Tobacco Info

From Tobacco Info No. 8 - January 2012
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After a 12-year decline, growth for the second year in a row

Number of taxed cigarettes sold in Canada surged by 10.6% in 2010

Sales volume grew by 14.8% over two years

In September, Health Canada released an annual summary that confirmed a little known phenomenon: convenience stores and other legal points of sale generally did very good business selling cigarettes in Canada in 2009 and 2010.

Sales volume increased from 27.56 billion cigarettes in 2008 to 28.63 billion in 2009 (+3.9%) and 31.65 billion in 2010 (+10.6%), for a cumulative gain of 14.8% over two years.

These are the highest numbers for the sales of tax-paid cigarettes since 2005.

The growth in 2010 was most dramatic in Quebec, where sales suddenly jumped by 29.8% from 2008 – following a period of steady decline between 1996 and 2008, which had been mirrored throughout the country as a whole. We find a similar situation in Ontario: after a continual decline over the same 12-year period, the sales volume in the legal distribution system increased by 4.2% in 2009 and 15.1% in 2010, for a cumulative gain of 20% as compared to 2008.

Across the country, there hasn’t been an increase in the sales volume of taxed cigarettes as strong as it was in 2010 since 1994, when, in February of that year, the federal and some provincial governments had drastically lowered tax rates on cigarettes in an attempt to stamp out the then flourishing black market. But in 2010, taxes didn’t decrease in a single Canadian jurisdiction, and even rose in some. 

Two years of a shrinking black market

Rob Cunningham, from the Canadian Cancer Society in Ottawa, and François Damphousse of the Quebec office of the Non-Smokers’ Rights Association, believe that the striking rise in sales is primarily due to a drop in contraband. The results from the Canadian Tobacco Usage Monitoring Survey (CTUMS) for 2010, which were released on September 7, indicate that the average consumption for Canadian smokers hasn’t changed significantly as compared to 2009. Neither CTUMS nor the Canadian Community Health Survey (CCHS) for 2010, which was released in June, show any significant changes to the prevalence of smoking in Canada in 2010.

And with a growing population, a stagnant smoking rate translates into an increase in the number of actual smokers in Canada. Cunningham and Damphousse don’t think that this phenomenon alone can explain the surge in demand for taxed cigarettes in 2010. The two men believe, rather, that many smokers who used to buy from the black market returned to the legal market in 2010, even though it meant paying more for their purchases – a fact that should encourage them to quit smoking in the longer term. The two health advocates believe that the 2010 drop in contraband should encourage governments to continue their efforts against the black market, to restore the deterrent effect of taxation on the amount of tobacco consumed and on smoking rates.

In their 2010 annual reports, multinationals British American Tobacco, which owns Imperial Tobacco Canada (ITC), and Philip Morris International, which owns Rothmans, Benson & Hedges (RBH), both credited the fight against contraband by governments, and not the ‘quality’ of their products, for the increased number of taxed cigarettes sold on Canadian soil. ITC and RBH are the main suppliers of nicotine to Canadian smokers.

By Pierre Croteau