The cartel and the corner shop: how crime syndicates took over NZ’s illicit cigarette trade

Sunday, 21 December 2025

Illicit cigarettes are now as at home in the Kiwi corner shop as a dollar bag of lollies as some dairy owners succumb to a burgeoning black market supplied by overseas gangs. Jonathan Killick went “undercover” in search of a dodgy durry.

It’s a “significant black market”, says the Customs Minister, and in Papakura, it’s an open secret. Young people, pensioners, and blue-collar workers alike filter out of superettes clutching cartons of cigarettes on which it seems unlikely proper taxes have been paid.

The Chinese cigarette brand Double Happiness isn't a new arrival on these shores - but the brazen scale of their import could be part of an estimated $600 million a year tax dodge.

“Give me one of the cheap packs” I say as I enter one convenience store in the south Auckland suburb. There’s no milk or bread for sale here, but the shopkeeper pulls a carton from underneath the counter.

“They’re all cheap,” she says, and in my hands is proof that the nine tonnes of illicit cigarettes seized by Customs at the border this year is just the tip of the dart.

One concerned shopkeeper in Papakura tells the Sunday Star-Times that, at first, 20-cigarette packets of Double Happiness were being sold for $20, but “widespread competition” has driven that down to $15 a carton. The tax alone on a single pack ought to be $29.26 and the packs carry no compulsory health warnings.

Customs and Associate Health Minister Casey Costello says this black market is a “blind spot” in the health response to nicotine and tobacco addiction.

And Nigel Barnes, the Chief Customs Officer for fraud and prohibition, says that tobacco smuggling in New Zealand has become “more organised, large-scale and sophisticated”.

“Organised crime groups are increasingly adding tobacco to drug and money-laundering operations due to high prices and strong demand in New Zealand,” Barnes says.

Health sources told the Star-Times they believe we could be at the early stages of the problems seen in Australia, where gangs have fought openly for control of corner shops, and over 200 fire-bombing incidents have been reported.

Last month, NZ Customs say they arrested a 36-year-old Chinese national working as an accountant, and a 43-year-old Malaysian man after raiding five storage facilities in Auckland, seizing 1.5 million cigarettes and half a million in cash.

When the Star-Times returned to the shop, in the heart of the town’s shopping area, to confront them about their continued sale of dodgy durries, the attendant made a video call to owner Abdallah Feehan. He said he couldn’t talk, because he was “in a meeting”.

“Just leave me your number and I will give you a call,” he said. He hadn’t got back to us by deadline - leaving our lead stubbed out while the issue continues to smoulder.

Sucked into selling

The Star-Times was asked to investigate the issue by a dairy owner who has been shocked by just how quickly the illicit cigarette trade has taken over his town centre.

For the shopkeeper, the tipping point was seeing youths as young as 14 selling cartons from their bicycles outside his shop.

He says he confronted a young boy and was told he had been paid $50 to sell large cartons containing 200 cigarettes from a bag slung across his handle bars.

“I said to the boy, ‘this is just sad’. And he said ‘it’s better than burglary’.”

And the dairy owner, whom we have agreed not to name, says it's having an impact on the local economy with shops like his, who refuse to sell illicit cigarettes, losing patronage.

He says his own legitimate cigarette sales have this year dropped from $8,000 a week to $800 a week.

“Customers who buy cigarettes buy lollies too. It pays the rent - and if selling these [illicit] cigarettes isn’t wrong, then everybody should be allowed to do it.”

When the Star-Times sought information on which agency was responsible for enforcement, the answers were hazy.

Police says Health NZ are the lead agency when it comes to monitoring sales, while a spokesperson for Health says the agency refers cases of illicit cigarettes to Customs, because it is in charge of importation.

One retailer the Star-Times confronted for allegedly selling illicit cigarettes said they had made numerous complaints before ultimately succumbing to the pressure to sell.

“Nobody does anything,” they say. “We just tried a few packets because all our customers were leaving. We have rent to pay and we're losing everything.”

“Everybody comes here and says they want those smokes, and when we don’t give it to them, they start swearing at us. [They say] ‘I will come and smash your face,’ that sort of thing.”

Meanwhile, the stores that are selling them are “busier than a train station” right through to 9pm, shopkeepers claim.

“There’s more people buying them than going into Farmers [department store].

“I told the [big] tobacco reps that if the Chinese cigarettes are here for another year, your jobs are gone,” a retailer says.

The large established brands are indeed perturbed by the burgeoning black market.

A spokesperson for British American Tobacco NZ, George Brougham, says a report it commissioned showed that as many as one in four cigarettes smoked in the country comes from illicit sources.

“A survey of empty discarded cigarette packs collected from across Auckland this year found that nearly half of the packs collected were not legal duty paid,” he says.

The emergence of a black market

Costello says the emergence of a black market was inevitable, and a direct consequence of previous government policy.

“I live in South Auckland, and very early on I was under considerable attack and scrutiny when I said there was a significant black market,” she tells the Star-Times. “I was pooh-poohed that I was completely off the mark.”

She’s referring to a public stoush in the media when the coalition government scrapped Labour’s planned legislation to reduce the number of retailers who could sell cigarettes to 600 shops.

In Costello’s view, limiting the availability of supply only drives the trade underground. Likewise, she says an ever increasing excise tax has “tipped over a threshold” and created conditions for a profitable black market.

“I think we've topped the market that will be deterred by price. Now we've got those older long-term addicted smokers who are willing to go without food, without Christmas presents for the kids in order to supply that habit.”

But public health professor Janet Hoek of Otago University continues to be vocal in her criticism of Costello, particularly the suggestion the demand could be curbed with products like oral pouches.

