2.8 Tobacco consumption not captured in government or industry figures

Not all tobacco consumed in Australia is reflected in official records of manufacturing and imports–exports or excise and customs receipts. In many countries around the world smokers are able to buy cigarettes from informal channels. Illicit tobacco products are significantly cheaper because suppliers have avoided paying excise or customs duty and goods and services tax (GST), which in Australia make up about 70% of the retail value of tobacco products sold through legitimate channels. In the early 1990s cigarettes could be purchased cheaply where suppliers had managed to avoid paying state franchise fees through a variety of means–see Chapter 13, Section 13.7.5 for further details. Since 1997 (at which time state franchise fees were abolished), illicit tobacco products have included:

  • roughly processed tobacco sold without branding in plastic bags either loose or rolled up into cigarettes (widely known in Australia as 'chop-chop')
  • contraband cigarettes, which are produced by legitimate manufacturers either in Australia or overseas but on which excise or customs duty and/or GST has not been paid. Some of these cigarettes would be:
    • counterfeit cigarettes produced to look like those produced by registered manufacturers. Not all counterfeit cigarettes are contraband: some enter the legal market

While it is possible to ask smokers about their use of unbranded tobacco, it is extremely difficult to assess the extent of use of contraband and counterfeit cigarettes.

2.8.1 Unbranded tobacco

Estimates of the total volume of chop-chop sold in 1999–2000 range from 400 to 2 600 tonnes.1 Australian Tax Office estimates of the quantities of tobacco diverted illegally in the following years were:

  • 243 000 kg for 2001–02
  • 295 000 kg for 2002–03
  • 313 000 kg for 2003–04
  • 347 000 kg for 2004–05.2

The amount of unbranded tobacco purchased by consumers since 2004 can be estimated from estimates of numbers and reports of the frequency of use by respondents in the Australian Government's 2004, 2007 and 2010 National Drug Strategy Household Surveys. As indicated in Table 2.8.1, while 24% of smokers in 2010 had tried unbranded tobacco at least once, almost 80% of those who had tried it no longer ever used it.

Table 2.8.1
Responses to the question 'How often do you smoke this type of tobacco?', current smokers
14 years and over, Australia, 2010

Of current users of unbranded tobacco

Of current smokers who have ever used illicit

Of all current smokers

Currently use every day, some days or only occasionally




Have used it but no longer use it




Have never used unbranded








Source: AIHW 20113

Note: Relates to AIHW National Drug Household Survey 2010, Table 3.1, p 39

Of the 5% of smokers who did currently use unbranded tobacco, almost 70% smoked it only occasionally. Only 1.5% of smokers smoked unbranded tobacco half the time or more.

The percentages indicated in Table 2.8.2 can be used to estimate the number of cigarettes made from unbranded tobacco smoked in Australia.

Table 2.8.2
Responses to question to those who have ever used this type of tobacco, 'Would you say that when you smoke you ...?'

Of current users of unbranded tobacco

Of all current smokers

Only smoke this type of tobacco



Mainly smoke this type of tobacco



Smoke this tobacco about half of the time



Smoke this tobacco less than half the time



Occasionally smoke this type of tobacco



Have never used unbranded or no longer use it


Total (valid cases only)



Source: National Drug Strategy Household Survey, 2010 (computer file). Canberra: Australian Data Archive, The Australian National University, 2011, absolute person weights used, applied to all current smokers.4

Allowing for the possibility that smokers who use unbranded tobacco might be somewhat heavier smokers than average, it is estimated that the 162 200 people currently using unbranded tobacco products would smoke about 348 million cigarettes made from unbranded tobacco per year. Even if such cigarettes weighed as much as 1 g (25% more than the weight of the heaviest factory-made cigarettes manufactured in Australia), the total amount of unbranded tobacco products purchased in 2010 would be no more than 348 000 kg, almost identical to tax office estimates for six years earlier. Total use of unbranded tobacco for 2007 calculated using the same methodology would have been about 310 000 kg. This would make the increase of use of unbranded tobacco between 2007 and 2010 about 12%–from 1.2% to 1.4% of the total tobacco market in Australia.

Table 2.8.3
Estimated number of chop-chop cigarettes smoked in Australia in 2010 based on responses to National Drug Strategy Household Survey

Users who use:


No. of smokers

No. of cigarettes per year per smoker

Total number of cigarettes per year by all chop-chop smokers

Only this tobacco


20 599

6 570

135 333 052

Mainly this tobacco


19 301

5 256

101 446 508

This tobacco half the time or more


9 894

3 285

32 501 245

Less than half the time


3 568

1 971

7 033 056

Only occasionally


108 832


71 502 738



162 194

347 816 599

Source: Quit Victoria 2011.5

2.8.2 Contraband and counterfeit cigarettes

Estimating the extent of use of contraband or counterfeit cigarettes is inherently difficult.

