Susan Gordon, Business Report

Local cigarette retailer Carreras Limited is in a fight to reclaim its market from what highly placed sources say is a thriving underground trade for cigarettes controlled by bosses of organised crime.

Carreras, a listed company that is 51 per cent owned by British American Tobacco (BAT), has been running press advertisements warning consumers of counterfeit Craven A cigarettes on the market, a brand made by its sister operations in the region, and which it has exclusive licence to sell here.

The racketeers undersell Carreras by some $10,000 per case to retailers, Wednesday Business understands. On the weekend, Carreras also began to issue warnings about two other brands, Rothmans and Benson & Hedges over which it also has exclusive rights.

Yesterday, attempts at official comment from Carreras' managing director Michael Bernard failed, but well placed sources say company executives are keeping quiet for security reasons, saying the perpetrators are considered 'dangerous' people.

But it might also be because the issue, in at least one case, has already reached the courts.

"For the police work, investigations are being carried out right now," said the source. "The Organised Crime Investigative Division (OCID) conducted raids on wholesalers and the police have one person in court."

That person was not named, but Wednesday Business understands it is a wholesaler operating from Red Hills Road in Kingston.

Carreras is also fighting against an established 'grey market' where unauthorised sellers have been illegally retailing the Rothman and Benson and Hedges cigarette brands locally without trading rights from brand owner BAT.

"Some traders have already been served notice to cease and desist, and we will be aggressively pursuing others," said a Carreras notice that also warned the company would "take all necessary action to stop the unlawful sale" - a reference to the pursuit of criminal prosecution.

Carreras a few years ago, in a reorganisation of its operations under which it ceased manufacturing activities to concentrate solely on trading, opted to cease the distribution of Rothmans in Jamaica.

Black market operators are said to be bringing in the legitimate product from overseas and selling to fill the demand that apparently still exists.

"People can purchase the brands abroad for personal consumption, but cannot retail the brand as they would be violating the trademark laws," said an insider.

The company is also worried about the potential erosion of brand equity, pointing out that "the quality of the products is not known."

A source within Carreras, who requested anonymity for security reasons, said the illegal activities were detected last year.

The grey market operations, he said, have increased since Carreras ceased making cigarettes at its now shuttered plant in Twickenham Park, St. Catherine in November 2005, but was yet to impact revenues.

Carreras is a rich company, known for paying generous returns to shareholders in the form of dividends. At December 31, 2007, in its nine-month results, the company's reported revenues topped $6.5 billion, putting it well on track to overtake the $7 billion of sales made in its 2006 financial year. Net profits at December were more than $2.8 billion. The blue chip trader has a market value of $36 billion.

"It is still in the early stages so initial impact has not been significant at this point in time; but it has the potential to become so, if not stopped," said the source.

Carreras' notice about the counterfeit Craven A warns that those packets carry a 'Before 10/Jan/08' label and code number 77437.

"We know the best before date we put in the market," said the insider, who also told Wednesday Business that the company has special technology to detect counterfeit cigarettes.

Sales, he said, are prevalent in the Kingston metropolitan areas and in some of the tourist resorts such as Ocho Rios and Montego Bay.

"The public needs to know," said the spokesperson. "We are the only suppliers of Craven A and any other persons who distribute them are doing so illegally."

susan.gordon@gleanerjm.com