“We know what would have reduced the number of people who smoke: removing nicotine from cigarettes so smoking was no longer addictive,” Hoek tells the Star-Times.

“I'm not aware of anyone suggesting that we should increase tobacco excise taxes beyond the annual CPI adjustment, so Ms Costello's argument seems to be a straw person.”

Says Costello: “There has to be some sensible conversations in this space and we've had lots of noise and narrative that isn't helpful to the big picture, which is trying to get people to stop smoking.”

“This is why I've been focused on the reduced harm pathway, providing products that allow people to transition away from cigarettes - price isn't the only [lever] we have.”

She says she wants to introduce a licensing regime for tobacco products, similar to alcohol, which would create tougher penalties for breaking the rules. But that’s easier said than done, and she is awaiting advice from officials.

“Councils that I've spoken to aren't really interested in trying to take on another compliance regulatory regime … It's definitely not something that police need to be bogged down with. I don't think Health [NZ] is the right place. So where does this sit?”

But the risk, says Costello, is becoming like Australia where gangs openly wage warfare for control of dairies.

“That’s why I had real concerns about reducing to 600 retailers. If you significantly reduce legitimate supply when you still have the same level of demand, you have those risks.

“Australia took vapes and made them prescription only … For a product that’s comparatively low harm, it just created a big illicit market.”

Off the record, over a durry

The Star-Times spoke to multiple well-placed sources at the heart of policy and enforcement in New Zealand. They say there has been a “blind spot” in Aotearoa’s health response to tobacco, and it has become impossible to deny that a lucrative black market has emerged.

“The health officials haven’t wanted to know about it … the reality is that a prohibitionist approach always has this risk attached to it,” says one source. “They keep claiming there’s no illicit market in New Zealand, which we know to be palpably wrong now.”

“And what we’ve got is this crazy regime now where the regulations around vapes are tougher than ones around tobacco.”

Sources say the problem is that once cigarettes slip past Customs at the border, it’s unclear who should handle enforcement. Health NZ appears to be the de facto agency, but only because its job is to monitor whether statutory health warnings are displayed on packaging. The Double Happiness packets we bought did not display any warnings.

“The other issue is that it’s kind of a minor crime, because it's mainly about not paying tax rather than being an illegal substance,” one source says. “The consequences of getting caught aren’t that dire, but it’s attractive because you can make a lot of money.”

And where it might have previously been a mainly Auckland issue, anecdotally, illegally-imported cartons are now showing up in the capital.

“You’ve got the health people saying there’s no illicit trade and the tobacco industry saying the escalation is dire. The truth is it’s probably in between.”

The Ministry of Health referred the Star-Times to a 2022 report it commissioned which states that there is “a downward trend in illicit trade in tobacco in NZ”.

It would not release an updated report authored this year, saying it was still “being finalised” and would be published “in due course”.

Health NZ said it took “all concerns about the sale of tobacco products seriously”, particularly where young people are involved.

But asked specifically if it recognised the widespread issue of illicit cigarettes it responded: “We do not have any further comment to make.”

Sources say prosecutions also cost a lot of money, for what is effectively a charge over incorrect labelling, and $2000 fines barely dent profits.

“It’s in the public interest to do something about it, but rather than prosecuting someone over one or two packets, we need to be able to gather evidence on some of the bigger distributors,” a source says.

That work is beginning to happen with van-loads of illegal cigarettes being tracked across the supercity as this story goes to publication.

“I guess it’s always been around, but there seems to have been an increase. Or maybe we are just a lot more aware of it now.”

“What I know is that some people will just turn up in stores and say ‘hey you’re losing out on profit if you don’t sell these’.

“They use the tactic of ‘if you don’t sell it someone else will’ and they start them small.”

All of the harm and none of the revenue

Back in Papakura, a man stands at the door of a liquor store watching for customers to arrive. This reporter watches him from a long lens in a van with tinted windows.

The store’s owner Shubham Gulati says no illicit cigarettes are being sold from the premises, but a newly set up superette close by another matter.

The ex-clothing store now set up with two fridges and a counter sees a regular stream of people arrive to buy cigarettes, and a man can be seen running over from the liquor store to serve them.

The businesses which run both the superette and the liquor store are in Gulati’s name, but when the Star-Times confronts him, he claims the superette is not his.

“I know the company is under my name, I accept that, but it is someone from Hamilton who owns that shop,” he says. “It’s not my product basically. I don’t even work there.”

He says while he legally owns the company, he knows nothing about the products it sells or where they come from. And the man running between the stores: “He’s not my staff member, he’s my mate.”

And Gulati pleads “if you want, they can stop. I can let them know and they will stop.” He says he’s going to have his name removed from the company “today” (it’s still there at the time of publishing).

But asked if he thinks it’s ethical to flood the streets of Papakura with cheap tobacco, Gulati offers a surprisingly forthright opinion.

“[Now] there’s no robberies or ram-raids. Because it’s very cheap and everyone can afford it.”

He promises to introduce me to the mysterious owner in Hamilton but stops short of giving me a phone number. As of publication, I’ve received no further contact, and once again the true source of these cigarettes continues to be shrouded in smoke.

For minister Costello, it’s “money being dragged out of our communities and going to organised crime cartels”.

“We get all the harm while all the excise revenue to pay to deal with that harm is going offshore.

“That’s the part people need to remember - every time you buy an illicit cigarette, you’re lining the pockets of an organised drug cartel that’s profiting off our misery.”

Gulati, meanwhile, is clearly nervous and taken aback to have a journalist knock at his door holding photographic evidence of cigarette sales. I apologise for surprising him like that.

“I’m not surprised,' he says. “I knew it would happen one day.”