Latin America’s $2.4 billion illegal alcohol market accounted for more than a quarter of the region’s total alcohol sales in 2012, costing the legal trade $736 million.
According to a special report by Euromonitor, the trade in illegal alcohol in Colombia, Ecuador, El Salvador, Honduras, Panama and Peru accounted for 25.5% of the region’s total market by volume in 2012, 14.1% by value, representing a loss of US$736 million dollars to the legal trade.
Retail prices of illegal products were found on average to be 30.3% lower than their legal counterparts, with the report noting that many consumers were unaware as to whether the product they were purchasing was legal.
Euromonitor analysts said: “As counterfeit refills have very similar pricing to legal brands, many consumers do not realize that the product they are purchasing is not original. Some formal channels such as wholesalers, retailers and on premise outlets sell illegal alcoholic beverages alongside legal products, further misleading consumers.
“However, there has been increased consumer awareness thanks to campaign efforts and local news about illegal alcohol.”
Uncontrolled residual ethanol volumes, price gaps and weak law enforcement were cited as key drivers of the illegal market with government regulations concerning legal alcohol sales and consumption also blamed for indirectly creating more opportunities for the illegal market.
Peru was found to have the largest illegal alcohol market with a 30.8% share of the total market in volume and 15.9% in value terms, with its growth blamed on a lack of control over the trading and use of ethanol.
Ecuador followed with its illegal alcohol trade holding a 28.6% share of the country’s total market in volume and 22.2% in value.
Report analysts said recent tax increases on imported alcoholic beverages had caused the sale of legal imports to fall giving rise to the illegal sale of alcohol.
Colombia and El Salvador came a close third and fourth each holding a 23.6% and 23.5% share of the total market by volume and 12.1% and 15.5% by value respectively.
In Honduras the illegal alcohol market accounted for 13.1% of the total market in volume and 3.6% in value, with the report noting that the country’s government had “no clear plan to reduce or control the size of the illegal market and made very little effort to do so in 2012”.
Panama was found to have the smallest illegal alcohol market which accounted for 2.4% of the total market in volume and 2.8% in value in 2012.
The report said programs implemented by customs in Panama had helped increase the seizure of illegal alcohol, while its government was also taking measures to regulate the sale of ethanol to prevent the production of illegal alcohol in the country.