South Africa: Trade in illicit alcohol reaches R20.5 bln, report finds
According to a new report - commissioned by the South African alcohol industry - the local trade in illicit alcohol has now reached R20.5 billion, and one in every 4.54 litres of alcohol sold is illegal, News24 reported on May 28.
Illicit alcohol includes counterfeit products, where empty bottles of legitimate brands are refilled with cheaper alcohol, as well as unbranded alcohol, smuggled products and illegal homebrewed alcohol which are sold without paying tax.
South Africas illicit alcohol market now makes up 12% of the R177 billion industry and the countrys sales bans during the pandemic have fuelled the trade, says market research firm Euromonitor.
Its report found that the value of South Africas illicit alcohol market has been growing at a 17% compound annual growth rate (CAGR) since 2017.
The report was commissioned by the South African Liquor Brand Owners' Association (SALBA), the Beer Association of South Africa (BASA) and Vinpro.
South Africas liquor industry has lamented the losses it suffered during a series of bans imposed by government over the past year to keep hospital beds clear of alcohol-related trauma cases and available for Covid-19 patients.
Smuggling was the largest form of illicit activity, growing by 13.4% (CAGR) in volume since 2017.
"Smuggled finished products are found in both formal as well as informal markets and tend to mainly include spirits. Smuggling is highly profitable compared to other categories due to ease of access and limited inputs required compared to producing counterfeit alcohol," said the report.
The research firm found that the spike in counterfeiting was driven by cheap raw materials and ease of access to ingredients such as ethanol.
Consumers were also willing to buy illicit alcohol at prices three to four times higher than normal but those who couldnt afford the steep prices experimented with home brews, which were lethal in some cases.
"Liquor laws and regulations in South Africa largely aim to control licit alcohol manufacturers and suppliers. Industry sources believe that the country has relatively sufficient regulations for the legal market, but minimal punitive measures and lack of enforcement encourages illicit activity," the report found.
The methodology of Euromonitors research included interviews with industry stakeholders such as supply chain managers and fieldwork in nine provinces.
"The report confirmed a clear correlation between the sales ban and the increase in the demand for illicit alcohol. The tragic indirect consequence of this has been the rise in illicit home brew consumption-related deaths and an increase in criminal activities, which are now firmly entrenched," Beer Association CEO Patricia Pillay said.
E-malt.com, the global information source for the brewing and malting industry professionals. The bi-weekly E-malt.com Newsletters feature latest industry news, statistics in graphs and tables, world barley and malt prices, and other relevant information. Click here to get full access to E-malt.com. If you are a Castle Malting client, you can get free access to E-malt.com website and publications. Contact us for more information at email@example.com .