Thanks to Zhurilo and Martynenko, the share of illegal cigarettes sold through United Tobacco in Ukraine has grown to a record 22% since independence.
The share of illegal tobacco products on the Ukrainian market in August 2022 increased by 5 percentage points (pp) compared to the average annual figure for 2021 – to 21,9% from 16,9%. The size of the shadow market has reached its highest level since Ukraine's independence, writes Ukrrudprom.
According to an October study by the Kantar Ukraine Institute, obtained by Interfax-Ukraine, the total volume of cigarettes illegally sold since the beginning of 2022 has reached 8,46 billion units, equaling the volume for the entire 2021. This resulted in a loss of UAH 20,65 billion in tax revenues for the state budget (UAH 15,49 billion for the entire 2021).
Kantar Ukraine clarified that in August 2022, the share of counterfeit cigarettes in Ukraine was 8% of the total market, while in 2021, in November it was 6,6%, in August – 5,6%, and in February – 4,2%.
The share of cigarettes labeled for export and Duty Free sales, but illegally sold in Ukraine, amounted to 12,2% of the entire Ukrainian cigarette market in November of this year, compared to 10,9% in November of 2021, 9,8% in August, and 6,9% in February.
The Institute clarified that 56% of tobacco products (62% in 2021) illegally sold in 2022 as export or duty-free products were marked as manufactured by the Vynnyky Tobacco Factory (Vynnyky, Lviv Oblast) and labeled as not intended for sale in Ukraine. Unidentified manufacturers accounted for 24% (23% in 2021), while United Tobacco LLC (Zhovti Vody, Dnipropetrovsk Oblast) accounted for 19% (15% in 2021).
In turn, the share of contraband cigarettes in August 2022 decreased to 1,8% compared to 2,9% in November last year and 2,7% in August 2021.
Of the contraband cigarettes, 15% were produced by the Belarusian Grodno Tobacco Factory (45% in 2021), 14% were from Moldovan factories (15%), and 70% were from unidentified manufacturers. The most common contraband brands are Brut, Ritm, Marshall, NZ, Bacio, and Williams.
Kantar recalled that the average annual level of illegal tobacco sales in Ukraine in 2021 was 16,9%, compared to 6,9% in 2020 (down 10 percentage points), 6,6% in 2019 (down 10,3 percentage points), and 4,4% in 2018 (down 12,5 percentage points). The lowest volume of the illegal cigarette market in a decade was recorded in 2016 – 1,1%.
According to the study, in 2021, 37% of illegal cigarettes were sold through retail kiosks, 27% of sales were in stores, 23% were sold by street vendors, and 9% were sold at open markets.
The most common brands of illegal cigarettes this year were Compliment, with 52% of the illegal market (47% in 2021), Marshall with 13% (15%), and Urta with 12% (9%).
Kantar Ukraine clarified that the largest share of illegal cigarettes is recorded in the Dnipropetrovsk region—20% of the total market—Odesa (13%), Kharkiv (8%), Khmelnytskyi and Lviv (7% each), and Kyiv (6%). In Kyiv, this figure stands at 8%.
Danylo Hetmantsev, Chairman of the Parliamentary Committee on Finance, Tax, and Customs Policy, cited these studies yesterday on his Telegram channel. He also noted that the UAH 20,6 billion in cigarette sales taxes Ukraine has lost since the beginning of the year could be used to purchase 560 armored personnel carriers, 279 tanks, or 136 Bayraktar attack drones.
Getmantsev emphasized that there are no obstacles to combating the illegal cigarette market, but "normal law enforcement work is needed."
"Until now, communications with law enforcement agencies (regarding the illegal cigarette market) resemble either a hot potato-passing contest between agencies or an art competition to write a piece on the topic 'Why not?' I'm convinced everyone knows and understands why not. A good place to start would be by immediately ending the search in Zhovti Vody, which is unprecedentedly long in the history of Russian criminal proceedings," the committee head added.
As reported, Getmantsev announced in October that law enforcement had been conducting a search since September at the United Tobacco tobacco factory (United Tobacco LLC, Zhovti Vody, Dnipropetrovsk Oblast), which is suspected of illegal tobacco production. Law enforcement officials have already identified the suspects and assessed the scale of the illegal activity.
According to the European Business Association (EBA), Ukrainian business representatives expect Ukraine's law enforcement system to take proactive action against shadow markets, including the production of illegal cigarettes, and are willing to assist in establishing the damage caused by the illegal activities of such enterprises.
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