Mon | Jan 18, 2021

Cigarette trader Carreras has a new rival – drug dealers

Published:Sunday | November 29, 2020 | 12:10 AM

Raoul Glynn, the new head of Carreras Limited, says cigarette traders are facing competition from drug dealers, who are finding that smuggling smokes is less risky for incarceration.

The trade in illicit or smuggled cigarettes is thriving despite initiatives by Carreras and the security forces over the years.

Now Glynn says Carreras may have to adjust its business model to incorporate “less risky” products like e-cigarettes in order to create opportunities for new revenue.

The biggest threat to Carreras’ market lead are dealers who sneak imported cigarettes past Customs without paying fees or duties. Those products then enter the market at lower prices than Carreras’ products, which are heavily regulated and taxed.

And now, according to Glynn, the band of smugglers is growing.

“Drug dealers are leaving the hard drug trade to go into illicit cigarettes,” he said at the meeting held at The Jamaica Pegasus hotel in New Kingston. “They get a slap on the wrist, but get the same profits as hard drugs.”

Glynn estimates the value of the illicit trade at $2.5 billion. Carreras’s annual sales is now in the range of $14 billion.

Over the years, to contain what the company has labelled its “number one risk” – that is, the evading of local taxes and smuggled illicit cigarettes or counterfeits – Carreras has worked collaboratively in cross-industry and multi-sector initiatives to halt smuggling, sought to build brand equity for its low-price Pall Mall legal product, engaged in price campaigns and consumer engagement activities.

At year ending March 2020, the distributor of Pall Mall, Craven A and Matterhorn brands of cigarette grew its annual revenue from $12.9 billion to $14 billion.

However, its sales have been constrained under the pandemic, coming in at $6.15 billion at half year ending September, down from $6.64 billion in the same period in 2019. Half-year profit also dipped from $1.74 billion to $1.56 billion.

Carreras, which is majority owned by British American Tobacco Plc, once made cigarettes in Jamaica, but now it imports and markets products made by other BAT-owned operations.

The CEO in time for questions defended the manufacturing of cigarettes in cheaper destinations such as Trinidad, saying it increases profitability and sustains the dividend that Carreras pays consistently.

Glynn, a Trinidadian with a long relationship with BAT, replaced Marcus Steele as head of Carreras on February 1 of this year.