Illicit cigarette market surges nearly 20% to 1.16 bn sticks in 2024

Illicit cigarettes continued to erode the tobacco monopoly of Ceylon Tobacco Company PLC, with a significant 19.6 percent Year-on-Year (YoY) growth and soaring to 1.16 billion sticks in 2024. This surge resulted in an estimated loss of Rs. 118 billion to state coffers during the year.

In 2024, the total market for combustible tobacco, comprising legal cigarettes, illicit products, and beedi, contracted to 9.7 billion sticks from 9.9 billion sticks in 2023. However, this contraction entirely impacted legal cigarettes, whose market share fell to 20 percent in 2024 from 24 percent the previous year.

Conversely, the beedi market share rose to 67 percent in the year, with sales increasing to 5.6 billion sticks from 6.4 billion sticks a year prior.

During the year, illicit cigarettes accounted for 12 percent of the market share, up from nine percent a year earlier. The gap between the legal and illicit cigarette market share has now narrowed to 8 percent, raising the possibility of illicit cigarettes overtaking legal sales in the coming years.

“The widening price gap between legal cigarettes and their illicit counterparts has contributed to a disproportionate growth in the illicit cigarette market. Meanwhile, the expansion of the under-regulated beedi market—driven by increasing price differentials between cigarettes and beedi—also continues to impact sales volumes, particularly within the lower end of our product spectrum,” CTC Chairman and Independent Non-Executive Director Suresh Kumar Shah told the company’s shareholders in its latest annual report.

Successive excise increases, including a 14 percent increase in January 2024 and an additional 3 percent VAT increase, further increased the price of legal cigarettes, exacerbating pressure on demand.

In addition to excessive taxation, weaker enforcement measures and the growing affordability gap between legal and illegal products are also contributing to the narrowing gap between legal and illicit cigarette markets.

CTC Managing Director & Chief Executive Officer Fariyha Subhani urged authorities to implement moderate and proportionate tax policies for the long-term sustainability of the legal cigarette industry, safeguard government revenue, and protect livelihoods.

As the single largest tax contributor to the government, CTC’s tax contribution amounted to Rs. 161.1 billion in 2024, approximately 6 percent of the government’s total tax revenue in 2024. The company continues to generate over 71,700 job opportunities across its value chain and injected over Rs. 1.4 billion into the rural economy through tobacco leaf purchases. (NF)