Study finds illicit tobacco accounts for almost a third of total products sold nationally

Crime syndicates are being described as “the new big tobacco” as research reveals the illicit market’s supercharged growth.

Crime gangs are selling about one-third of smoke products in Australia amid claims the illegal sector is now Australia’s real “big tobacco.”

Syndicates like those allegedly run by exiled gangland boss Kaz Hamad have helped propel illegal market share to the levels of established giants like British American Tobacco and Philip Morris, industry research says.

The study, commissioned by Philip Morris and compiled by FTI Consulting, says illicit tobacco accounted for 28.6 per cent of the total product consumed nationally last year, up from 23.5 per cent in the previous 12 months.

Industry figures say that rate of rampant growth would have already pushed the illegal sector beyond a 33 per cent market share at the same time as consumption of the legitimate product dropped by 18 per cent.

Exiled gangland boss Kaz Hamad.

Police inspect a firebombed tobacco shop in Oakleigh. Picture: David Crosling

The outlaw industry sold 2.8 million kg in 2023 as Australians battling a cost of living crisis flocked to the cheaper alternative imported and grown locally by crime gangs.

FTI Consulting’s paper, commissioned by Philip Morris, states this would have pumped $4.85 million in excise into federal coffers if the purchases were made legally.

It also found that illicit tobacco goods prices had declined so that they were now between 15 and 37 per cent of the price of legal smokes, which rose in cost by 11 per cent over 12 months.

The illicit market’s supercharged growth has had massive crime consequences in Victoria.

A car rammed into a tobacconist in Seville. Picture David Crosling

Fighting among gangs wanting control of the market has led to an unprecedented wave of firebombings, many involving teenagers paid a relative pittance to do the dirty work.

The FTI study says there have been 71 cases of arson linked to the illicit tobacco trade since March last year.

More than 50 were on smoke businesses or vape stores and the rest targeted gyms, cafes, reception centres and other businesses.

One industry figure said the growth of the illegal sector was extraordinary and only served to strengthen organised crime entities.

“Crime syndicates now hold a nearly 30% market share, positioning them as the new big tobacco,” that source said.

Another said it was no wonder when they could sell packets for $15 or charge $30 for a packet of 100 tailor-mades put together using their own loose-leaf tobacco.

“If it (illicit tobacco) isn’t the market leader, it’s bloody close and with no sign of slowing down,” he said.

The research’s findings come after Ritchies-IGA chief executive Fred Harrison told the Herald Sun last month that the company’s sales were declining by more than 20 per cent every year as the illegal tobacco players’ influence continues to build.

Mr Harrison predicted there would be no legal tobacco sector in five years at the current rate of change.

Originally published as Study finds illicit tobacco accounts for almost a third of total products sold nationally