁰⁰

  As in other TRACIT reports there is no mention of the involvement of tobacco companies in illicit activity.

South Africa

• In October 2019, TRACIT’s Director General Jeffrey Hardy addressed the 12th International Law Enforcement Intellectual Property Crime Conference in Cape Town. The conference was organised by INTERPOL, the International AntiCounterfeiting Coalition and South African Police Service.
• TRACIT used the conference to launch its policy recommendations for South Africa, including tackling illict tobacco which, according to a paper in Tobacco Control, is estimated to compromise a third of the market.¹⁰¹.¹⁰² TRACIT’s recommendations echoed those for its other country reports including tying activiy to achieve Sustainable Development Goals, tackling corruption, “rationalize tax policies”, promoting track & trace and similar technology and promoting private-public partnerships.¹⁰³ As examples of “valuable partners” it offers the American Chamber of Commerce in South Africa and the Consumer Goods Council of South Africa. The former has Philip Morris SA as a member,¹⁰⁴ while the latter has Soraya Zoueihid, the Area Director for British American Tobacco in Southern Africa, as a board member.¹⁰⁵

Staff

Senior Management

The senior management team is made up of the following people:¹⁰⁶

• Jeffrey P Hardy – Director-General. Hardy previously served as the Director of the International Chamber of Commerce’s Business Action to Stop Counterfeiting and Piracy. The group has consistently produced reports sympathetic to its tobacco industry members and lobbied against Plain Packaging measures. Hardy is founder and managing director of IDA Consulting, a management consultancy.¹⁰⁷ Hardy is listed in the EU lobbying register.¹⁰⁸
• Stefano Betti – Deputy Director General
• Louis Bonnier – Director of Programs. Co-author of the report on illicit trade and SDGs
• Ulrika Bonnier – Director of Programs. Co-author of the report on illicit trade and SDGs
• Suriya Padmanaabhan – Director of Programs
• Cynthia H Braddon – Head of Communications and Public Policy
• Esteban Giudici – Senior Policy Advisor

Directors

TRACIT gives its mailing address as One Penn Plaza in New York City, but it is registered in Fort Myers, Florida, as not-for-profit organisation under US tax code 501(c)(6). Its corporate filing on 19 April 2019 listed three directors: ¹⁰⁹

• Jeffrey Hardy
• David Benjamin
• Shelley Duggan. UK-based trademark lawyer who is a director at Proctor & Gamble. Duggan is chair of the Anti-Counterfeiting Group (ACG), a not-for-profit global trade association which tackles counterfeiting and is partner of TRACIT.¹¹⁰ One of the founders of the ACG was British American Tobacco. It is no longer listed as a member but Philip Morris, Japan Tobacco International, Imperial Tobacco and the Tobacco Manufacturers’ Association all are.¹¹¹

Advisory Council

The organisation’s Advisory Council is made up of independent experts providing advice in a personal capacity.¹¹² Among its members are:

• Karl Lallerstedt, from the Confederation of Swedish Enterprise, contributed a chapter to a book on organised crime which grew out of a BAT-funded project.¹¹³.
• Leonard McCarthy, founder of integrity and risk management firm LFMcCarthy Associates, prior to that an investigator at the World Bank.¹¹⁴ McCarthy came to prominence as the head of South Africa’s Directorate of Special Operations, or so-called Scorpions, which investigated organised crime, including tobacco smuggling. The unit was disbanded in 2009.¹¹⁵

Relevant Links

TRACIT homepage: https://www.tracit.org/

TobaccoTactics Resources

• Tobacco Smuggling
• Protocol to Eliminate Illicit Trade in Tobacco Products
• Tobacco-funded group TRACIT tries to influence tobacco control policy, 28 July 2020

References

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