A European Union ban on menthol-flavored cigarettes and smoking tobacco is to take effect in Estonia from Wednesday, with the prohibition also applying to capsule cigarettes, as well as mentholated filters and cigarette papers, Baltic News Service reports.
Since the market share of menthol cigarettes in Estonia was largest in the three Baltic States, BNS reports, the move is quite significant and will lead to the shutting down of over 25 percent of the market, a tobacco lobbyist group says, and will drive sales underground.
"[Menthol] cigarettes account for close to 27 percent of the cigarette market, and can no longer be sold from Wednesday. The situation where every fourth cigarette disappears from the market significantly increases the black market risk," member of the board of the Estonian Tobacco Producers' Association Jaanus Pauts said.
The ban on menthol-flavored cigarettes arises from the 2014 European Tobacco Products Directive, which prohibited characterizing flavors*, but granted an extension until May 2020 to products whose market share is higher than three percent. The change is set to enter into force in all EU member states.
Data by information, data and measurement firm Nielsen from March shows that menthol-flavored and crushball cigarettes account for approximately 27.7 percent of all cigarettes sold in the local market, making the ban a challenge not just for the tobacco industry but also for the state insofar as it concerns combating smuggling and illicit trade, BNS reports.
Crushball, or capsule cigarettes, refer to brands which require physically popping a capsule contained within the filter, to release a menthol or other flavor. Major manufacturers to have produced such products in recent years include Marlboro.
"Our situation is worse compared with Latvia and Lithuania, as their market shares of menthol cigarettes are smaller at 17.8 percent and 20.6 percent respectively. That means that our risk of seeing the black market increase is highest," Pauts went on.
The state also seems set to lose a large amount of excise revenue, at a time when national budgets are already under severe strain due to the coronvirus pandemic and its economic fallout.
"Considering both the excise duty and VAT, at present figures the state is losing approximately €27 million in tax revenue. This figure was [also] significantly larger a few years ago," Pauts said.
"Past experience and black market data show that figures therein start increasing as soon as major changes occur in the legal market, such as a tax hike or a relative decrease in purchasing power. Hopefully, the Tax and Customs Board will be able to continue its good work in controlling the black market."
*Characterizing flavor means a clearly noticeable smell or taste other than that of tobacco, resulting from an additive or a combination of additives, including, but not limited to, fruit, spice, herbs, alcohol, candy, menthol or vanilla, and which is noticeable before or during the consumption of the tobacco product.
The prohibition of tobacco products with characterizing flavors does not preclude the use of individual additives outright, but it does oblige manufacturers to reduce the additive or the combination of additives to the extent that the additives no longer result in a characterizing flavor, according to BNS.
Editor: Andrew Whyte