BAT Podcast with AACS CEO: Vape Policy Imbalance Fuels Australia’s Billion-Dollar Illicit Market

Key Points

• Tax-driven black market: Since 2012, Australia’s tobacco excise has risen 400–500%, pushing legal cigarette prices to AUD 45–55 per pack while illicit products sell for AUD 7–15. Over 50% of tobacco consumption is now illegal.

• Vape access collapse: Out of 30,000 pharmacies, only 700 stock compliant nicotine vapes. Around 1.6 million adults now rely on illegal stores, where unregulated products are sold openly.

• Crime surge: The illicit nicotine trade—worth about AUD 10 billion—has fueled 255 attacks on retailers in 18 months, with organized crime recruiting minors for arson and theft.

• Policy contrast: New Zealand’s regulated vape model cut adult smoking by 39%, while Australia’s restrictive stance has revived smoking rates and empowered black-market networks.

• Industry call for reform: AACS urges four actions—halve tobacco excise, permit licensed vape retail, unify national enforcement, and place the Australian Federal Police in charge of crackdowns.

2Firsts，October 27, 2025 – In the latest episode of British American Tobacco’s (BAT) podcast The Smokeless Word, Kingsley Wheaton, BAT’s Chief Strategy and Transformation Officer, sat down in Brussels with Theo Foukkare, CEO of the Australian Association of Convenience Stores (AACS).

Based on the discussion, 2Firsts summarizes the key insights from the conversation, revealing how Australia’s high tobacco taxes and restrictive vaping policies have driven the country’s nicotine market into the hands of organized crime.

Policy Intentions vs. Reality: 400–500% Tax Hike, Half the Market Goes Illicit

According to Foukkare, Australia was once hailed as a global leader in tobacco control. However, since 2012, tobacco excise taxes have increased by 400%–500%, pushing the average retail price of a legal pack of cigarettes to AUD 45–55, while illicit products sell for as little as AUD 7–15.

This widening price gap has fueled explosive growth in the black market. Foukkare estimated that over 50% of tobacco consumed in Australia is now illicit, while the vaping market is almost entirely controlled by organized crime. Combined, the illegal nicotine trade is now worth about AUD 10 billion, exceeding the total value of the country’s five largest illegal drug markets.

He warned that cheaper illicit products are driving smoking rates back up for the first time in years — a trend also noted recently by the Australian Medical Association.

Vaping Regulation Breakdown: Legal Access Scarce, Illegal Sales in Plain Sight

Foukkare described Australia’s vaping framework as “a de facto ban.” In theory, adults can only access nicotine vapes in three ways:

• Prescription-only: For products over 20 mg/mL nicotine;
• Pharmacy sales: Under 20 mg/mL, theoretically available over the counter;
• Illicit purchase: Widely accessible from unregulated stores or online.

In reality, out of 30,000 pharmacies, only 700 stock compliant products — and these are flavorless and limited in choice. Doctors and pharmacists largely reject the system, while consumers turn to illegal sources.

Today, around 7.5% of Australian adults (1.5–1.6 million people) use vapes, most buying from stores linked to organized crime. Illegal vape products are openly displayed with bright signage, flavor menus, and catalogues — no longer “under the counter.”

Even in Canberra, where vaping fines can reach AUD 32,000, enforcement is virtually nonexistent.

Profits and Violence: 255 Attacks Shake Australia’s Retail Sector

The immense profits of the illicit nicotine market have emboldened organized crime groups. Over the past 18 months, Australia has seen 255 violent incidents targeting retail stores — including firebombings, Molotov cocktail attacks, and car-ram raids — spreading from Victoria across all states and territories.

Criminal groups have also recruited minors as young as 12–14 to steal vehicles and participate in smuggling or arson attacks.

Legitimate retailers are bearing the cost: an estimated AUD 2 billion in lost sales over four years, 30–40% revenue declines, rising insurance premiums, and staff traumatized by armed robberies.

A Stark Contrast: New Zealand’s Pragmatic Model vs. Australia’s Policy Stalemate

When asked about neighboring New Zealand, Foukkare noted that both countries share similar markets but follow opposite approaches.

New Zealand has adopted a regulated retail model for vaping, allowing compliant products to be sold under strict controls while limiting youth access. As a result, adult smoking rates have fallen by 39% in four years — across all age groups.

By contrast, Australia’s rigid policy remains driven by ideology rather than evidence. Foukkare criticized the federal health ministry for relying on a small circle of academic advisors and ignoring real-world outcomes from the UK, Sweden, and New Zealand.

Even as state leaders like the Premier of New South Wales call for tax reform and stronger enforcement, the federal government has yet to act.

Four Key Reforms: Rebalance Regulation and Restore Control

Foukkare outlined four urgent measures the government must take to reverse the crisis:

• Rollback Tobacco Excise: Halt future increases and cut current excise by about 50%, bringing prices back to 2018–2019 levels and narrowing the gap with illicit products.

• Establish a Regulated Vape Retail Model: Permit licensed retail sales with strict age verification, limited flavor ranges, closed-door display, and appropriate taxation.

• Implement a National Enforcement Framework: Replace fragmented state laws with federal standards modeled on South Australia’s success — licensing, warrantless search powers, landlord liability, and three-month closure orders for offenders.

• Federal Police Leadership: Assign the Australian Federal Police (AFP) as lead enforcement body, coordinating nationwide task forces from ports to storefronts.

South Australia has already seen results: 80 illegal stores closed in four months, with legal sales rebounding — proof, Foukkare said, that “enforcement works when it’s unified.”

He warned that without reform, Australia’s legal tobacco market could disappear within two years, leaving organized crime fully entrenched.