De La Rue wins UK tobacco safety feature contract

De La Rue has won a contract to implement a track-and-trace system for all tobacco products in the UK, worth £3.5m ($4.65m) over the next five years.

The contract with Her Majesty's Revenue & Customs (HMRC) will see De La Rue implement a digital solution to track and trace the  approximately 1.7 billion cigarette and hand rolling tobacco packs sold in the UK each year through a unique identifier – one of the requirements of the 2014 EU Tobacco Products Directive which comes into force on May 20.

The measure is designed to ensure the traceability of all tobacco products, and “help prevent the illicit trade of tobacco products throughout the EU and protecting citizens from counterfeit products which could be damaging to their health.”

De La Rue may have lost the contract to produce the UK passport last year, but the new contract plays into its strategy of expanding its product authentication traceability business, which it wants to double in size within the next three years, according to chief executive Martin Sutherland.

“As a result of our continued investment in the product authentication and traceability market, we are delighted to be working with HMRC here in the UK to provide this track and trace service and to partner with them on rolling this out to the wider industry,” he said this morning.

De La Rue notes that as part of the contract it will also “manage the service for HMRC with all tobacco manufacturers, importers and relevant economic operators serving the UK tobacco products sector.”

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The company has been investing to build its PAT business, closing a $25m acquisition of DuPont Authentication in 2015 to boost its position in photopolymer holographic films and 3D holograms, and has said it is also considering other ‘bolt-on’ acquisitions to extend its product range further.

The illicit tobacco trade costs the UK around £2.5bn every year, robbing the Treasury of tax revenues and undermining the businesses of legitimate tobacco traders. De La Rue’s announcement comes immediately after five tonnes of suspected illegal tobacco was discovered in Glasgow.

Moreover, counterfeit tobacco is often not produced to the same standards as products made by the leading tobacco companies, containing even higher levels of toxic ingredients such as tar, nicotine and carbon monoxide than genuine brand-name products.