Atlantic Canada looks to curb fast-growing contraband tobacco market
Atlantic Canada is a fast-growing market for contraband tobacco—and provincial government, law enforcement, the Convenience Industry Council of Canada (CICC) and the private sector are beginning to band together in an effort to curb it.
“The illegal market has become significant and just so we’re clear, it’s not only independents that are having the conversation with us – even the corporates are saying this has become a 911 situation for them in Atlantic Canada,” says Mike Hammoud, VP, Atlantic Canada at the CICC. “C-stores here haven’t seen reductions in their tobacco sales like this, ever.”
It's difficult quantifying the size of a contraband market as a percentage of total product sales. But according to best estimates, Hammoud says “contraband rates in Nova Scotia and New Brunswick are in the high 30s to low 40s.”
And according to an Ernst and Young study in 2023 commissioned by the CICC, 44% of cigarettes sold in Newfoundland are contraband, rivaling rates in the two other rampant markets of the country, B.C. and Ontario. “That is alarming, given it’s an island and has historically had low contraband rates,” adds Hammoud.
Before becoming integrated into the CICC in 2022, Hammoud spent almost 14 years as president of the Atlantic Convenience Stores Association (ACSA), which had been sounding the alarm on contraband amid the rising cost of a pack of cigarettes due to increased government taxation.
“Since I’ve been involved in the file, this is the first time I’ve seen governments actually beginning to believe that this is a problem,” Hammoud observes. “That’s because they are seeing the impact on their bottom lines now consistently and pretty dramatically.”
This was brought to the fore at the first ever Atlantic Forum on Contraband Tobacco held on April 16 in Moncton, which attracted an audience of about 500-strong. The forum featured several speakers and panelists from the public and private sector, including John Lunney, deputy chief, inspections and enforcement, justice and public safety for New Brunswick; Sgt. Sergio Miranda, contraband enforcement division, Sûreté du Québec; Danny Fournier, manager, illicit trade prevention at Rothmans, Benson & Hedges (RBH) Canada; Sgt. Julie Goulet, Crime Stoppers coordinator, community engagement unit, New Brunswick division of the RCMP; and Hammoud.
New Brunswick Public Safety Minister Kris Austin gave opening remarks. He says in the one-year period from April 1, 2023 to March 31, 2024, the province seized more than three billion contraband cigarettes destined for New Brunswick, as well as two million cigarettes in partnership with Quebec law enforcement.
That would have amounted to $880,000 in lost provincial taxes and $540,000 in lost federal taxes.
‘New Brunswick is the gateway’
Tobacco remains a top-selling category for c-stores. According to the CICC, collectively it delivers $3.9 billion in annual sales for the channel nationwide—down from $4.2 billion in 2019—for about 7% of total c-store sales and 45% of in-store sales.
On a per store basis, tobacco brings in an estimated $175,000 annually.
When it comes to inhibiting the flow of contraband into Atlantic Canada, law enforcement experts say efforts should focus on New Brunswick, given you have to travel through it to reach Novia Scotia and P.E.I.
“What I says during the conference is that it’s a Game of Thrones thing—if New Brunswick falls, the others will fall with it. The province is really the gatekeeper to the rest of Atlantic Canada,” notes RBH Canada’s Danny Fournier, who is encouraged by the actions recently taken by government so far. “They crack down on every intel we tell them from our sales force in a very timely fashion.”
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While the premier of New Brunswick Blaine Higgs disbanded the province’s Contraband Enforcement Unit in 2019, which the Liberals had formed in 2015, his office has expanded the Department of Justice and Public Safety’s Safer Communities and Neighbourhoods (SCAN) unit from six officers to 41 during the 2022-23 year.
The SCAN unit closed 23 retail outlets that were selling contraband tobacco and/or cannabis during the 2023-24 fiscal year and has closed seven so far this fiscal year (starting April 1), confirms Allan Dearing, a Department of Justice and Public Safety comms officer.
For its part, New Brunswick Crime Stoppers in collaboration with RBH and Imperial Tobacco Canada plans to launch an illegal tobacco awareness campaign, including around the fact that contraband sales fund organized crime.
New Brunswick Crime Stoppers coordinator Sgt. Goulet says it is considering for the campaign an awareness video posted to its social media channels which include Facebook and Instagram, a media buy of digital billboards in municipalities across the province, as well as brochures and other printed materials.
“There is also the possibility of doing a contraband tobacco awareness presentation while promoting the Crime Stoppers program,” Sgt. Goulet told Convenience Store News Canada (CSNC). “The presentation will be done wherever there is an opportunity – even for law enforcement. Law enforcement officers might not have the same knowledge or expertise on this topic.”
In B.C., Crime Stoppers has partnered with RBH on a “Double the Reward” campaign for tips that leads to seizure of contraband or an arrest. Says Fournier: “We have a campaign going on right now where if you would have gotten a $1,000 reward for a qualifying tip, you’re going to instead get $2,000.”
