EUROPE | Like blowing smoke in mirrors, Philip Morris International released data indicating the high volume of illicit cigarettes sold in Europe every year.
Philip Morris International Inc. has warned about the high levels of contraband and counterfeit cigarettes in the European Union (EU) year over year, with 35.2 billion illicit cigarettes consumed in the region in 2023, accounting for 8.3 percent of total consumption in the EU, an increase of 0.1 percentage point compared to 2022.
PMI praised European law enforcement agencies for their continued crackdown on criminal networks that profit from the illicit tobacco trade, and calls on regulators to advance a sensible, data-driven policy approach that puts consumers—and public health—front and centre and that effectively addresses the challenges posed by the millions of adult smokers who are turning to the black market rather than quitting or, for those who do not quit, switching to smoke-free products.
The results of the 2023 KPMG annual study on illicit cigarette consumption, commissioned by Philip Morris Products SA, revealed that the illicit market in the EU continues to be a major threat for public health, public security, and states’ economies.
Counterfeit cigarettes remain one of the main sources of illicit consumption in the region, with 12.7 billion (36 percent) cigarettes consumed—as criminal networks increasingly target higher-taxed and higher-priced markets. Overall, governments in the EU lost an estimated EUR €11.6 billion in tax revenue, up from EURO €11.3 billion in 2022.
France is still leading the ranking as the country with the largest illicit consumption in all of Europe, with 16.8 billion illicit cigarettes and an estimated EUR €7.3 billion in tax revenues lost.
“We are witnessing an evolution of organised crime groups in Europe, as they are increasingly locating production facilities nearer Western European countries. We consider this phenomenon to be a direct consequence of failed policy approaches that have not done enough to curb illicit trade and reduce smoking prevalence, and it is putting consumers, governments, legitimate businesses, and society alike at risk,” said Christos Harpantidis, Senior Vice President of External Affairs, PMI.
“Law enforcement agencies have played an instrumental role in disrupting crime rings dealing in clandestine cigarette production across Europe, as well as cross-border contraband operations. However, suppose we want to curb illicit trade in the region altogether. In that case, we need a holistic approach that complements tough penalties and strong law enforcement with awareness and education campaigns about the real-life impact of illicit trade. In this predictable fiscal and regulatory environment, adult smokers are not being driven to the black market, and coordinated and committed public-private partnerships.”
Interviews with law enforcement agencies included in the KPMG report shed light onto transnational organised crime’s professionalisation of their role in the supply chain of illicit cigarettes.
According to information from law enforcement agencies, publicly available media articles, and PMI estimates, criminals have expanded the setup of illegal cigarette factories; in 2023 alone, law enforcement data shows that regional and local authorities disrupted at least 113 clandestine cigarette manufacturing sites in 22 European countries.
The steady increase of counterfeit cigarette consumption for the fourth consecutive year across Europe—mainly driven by the U.K. and Ukraine—is now coupled with the rise of all other illicit trade categories, including illicit whites and contraband.
Combined with the continued recovery of cross-border legal volumes, after COVID-related travel restrictions ended in 2022, total non-domestic consumption across the 38 European countries in the study has also reached its highest level ever (15.5 percent), equal to more than one cigarette out of six.
Despite this scenario, KPMG revealed that illicit cigarette consumption was less than 10 percent of total consumption in 26 European countries. Of these, 16 markets had an illicit consumption share of less than five percent. In 25 of the 38 European countries included in the study, the share of illicit cigarette consumption was either stable or declining compared to 2022.
“It’s truly encouraging to see a decrease in illicit consumption in countries like Italy, Poland, Romania, and Spain. We need to continue working together with law enforcement agencies and governments to ensure that illicit trade does not become an even larger problem across the EU,” stated Massimo Andolina, President of the Europe Region, PMI.
“Illicit trade undermines efforts to reduce smoking prevalence; it’s bad for public health and consumers and creates financial damage for governments and lawful operators. Regulators must make this fight a top priority, while at the same time enabling smoke-free products to be available and affordable for all adult smokers who don’t quit cigarettes.”
Harpantidis said that in order to tackle illicit trade, governments must deploy relentless law enforcement action against criminals profiting from the black market.
This has proven successful over excessive taxation on consumer goods, or even prohibition,” added Harpantidis.
“In order to end smoking overall, traditional tobacco control policies must be complemented with innovative approaches. Governments must recognise that embracing alternatives to cigarettes for those adults who would otherwise continue to smoke will reduce smoking-related harm much faster than existing measures alone.”
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