The illicit trade in spirits increased by 9.7% in Latin America during the pandemic and it is estimated that by the end of 2020, a volume equivalent to 750 million one-liter bottles will have been marketed outside the law.
The figures belong to the first study on the illicit trade in alcoholic spirits in Latin America and the Caribbean after the impact of covid-19, which has been carried out by Euromonitor International, a leader in strategic market research.
The study shows that the restrictions on access to formal sales channels imposed by governments to try to stop the pandemic were taken advantage of by those who produce and sell illegal beverages.
They also took advantage of the proliferation of new distribution channels due to the pandemic, such as small businesses, e-commerce and delivery applications.
IN ALL COUNTRIES THE TRADE OF ILLICIT BEVERAGES INCREASES
All the countries evaluated – Panama, Mexico, Colombia, Brazil, Peru and the Dominican Republic – showed consistent growth in illicit activity and, according to Euromonitor International, if there is a slow economic recovery in the region, the chances that these criminal activities will proliferate will increase. .
Colombia is the country with the highest percentage of illicit activity growth with 10.6% compared to 2019 levels, followed by Brazil (+ 10.1%), Mexico (+9.8%), Dominican Republic (+ 9 , 4%), Peru (+ 6.5%) and Panama (+ 6.4%).
“With this study we seek to contribute towards a greater understanding of the problem of illicit trade, specifically in alcoholic beverages, due to the negative impact it has been shown to have,” said Lilian Krohn, Euromonitor International Consultant.
The study identified the main drivers of illicit activity in Latin America and the Caribbean, ranging from the closure of non-essential businesses as a preventive measure for COVID-19 to instability due to income inequality and loss of employment due to the pandemic. .
THE PANDEMIC ALSO HITS THIS MARKET
The latter affected both purchasing power and purchasing aspirations and pushed consumers to seek lower-cost products.
For suppliers of illicit alcohol, the opportunity has been opened to deceive consumers who seek to maintain their lifestyle at a lower cost with products that look like the originals.
A reduced ability of the authorities to monitor the application of the law in the industry and the increase in the importation of raw materials such as ethanol fueled informal practices throughout the supply chain.
The criminal gangs took advantage to supply the counterfeiting chains.
Free zones played a key role in smuggling access, with gray areas and unclear rules exploited by criminal activities.
THE KEY IS IN COOPERATION
Historically, studies have shown that illicit sales have a negative impact on society, governments and businesses, and the study considers cooperation between producers, merchants, digital platforms and government to be key to counteract the problem.
One of the first necessary measures is to ensure that the consumer is informed of the health risks associated with the consumption of alternative products, as well as the strategies adopted by suppliers of illicit spirits to deceive them.
New sales channels such as electronic commerce represent an opportunity and a challenge and that is why control mechanisms must be strengthened to prevent the spread of the illicit market in this area as well.
It is necessary to establish permanent monitoring to guarantee that the products are legal, that they have paid the corresponding taxes and passed the health controls established by the country.
At the same time, work should be done in coordination between industry, governments and online companies to report illegal vendors and places of sale.
Public servants must have permanent access to training that helps them effectively and constantly identify new criminal strategies and thus stop the expansion of the illicit market.
The study model was based on predetermined factors including projected macroeconomic data in 2020 together with historical information from studies related to illicit alcohol and the impact generated by specific measures around covid-19.
The base of the projection assumes a larger wave of covid-19 between the first quarter and the third quarter of 2020, followed by softer and better controlled waves in the second half of the year.