Illicit trade is a universal threat that grows in scope and magnitude undermining good governance, the rule of law and citizens’ trust in government. Illicit trade not only has a corrosive impact on the sales and profits of affected firms and on the economy in general, but also poses critical threats to social welfare, and public safety. In addition, in some high-risk sectors, such as that of illicit pharmaceuticals, food or alcohol, illicit trade poses particularly severe health and safety threats for citizens.

The market for alcohol products is an attractive target for illicit trade and organised crime as the market is large, as are the profits that can be made from the illicit trade, in some cases with little investment. The ease with which consumers can be deceived into buying illicit products, and the low risk of detection for all forms of illicit trade, create suitable conditions for eluding law enforcement.

Illicit trade, which includes smuggled and counterfeit products as well as a number of other forms of unlawful trade, is a significant threat to society, businesses and consumers, undermining good governance, the rule of law and citizens’ trust in government and legal businesses and trade. It has a negative impact on the sales and profits of legitimate firms and on the economy in general, while posing major health and safety threats to consumers.

This chapter sets the scene by presenting the global alcohol industry: its main players, its international trade flows as well as its specificities in terms of marketing and distribution as in some countries the state plays an important regulatory role. It also clarifies what the illicit alcohol refers to and presents the specificities of this market

This chapter analyses the illicit alcohol market in depth. In addition to provide general information on the scale and magnitude of the market, it identifies the main drivers of this market, whose profitability is particularly high due to the specific taxation (excise tax) of alcohol. It also analyses the role of organised crime in this market as well as elements related to the penalties incurred. Finally, it addresses a specific aspect of the illicit alcohol market by focusing on counterfeit alcohol.

This chapter deals with the impacts of illicit trade in alcohol and shows that it can affect economies in a number of ways, including through effects on consumer health and government revenues, as well as impacts on legitimate producers and on efforts to pursue sustainable development goals, which are compromised due to the role of organised crime in the market.

This chapter illustrates how governments, businesses and civil society have responded to the challenges posed by illicit alcohol trade in various ways, some of which are discussed in the section on the effects of the pandemic on the markets for illicit alcohol. There is also a summary of some other key actions taken at the governmental and intergovernmental levels, and by other key players.

The analysis summarised in this report highlights that the market for illicit alcohol is a large one and attractive to illicit traders for at least three reasons.

The recommendations cover actions that governments, industry and the community can take (IARD, 2018).