Despite a steady decline in the UK’s legal cigarette market of which Imperial Tobacco has a 45% share, the company continues to report increases in profits, due to a rise in its international operations. While some of these sales will be legal, the company’s commercial success in recent years has been partially dependent on growth in smuggling and the export of UK-made cigarettes that will be smuggled back into the UK black market. Imperial exports around 20 billion cigarettes annually but many of these go to countries in which there is little or no market for their products – except smugglers, who smuggle them back into Britain. In the late 1990’s it was estimated that over half of Imperial’s exports returned this way. In 2000, Imperial Tobacco’s international business reported a record operating profit, up 23% to £231m from £188m in 1999. Much of this international growth was represented by products actually sold in the UK illegally.

According to a 1999 World Customs Report, the top two brands being smuggled across Europe were Regal and Superkings, both Imperial tobacco brands. In 2004-05 Superkings accounted for 22% of the genuine UK brands seized by Customs officers. The report of an investigation into tobacco smuggling by the House of Commons Public Accounts Committee was highly critical of Imperial’s involvement in the illicit trade and called on the company to co-operate more fully with Customs and Excise’s strategy for combating tobacco smuggling. Following this exposure, Imperial took steps to reduce the amount of its product being smuggled and now Gallaher brands make up the largest proportion of genuine product that is being smuggled. In 2004-05, two Gallaher brands – Sovereign and Dorchester accounted for 25% and 16% respectively of seized cigarettes.