Friday, January 13, 2012

Cigarettes Grab Spain’s Tobacco Market

A number of increases in taxes on cigarette sales that were recently registered in Spain have prompted both price warfare between companies struggling for recession-hit consumers, and a sudden increase in the sale of cigarette products.
“At present the problem of cigarette market seems to worsen due to recession and an evident falling purchasing power,” stated José Luis Nueno, a professor of marketing.
According to a report realized by leading tobacco company Imperial Tobacco, about 6% of all cigarette sales in Spain belong to illicit market, more than 10% in Andalusia and nearly 20% in such regions as Málaga and Seville.
Within the past two years, tax increases in Spain have prompted a huge number of smokers switch to cheap cigarette brands or even rolling tobacco in comparison to earlier popular Virginia and such famous smokes as Marlboro and Camel.
One more option for the hard-pressed Spanish smoke lovers has been the chance to try something of Chinese-produced bootleg smokes that have become rather popular common, or to purchase cigarettes. The lowest prices for cigarettes and availability can make the illegal cigarettes more appealing.
Spain’s porous borders have always made it an appealing and very profitable market for contraband cigarette smugglers.
One of the most powerful cartels importing non-taxed tobacco products were Galician-based gangs who used high-speed boats in order to bring these products in the country. Very soon they switched to higher margin crimes, such as cocaine smuggling, and corresponding faced a wave of arrests. Mr. Nueno said that criminal operations in Spain have become much more divergent.
The great part of cigarettes confiscated by Spanish custom authorities comes through the country’s borders with Andorra, Portugal, and Gibraltar.
“Officially Spain has three regions where the use and demand for cigarettes is highest, namely Galicia, as it situated in the main proximity to Portugal. Andalusia, due to Gibraltar, and Catalonia, because of Andorra,” added Mr. Nueno.
The estimates for contraband tobacco products coming Spain are based on the extrapolation from the amount confiscated at customs.
According to statistics, in 2009, about 12.3 million cigarettes from illicit market entered Spain.