Illicit tobacco makes up one-third of market, research finds

Cigarettes — Retail NZ said the scale of the issue in Australia was a cautionary tale (Source: Unsplash)

By Harry Booth Jun 17, 2026

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A new report on the prevalence of illicit tobacco sales in New Zealand has found that it now accounts for a third of the entire market, a share that is growing.

FTI Consulting’s Illicit Tobacco in New Zealand report found that 33.5 per cent of all tobacco consumed in the country in 2025 was illicit, up from 27.2 per cent the previous year. This volume of sales, FTI said, accounts for $817 million in lost government revenue through excise taxes and GST.

The growing illicit tobacco market in New Zealand was first sparked by the 10 per cent tobacco excise tax increase, announced in 2010. The government now estimates excise duties and GST to account for around 70 per cent of the retail price of legally sold tobacco.

Responding to FTI’s figures, Retail NZ CEO Carolyn Young said the government needs to do more to combat the scale of the issue.

“While it is alarming that one in every three cigarettes smoked in New Zealand is now an illicit product, this, sadly, does not come as a surprise to us,” Young said.

“This report confirms what we are increasingly hearing from our members – that there are stores in our communities brazenly selling illicit tobacco products, but the authorities don’t currently have the tools and resources to put a stop to it.”

Retail NZ said that the situation in Australia is a “cautionary example” of what happens when the illicit tobacco problem grows too great to handle; it cited data from the Australian Bureau of Statistics that found 80 per cent of all nicotine products across the Tasman to be illegal, up from 12 per cent in 2017.

“We know the report will be challenged by some as it was commissioned by tobacco companies, but our advice is we ignore these findings at our peril,” Young added. “Australia’s government turned a blind eye to similar research, and now its own Bureau of Statistics has found that four in every five nicotine products consumed there is illegal. We must learn from their mistakes and take this problem seriously.

“It is clear the window for New Zealand to take action is rapidly closing. We must act decisively with all the tools at our disposal to have the best chance of success.”