Shops are flourishing thanks to huge profits despite significant reforms flagged a year ago, observers say
O ver the past four years, David has made complaints to his local council, police, the Australian Taxation Office and federal and state politicians about the illicit tobacco and vape store that opened across the road from his home. R&M Wholesale
With a “cash only” sign, vapes visible on the shelves through the windows, and people frequently leaving the store carrying illicit tobacco packets in plain sight, David says even the local police have acknowledged that illegal trade is occurring.
He says it is one of the busiest stores in his small town in the Gippsland region of Victoria, east of Melbourne. And that angers him, he says, “because I pay my taxes every year”.
“Yet this store gets around paying tax, not to mention all the other crap around [vapes and tobacco] being addictive. But the police say there’s nothing they can do, that it’s a federal matter, and council says it’s a police matter, and no matter who I speak to nothing ever comes of it.”
David does not want to share his full name because of the spate of firebombing attacks linked with the tobacco turf wars, and because “there’s a lot of people who would be pissed off with me locally for fighting this, because this is a very poor area and they rely on these cheap stores for their addictions”.
He believes a lack of enforcement action, and high profit, are the key reasons vape stores continue to open in the face of significant reforms that were first flagged one year ago in November 2022.
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Next year, vape stores will have to close, or sell something else. Importation bans are being implemented early in 2024, along with legislation to prevent domestic manufacture, advertisement, supply and sale of non-therapeutic and disposable single-use vapes.
Despite this, thousands of the stores have opened throughout Australia since the reforms were first announced – many of them opposite schools. Community opposition does not deter them.
The sheer profitability of the stores mean any fines for selling to minors, or for selling non-nicotine vapes that in fact contain nicotine, amounts to a slap on the wrist, David says.
“The game is nearly up for them, but in the meantime they’ll still make a profit and will just be hiding all their assets and money. And when they do have to close, they’ll have their money and be gone.”
According to media reports, in July 2022 the owner of several vape shops in Queensland faced court after illicit tobacco and thousands of nicotine vapes were seized in a police raid on one of his stores. The case did not appear to stop his stores from continuing to operate and sell illegal items.
The owner was back in court in March 2023, when the supreme court of New South Wales found there were “reasonable grounds” for the NSW Crime Commission’s suspicion that he had “engaged in serious crime-related activity” related to the same stores.
The judgment describes how earlier that month, the owner was found with $530,000 cash in his car in NSW. The NSW Crime Commission was granted an order seizing the cash, and funds in bank accounts linked to two of his vape stores.
Between 1 April 2022 and 30 September 2023, NSW Health seized more than 485,000 e-cigarettes and e-liquids worth an estimated street value of more than $15.5m.
Asked why she thought stores were continuing to open and flourish despite incoming reforms, the NSW chief health officer, Dr Kerry Chant, told Guardian Australia in November that “it clearly has some profitability”.
While she believes the state’s enforcement efforts are having an impact, she acknowledges that the implementation of federal reforms in 2024 are sorely needed to make a real dent in the trade.
“Supply is so widespread … our compliance officers can only do a component of the work.”
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Under the incoming reforms, therapeutic vapes to help with smoking cessation will remain available to patients, and these scripts can be filled through pharmacies.
These pharmacy-supplied products will need to meet stronger quality standards, will come in limited flavours, will be in pharmaceutical packaging, and any importers will need to hold licences and permits from the Office of Drug Control.
Richard Lee is the CEO of Liber Pharmaceuticals, which supplies retail pharmacy networks with nicotine vaping products, and he believes the government’s reforms will dent the illicit trade.
“With limited enforcement powers to date, the huge margins available from the illicit sale of disposable vapes have seen a black market explode with little fear of punishment and nominal fines to the few who have been prosecuted,” Lee says.
“As such, we witnessed, quite literally, hundreds of vape stores popping up, in a cookie-cutter fashion, in both metro and rural areas. These stores followed the same business model, carried substantially the same stock, and all in flagrant disregard of the law.”
The recent spate of tobacconists set on fire in Victoria and Queensland has demonstrated how organised crime has “now embedded itself in the illicit vaping supply chain, alongside illegal tobacco”, he says.
“The government’s enforcement announcements are timely … and seeks to break the illicit supply chains that have become embedded on Australia’s high streets in recent times,” he says.
The CEO of the Master Grocers Association, David Inall, whose organisation represents independent retailers, says the MGA “will ensure that the new laws are well-understood as all retailers must comply”.
“Any non-compliance should be dealt with by the relevant law enforcement authorities,” he says.
The CEO of the Public Health Association of Australia, Adj Prof Terry Slevin, has “no sympathy” for the thousands of small retailers who will have to close their stores or cull their vape stock once the reforms come in.
He says many of the stores have been getting around current restrictions by selling “non-nicotine” vapes that actually contain significant quantities of the addictive substance, and also knowingly sell them to children.
Slevin believes the tobacco and vaping industries are subsidising some of the retailers, “in the hope of creating pressure on government, on the basis that the more stores that are selling the products and relying on them for the viability of their business, the more they can argue these reforms will be anti small business”.
“I think many of these stores are part of a political strategy. They also wouldn’t open unless they had some kind of assurance from suppliers that these products will be popular and profitable. But I have no sympathy for any business taking advice from the tobacco or vaping industries.”
He says if these businesses are forced to close due to their profit being contingent on vape sales, then “that’s just the price they have to pay”.
“A good business operator will understand risk and manage that risk, and these reforms have been on the table pretty much since this government came into effect,” he says.
“If you’re opening a vape store in 2023 expecting to profit for years to come from the sale of vapes, despite these clear government reforms, then that’s a bet I hope you lose.”
Disposable Vapes In Bulk Do you know more? melissa.davey@theguardian.com