Ukraine’s Illegal Cigarette Market Reaches Two-Year High at 21.6%
Illegal cigarettes accounted for 21.6% of Ukraine’s market in July 2026, the highest share in two years. Kantar Ukraine estimates the resulting annual tax loss at UAH 36.4 billion, with duty-free and export-labelled products driving the latest increase.
Illicit share rises to 21.6%
Illegal tobacco products accounted for 21.6% of Ukraine’s cigarette market in July 2026, according to research by Kantar Ukraine. The figure was the highest recorded in the past two years and approached the historical peak registered in October 2023, Focus reported. The illicit share had risen from 17.6% in February to 19.8% in April before reaching the July level.
Kantar estimates that the current scale of illegal trade could deprive Ukraine’s state budget of UAH 36.4 billion in taxes annually. The estimate is the highest in the recent survey periods. For legitimate manufacturers, distributors and retailers, the expansion also means stronger competition from products sold without the full tax burden carried by the regulated market.
Duty-free and export-labelled cigarettes drive growth
The latest increase was led not by conventional counterfeits but by cigarettes marked for duty-free sale or export and subsequently sold illegally inside Ukraine. This category expanded from 7.8% of the market in April to 10.9% in July. Meanwhile, the share of counterfeit products, including packs carrying fake excise stamps, fell from 11.2% to 9.1%.
According to packaging information cited by 24 Channel, 57% of the cigarettes in the duty-free or export-labelled category were produced by Vynnyky Tobacco Factory, while 41% were attributed to Marshall Finest Tobacco. Brands frequently identified in this segment included Compliment, Marshall, Manchester, Urta, Lifa and Brut. Packaging data do not by themselves establish responsibility for how products entered illegal retail channels.
Counterfeit cigarettes produced locally with fake excise stamps represented 37% of all counterfeit products, 24 Channel reported. Based on labels found on the packs, the largest portion in this group was associated with Marshall Finest Tobacco, also identified as United Tobacco or VK Tobacco FZE.
Seven regions account for most illegal sales
The illicit market is heavily concentrated geographically. Seven regions accounted for 68% of illegal tobacco products, according to PravdaTutNews and Focus. Dnipropetrovsk region had the largest share of the national illicit segment at 18%, followed by Kharkiv at 12% and Odesa at 11%. Kyiv city and Kyiv region together represented 8%, Lviv 7%, and Kirovohrad and Khmelnytskyi 6% each.
About two-thirds of illegal tobacco products were sold through ordinary kiosks and shops. This indicates that the trade is embedded in mainstream retail channels rather than being confined to informal or hidden points of sale, increasing enforcement challenges and exposing compliant retailers to direct price competition.
Digital excise timetable under debate
The renewed growth follows a gradual decline in the illicit share during 2024–2025. Parliament’s finance, tax and customs committee chairman, Danylo Hetmantsev, contrasted the July figure with the 12.6% shadow-market share recorded in 2024 and argued that higher budget losses were the central measure of enforcement performance.
Ukraine plans to introduce an electronic excise system for alcohol and cigarettes, but business associations are seeking a postponement. They have urged parliament to consider and approve bill No. 15532, which would move the launch to July 1, 2027. Industry representatives say the additional time is needed to prepare for the new system. The effectiveness of that transition will matter for tax collection, product traceability and the competitive position of companies operating legally.