Empowering consumers to fight illicit trade in Russia: “We must target demand at its source”

May 12, 2021
Russia

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At the end of 2020, and through the start of 2021, Russian police forces carried out a series of coordinated country-wide raids, revealing the extent to which illicit tobacco trade remains rife within Russia’s borders. In stark contrast to the impact COVID-19 has had on multiple sectors across national economies, illicit tobacco appears to have experienced a boom during the pandemic. 

In a matter of days, Russian authorities had dismantled extensive illicit tobacco operations and arrested the criminals responsible. Thanks to inter-regional collaboration between local authorities and federal organizations, millions of illicit tobacco packs, worth hundreds of millions of rubles, were seized:

- Dec. 8 – Police raided several warehouses in Tula and its neighboring regions, seizing equipment, false documentation and excise stamps used to make and sell illicit tobacco goods. Over a million cigarette packs were confiscated, with the criminal operation costing the state an estimated 150 million rubles in damages. 

- Dec. 11 - 450 boxes containing around 225,000 cigarette packs were seized in the Apraksin Dvor region, valued at approximately 13 million rubles. 

- Dec. 14 - Orenburg regional authorities uncovered over 200,000 packs of unmarked tobacco products worth 15 million rubles, and a further 8,000 packs branded with a well-known foreign manufacturer’s trademark.

- Dec. 15 – In Izhevsk, 110,000 cigarette packs with fake excise stamps and 20,500 unmarked cigarettes were seized, valued at 7.83 million rubles.

- Dec. 23 – In Tula, authorities unearthed 874,000 cigarette packs worth around 40 million rubles, hidden in a consignment of “Korona” branded cigarettes without excise stamps or legal marking.

- Feb. 4 - Rostov border officials seized 24,000 packs of Marlboro cigarettes, worth 3.6 million rubles, allegedly being smuggled from Russia to Ukraine.

- Feb. 10 - Over 150,000 illicit cigarette packs without proper excise stamps were discovered by customs officials in Novosibirsk, amounting to tax losses of over 7 million rubles.

Yet despite law enforcements’ concerted efforts, the illicit tobacco trade remains prevalent within Russia. 

Illicit tobacco trade in Russia: no longer behind closed doors

Recent research indicates that Russian consumers are not only aware of the illicit tobacco trade, but that they willingly choose to engage with it. This is according to a recent consumer research study conducted by the tobacco industry1, which analyzed Russian smokers’ illicit tobacco consumption, behaviors, and beliefs. Four out of five respondents claimed they were aware of illicit trade2. Yet rather than shying away from criminal suppliers, 35 percent of consumers polled have interacted directly with illicit products, with 22 percent claiming they buy illicit brands on a regular or occasional basis3. This was echoed by the Russian Public Opinion Research Center (VCIOM), that found one in four smokers purposely bought illegally sold cigarettes. 

This is due in part to cost. Illicit tobacco products are often cheaper than their legal equivalents - and affordability makes them highly attractive to Russian consumers. This was reflected in the consumer research study, where respondents claimed that the significant price difference between illicit and legal tobacco goods was adequate compensation for any potential quality issues4. Furthermore, one in four smokers told VCIOM that they buy contraband cigarettes to save money. This was prevalent among lower income families, with 41 percent of respondents citing low living standards as a driver of illegal cigarette trade. 

This is a continuing trend; last year STOP: ILLEGAL spoke to Alexander Mironenko, Director Eurasian Economic Union & Illicit Trade Prevention at Philip Morris International. He echoed this sentiment, noting that when Russian citizens have less money and are given the option to buy cheaper illicit goods, “they will choose the latter.” 

The consumer research study also revealed that illicit tobacco goods are entering the Russian market via legitimate channels, with half of respondents5 claiming to know genuine retailers selling contraband. The open sale of illicit tobacco goods is also increasing consumers’ tolerance to criminal activity, with some respondents questioning their “prohibited” status given their presence in the market.

Behavioral change key to tackling a prevalent issue 

Over the last year, COVID-19 has helped illicit trade thrive around the world, presenting “unprecedented opportunities” for criminals to capitalize on the circumstances. In Russia, this was no different. Authorities have accelerated their efforts over the past months to tackle criminal enterprises:

- In December 2020, a law was introduced, restricting the volumes and movement of unlabeled tobacco products, and implementing personal consumption limits

- Later that month, regulation setting a minimum price for tobacco products was passed

- In March 2021, a bill was submitted to the State Duma, calling for the destruction of illicit tobacco products and production equipment, to prevent illicit goods from reentering the market.

To eradicate the issue, PMI’s Mironenko reiterates the need to change Russian consumers’ perceptions of illicit trade. “While the pandemic has undoubtedly increased illicit trade, it cannot be blamed for the existence of criminal enterprises. Perpetrators are responding to sustained demand—and there lies the solution. We must target demand at its source, building awareness and educating consumers to the risks and detrimental effects of engaging with illicit trade,” he commented.

“Our research shows consumers are aware of illicit trade, and a proportion will willingly engage with it. It also found that whilst most are well-aware of the country of origin of their tobacco products, one in three believe the illicit goods are being sold legally – which couldn’t be further from the truth. This means we must do more. Yet results can only be achieved when we respond as a collective force, supported by adequate resources.” 

Research has also revealed the clear need within the Russian market. To successfully dismantle criminal operations within its borders, authorities must sustain their efforts—and they will need to empower consumers. Because, at the center of illicit trade demand, consumers play a significant role; if they are sufficiently informed, engaged, and can enact long-lasting behavioral change, they can also become a vital part of the solution.

To find out more about why changing consumer behavior is key to tackling illicit trade, click here.


1 Illicit Category—Legal Age Smokers (LAS) Consumer Understanding Report (October 2020), summarizing the results of three research studies conducted by KANTAR on behalf of Phillip Morris International 
2 ibid
3 ibid
4 ibid
5 ibid

STOP ILLEGAL

Written by STOP: ILLEGAL

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