Alcohol

Illicit Trade in Alcohol

Illicit trade in alcohol is widespread, representing significant percentages of alcohol consumption worldwide and stripping governments of billions of dollars in tax revenues. According to Euromonitor’s 2018 Global Study on Illicit Alcohol, 1 in 4 alcohol bottles are illicit, representing 25.8% of all global consumption.

In addition to the serious health risk for consumers, the illicit trade in alcohol results in substantial losses in tax and duty revenue for governments. According to the Euromonitor report, the fiscal loss to governments in these countries is as much US$ 3.6 billion every year. These findings correspond to a 2016 report by the EU Intellectual Property Office that estimated counterfeit spirits and wine drain €1.2 billion (US$1.4 billion) in government revenues in Europe, of which €739 million (US$843 million) are excise duties.

For industry, the main impact relates to lost market shares, costs related to intellectual property theft, reputational damage and lost consumer trust.

What is Illicit Alcohol?
Illicit trade in alcohol encompasses a wide variety of illegal activity that is typically characterized as:

Contraband/Smuggled Alcohol: Alcohol with original branding that has been illegally imported / smuggled into a jurisdiction and sold, evading tariffs/customs. This Includes beverages brought across the border via organized smuggling or in excess of the applicable traveler’s regulated allowance.
Counterfeit Alcohol: Fraudulent imitations of legitimate branded products, including refilling, falsification and tampering. These beverages infringe the intellectual property rights of legitimate producers and present brand reputational risk and potential liability. It is often produced in illicit factories and sometimes substitutes lower grade alcohol not intended for human consumption such as denatured ethyl alcohol.
Illicit Artisanal: Alcoholic beverages produced following artisanal practices, including home production. Artisanal alcoholic beverages are considered illicit if they are produced for commercial purposes, and if their production and / or sale violate local law.
Tax Leakage: Legally produced alcohol beverages on which the required excise tax is not paid in the jurisdiction of production.
Non-conforming Alcohol / Surrogate: Products that are not compliant with production processes, guidelines, or labeling legislation. Includes products produced with denatured alcohol or illegal industrial alcohol not produced for human consumption.

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Featured reports

Country studies
Reports prepared by Euromonitor International

Argentina, 2014 (Spanish)
Bolivia, 2017 (Spanish)
Colombia, Ecuador, El Salvador, Honduras, Panama and Peru, 2016
Colombia, Ecuador and Peru, 2018 (Spanish)
Czech Republic, 2015
Dominican Republic, 2017

Guatemala, 2016 (Spanish)
Malawi, 2016
Mexico, 2018 (Spanish)
Paraguay, 2018 (Spanish)
Russia, 2015
Sub-Saharan Africa, 2018

Learn how illicit alcohol impacts the achievement of the UN Sustainable Development Goals

From smuggling, counterfeiting and tax evasion, to the illegal sale or possession of goods, services, humans and wildlife, illicit trade is compromising the attainment of the UN SDGs in significant ways, crowding out legitimate economic activity, depriving governments of revenues for investment in vital public services, dislocating millions of legitimate jobs and causing irreversible damage to ecosystems and human lives.

The TRACIT report Mapping the Impact of Illicit Trade on the Sustainable Development Goals investigates illicit trade in 12 key sectors that participate significantly in international trade and are most vulnerable to illicit trade. For each sector, the negative impacts of illicit trade are mapped against the 17 UN SDGs. The full report is available here.

Read the chapter: SDGs and illicit trade in alcohol

RISKS ASSOCIATED WITH ILLICIT ALCOHOL

CONSUMERS
Serious health risks, including death and blindness.

GOVERNMENTS
Loss in fiscal income due to unpaid taxes and health expenses. Large pool of value for governments from fiscal loss from illicit alcohol.

BUSINESSES
Licit business lose opportunities to illicit market. Licit brands degraded.

Featured events

The Global Illicit Alcohol Trade
Washington, D.C., November 5, 2018

Don’t Peg On Poison, Perils of Illicit Alcohol in India
New Delhi, September 19, 2019