Mega profits from illegal tobacco now outstripping the illicit drug market
For decades, drugs have been where Australia’s biggest organised crime gangs raked in their profits, but now illegal tobacco and vapes have taken over. Here’s what’s driving the shift.
Crime gang profits from illicit cigarettes and vapes is now outstripping what syndicates make from the top five drugs in Australia combined.
The outlaw sector raked in a reported $10bn for illicit smokes in 2024 and the annual figure is rising steeply every year.
Dominance of organised crime figures, like Kazem Hamad, is such that they now have a market share pushing towards 50 per cent – equal to that of all legal sellers across the country – compared to 39.4 per cent last year.
The Australian Criminal Intelligence Commission’s (ACIC) most recent wastewater report showed 22.2 tonnes of cocaine, meth, heroin, MDMA and cannabis was consumed in Australia over a year.
That amount represented an estimated street value of $10.3bn.
“The value of the markets for these five drugs based on consumption during the relevant period was in excess of $10.3bn,” acting chief of ACIC, Matthew Rippon, wrote.
“Together, these figures underline the size of the black economy that relates to illicit drug markets.”
But now the illicit tobacco and vape industry is rapidly overtaking that huge drug market.
Drugs have for decades been the mainstay of Australia’s biggest organised crime groups but the more recent experience shows a massive shift towards tobacco, a situation which is the unintended consequence of several factors.
• High taxes on legal smokes have sent smokers en masse to the pirate retailers who often are selling at one-third the price of their competitors.
• Their profit margins are extraordinary because of the comparative pittance paid for a product which is later blatantly sold from shops at huge mark-ups.
• Less than one per cent of sea cargo is checked and crime gangs only need one in every 30 containers to get through to make a profit
• Those busted smuggling illegal tobacco are punished for excise avoidance which carries far lighter sentences than drug trafficking.
The situation has also led to many retailers opting out of selling cigarettes because they are utterly uncompetitive against the 1000 shops in Victoria – more stores than Woolworths and Coles combined – which have sprung up in recent years brazenly selling the illegal goods.
“The federal government has helped put these dangerous criminals on Australia’s rich list by continuing to jack up tobacco excise – they’re handing them customers and boosting their profits to insane record highs,” Theo Foukkare, CEO of the Australian Association of Convenience Stores, said.
“Retailers are playing by the rules while the dodgy shop next door is selling tax free, illicit tobacco at a third of the cost and there’s bugger all enforcement.
“There’s minimal threat of jail time so they keep selling tax free, illicit tobacco and Aussie adults who choose to smoke, keep buying from them.
He added: “Maximum profit and next to no punishment makes these rich list crims even richer.”
Other store owners have quit because of the danger of robberies by gangs of young armed offenders who have been hitting suburban outlets in recent years.
Master Grocers Australia CEO Martin Stirling said this was opening the door for the black market syndicates.
“Retailers are being pushed to the brink: violent crime, staff safety concerns, and insurance and security costs are making legal tobacco less viable by the day,” Mr Stirling said.
“When selling legal tobacco becomes too costly and too dangerous, retailers walk away.”
The latest is Narre Warren North IGA owner Marco Ciavarella. The Herald Sun revealed he had pulled cigarettes from his shelves after multiple attacks in which young thieves stole $17,000 in smokes.
Fred Harrison, CEO of Ritchies, said the growth of illicit tobacco was alarming.
“Over the past few months, Illicit has nearly doubled in sales and is continuing to grow at a rapid rate,” he said.
“Government inaction is certainly not helping us and my concern is the lawlessness that is now confronting Australia.
“If we allow the sale of illegal tobacco and vapes to continue and grow, then what is next? I do not know of another industry, where lawlessness and illicit product has been allowed to thrive as the tobacco and vape industry has.
“It just does not make sense that government and authorities have not tackled this issue more dramatically and their passive approach seems to be endorsing the validity of these products.”
An industry expert said the situation “isn’t misfortune, it’s mismanagement.”
“The explosion of violence, soaring crime, lost revenue and worsening health outcomes aren’t accidents, they’re the direct result of government failure,” they said.
“The government has surrendered control of Australia’s tobacco and nicotine market to organised crime. These syndicates are raking in tens of billions of dollars and they won’t stop, it’s easy money with almost no risk.”
They added: “The choice for the government is stark; a regulated market or a criminal empire. If it’s the former, they need to act decisively and address all of the failures that created this mess because while they posture with tough talk, criminals are winning.”
Another source added: “What a remarkable legacy Minister Mark Butler is leaving – turning back decades of tobacco control to cheap smokes, menthols, flashy packs with no health warnings and, best of all for criminals, no excise.”
Originally published as Mega profits from illegal tobacco now outstripping the illicit drug market