A Deloitte report commissioned by Australian tobacco companies6 stated that 5% of all tobacco users have smoked counterfeit and 5% contraband cigarettes–see Table 6.3 of Deloitte report. While it is reasonably clear that unbranded tobacco is an illicit product, it is not clear in the report how respondents to the Roy Morgan survey on which the report was based were asked to judge whether branded products were counterfeit or contraband. It is possible that some people confused discount cigarettes with contraband. While the most popular brands in Australia retailed in convenience outlets in 2011 for about $16.50 for a packet of 25, many cheap imports sell for considerably less, a couple for as little as $10: it would seem likely that people may conclude that such very cheap cigarettes might be counterfeit.

Another possible explanation for over-inflated estimates of counterfeit cigarettes might be that consumers are inaccurately interpreting small variations in taste of manufacturers' products as a sign that products are counterfeit. The National Drug Strategy Household Survey reported that 4.6% of smokers had within the last month purchased cigarettes that tasted or looked slightly different from usual. This is an interesting result, with many possible explanations. A 2011 study published in the British Medical Journal's Tobacco Control journal found that 41.7% of smokers noticed changes in their regular brand of cigarettes following the introduction of reduced ignition propensity laws in the US state of Massachusetts.7 Regulations to reduce the fire risk of cigarettes came into force over the survey period in Australia,8 so it may be that some smokers picked up in the estimate here are perceiving slight variations in the performance of cigarettes resulting from changes in manufacturing procedures required to comply with this legislation. These kinds of false attributions are likely to be high in an environment where tobacco companies have been speaking frequently in the media about the issue of illicit tobacco.

International business information consultancy, Euromonitor, estimates that contraband cigarettes–manufactured cigarettes on which neither excise or customs duty has been paid–comprised about 3% of the total number of cigarettes smoked in Australia between 1999–20009 and 2008–09.10 The sources for these estimates are listed as 'Australian Customs Service and industry sources'; however no information is provided on the assumptions or data variables selected.

See Chapter 13, Section 13.7.8 for further calculations and discussion of the extent of illicit trade in Australia.


1. PricewaterhouseCoopers. Research Report on the Illegal Tobacco Market. Sydney: for British American Tobacco Australia, 2004. Available from: http://www.bata.com.au/oneweb/sites/BAT_53RF5W.nsf/vwPagesWebLive/80256AED003D81CC80256AC4002DFEB2?opendocument&SID=&DTC=&SWHT=&SQRY=Illegal%20Tobacco&SSTART=&SEND=&DFB=%20AND%20

2. The Auditor-General. Administration of Petroleum and Tobacco Excise Collections: A Follow-up Audit, 33 2005-06 Performance Audit. Canberra: Australian National Audit Office, 2006. Available from: http://www.anao.gov.au/director/publications/auditreports/2005-2006.cfm?item_id=1EB393419FB39C1B5F3F8574CAD4AB76

3. Australian Institute of Health and Welfare. 2010 National Drug Strategy Household Survey: survey report. Drug statistics series no. 25, AIHW cat. no. PHE 145. Canberra: AIHW, 2011. Available from: http://www.aihw.gov.au/publication-detail/?id=32212254712&libID=32212254712&tab=2

4. Australian Data Archive Social Sciences collection. National Drug Strategy Household Survey, 2010. Canberra: Australian National University, 2011. [viewed December 2011] ; Available from: http://www.ada.edu.au/social-science/01237

5. Quit Victoria. Illicit trade of tobacco in Australia: a report prepared by Deloitte for British American Tobacco, Philip Morris Ltd and Imperial Tobacco: a critique prepared March 2011, updated August and November 2011. Melbourne, Australia: Cancer Council Victoria, 2011. Available from: http://www.cancervic.org.au/plainfacts/browse.asp?ContainerID=plainfacts-myths

6. Deloitte. Illicit trade of tobacco in Australia. Sydney: Prepared for British American Tobacco Australia Limited, Philip Morris Limited and Imperial Tobacco Australia Limited, 2011. Available from: http://www.bata.com.au/group/sites/BAT_7WYKG8.nsf/vwPagesWebLive/DO7WZEX6?opendocument&SKN=1

7. Seidenberg AB, Rees VW, Alpert HR, O'Connor RJ, Giovino G, Hyland A, et al. Smokers' self-reported responses to the introduction of reduced ignition propensity (RIP) cigarettes. Tobacco Control 2011;Published online July 12, 2011 Available from: http://tobaccocontrol.bmj.com/content/early/2011/07/12/tc.2011.043257.abstract

8. Trade Practices (Consumer Product Safety Standard) (Reduced Fire Risk Cigarettes) Amendment Regulations 2009 (No. 1) (Cth). Available from: http://www.comlaw.gov.au/Details/F2009L01271

9. Euromonitor International. Tobacco in Australia, Global Market Information Database. London: Euromonitor International, 2006. [viewed 14 December 2006] ; Available from: http://www.euromonitor.com

10. Euromonitor International. Tobacco in Australia, Global Market Information Database, 2010. London: Euromonitor International, 2011. Updated September 2010 [viewed 9 December 2011] ; Available from: http://www.euromonitor.com

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