Implementing a ban on menthol flavoring in cigarettes would set up a massive black market with illegal profits, which may easily constitute billions of dollars annually, concluded the latest independent economic study funded by Lorillard, Inc. The report will be presented to the Tobacco products Scientific Advisory Committee during the next meeting.
After investigating the Canadian and NYS cases, Compass Lexecon, an economic consulting company based in Chicago, found out that prohibiting menthol flavoring would not result in any significant decline in the number of smokers. The company concluded that a huge black market would be created instantly to occupy the place of legal companies by offering smokers a relatively low-priced supply of illegal menthol cigarettes, smuggled into the country.
“The evidence shows that a total ban on menthol cigarettes would not significantly reduce average cigarette smoking and could result in a black market rise where sales of contraband cigarettes could account for a major part of actual menthol sales,” admitted Fredrick Flyer, Compass Lexecon’s senior vice president.” In addition, there may be formidable adverse consequences such as a dramatic growth in organized crime and easier youth access to tobacco products.
Illegal sales would be even higher in case black market establishes lower prices for their merchandize, according to the study.
Overall, the study discovered that menthol cigarettes ban would lead to:
- An emergence of black market.
- A growth of organized crime syndicates activity.
- An underground market for menthol-flavored cigarettes, which could reach 70 percent of the present market and account for 85 percent of the present menthol sales profits. Currently, sales of menthol cigarettes comprise around $26.2 billion.
- No significant change in cigarette consumption patterns, thus, there would almost no benefit public health.
“The study came to the conclusion that a ban on menthol flavoring in cigarettes cannot be justified by economic or public health benefits,” stated Ronald S. Milstein, Senior Vice President of Lorillard.
Compass Lexecon examined black markets in New York State and Canada, which grew dramatically after cigarettes prices went up due to tax increases. In Canada, illicit sales have equaled nearly 50 percent of overall cigarette sales in several provinces. After examining these cases and other available data, the authors deduced that a small part of menthol smokers would opt to non-menthol cigarettes or give up, but that the major part would turn to black market menthol cigarettes.
About Lorillard, Inc.
Lorillard, Inc. is the third-biggest cigarette maker across the United States. The company was founded in 1760 and currently is the oldest tobacco company in the country. The company is based in Greensboro, North Carolina, and is famous for its flagship brand, Newport, the best-selling cigarette brand in menthol category, and second most popular brand in the U.S. Lorillard also markets, Kent, Maverick, Old Gold and True brands.
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