Why is Contraband Detrimental to Our Business?

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Undermines brand integrity and goodwill

Not only does smuggling undercut legitimate trade, counterfeit cigarettes destroy the goodwill value of authentic product and the investment made in the brand. Infiltration of the counterfeit product through illicit trade channels deprives the company and its distributors of the opportunity to implement consistent marketing and trade programs. Counterfeit's impact on the price and its poor quality damage the integrity of our brands and confuse the legitimate customer base.

Discourages investment

A high level of cigarette contraband is gravely detrimental to investment in the country concerned, since it disrupts well-ordered and structured markets which are required for beneficial business development. Grocery stores and other small-scale traders often depend upon their tobacco sales in order to remain in business; contraband can cause them to fail, thus depriving communities of their local stores and depriving the tobacco manufacturers of their legal and regular outlets. Recent UK Research findings published in the trade magazine Independent Retail News suggested that tobacco and alcohol smuggling in the country costs retailers an average of £ 20,000 (US$ 32,000) each in 2002.

No benefit to market share development

There have been frequent erroneous allegations that companies promote contraband to develop market share. A large shadow segment disrupts well-ordered and structured markets which are required for beneficial business development. JTI is a legitimate long-term investor which seeks to be a respected and dutiful citizen in all countries where it trades. JTI has not and does not condone any activities which seek to increase market share in an illegal manner and indeed, as stated above, the consequences of illegal trade are highly detrimental to the legitimate industry. European Union Customs authorities themselves have stated in official reports that there is no evidence that cigarette companies are participating in contraband trade.

Damages reputation and credibility

Unjust accusations of industry complicity in the contraband trade persist despite that fact that the grave damage contraband does to the legal tobacco industry is recognized. These accusations tarnish the reputation and credibility of the industry and have a negative effect on public opinion, already prejudiced against our industry. Moreover these accusations can, over time, erode the morale of our employees and the support of our shareholders.