- More than 35 billion illicit cigarettes were consumed across
the 27 EU member states in 2023, close to 2022 figures.
- France continues to be the largest illicit market in the EU,
and now accounts for 47.7% of total illicit cigarette consumption
in the region.
- Illicit consumption has grown for the fifth consecutive year in
Europe, reaching 52.2 billion cigarettes across the 38 countries
included in this study. Nearly one in 10 cigarettes in the
continent are illicit.
- More than 110 clandestine cigarette factories were dismantled
in 2023, as illegal manufacturing sites are being set up nearer
large end markets.
Philip Morris International Inc. (PMI) (NYSE: PM) today warns
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% of
total consumption in the EU, an increase of 0.1 percentage point
compared to 2022.
PMI praises 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 center 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%) cigarettes
consumed—as criminal networks increasingly target higher-taxed and
higher-priced markets. Overall, governments in the EU lost an
estimated €11.6 billion in tax revenue, up from €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 €7.3 billion in tax revenues
lost.
“We are witnessing an evolution of organized 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, if we want to curb
illicit trade in the region altogether, 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, a predictable fiscal and regulatory environment
where 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 organized crime’s
professionalization 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 at least 113 clandestine
cigarette manufacturing sites in 22 European countries were
disrupted by regional and local authorities.
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%), equal to more than one
cigarette out of six.
Despite this scenario, KPMG revealed that in 26 European
countries illicit consumption share was less than 10% of total
consumption. Of these, 16 markets had an illicit consumption share
of less than 5%. And 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
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.”
“If we want 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 recognize 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.”
The KPMG report has expanded to 38 European countries
For the first time since its publication in 2006, the KPMG
annual research study has broadened its scope and incorporated all
Balkan countries. Now, the research covers 38 countries: the 27 EU
member states, as well as Albania, Bosnia and Herzegovina, Kosovo,
Moldova, Montenegro, North Macedonia, Norway, Serbia, Switzerland,
Ukraine, and the U.K.
The Balkan region has shown lower presence of illicit cigarettes
compared to some of the Western European countries, such as France
or the U.K. Ukraine, on the other hand, remains the country with
the second highest volume of illicit cigarettes consumed, at 8.4
billion.
This is the 18th consecutive year that KPMG has estimated
illicit cigarette consumption across Europe.
What are Europeans saying?
Illicit trade has a direct impact on people’s lives across
Europe. It makes unlawful and inferior-quality tobacco products
easily accessible—discouraging smoking cessation efforts,
undermining youth access prevention measures, and preventing adult
smokers from considering better alternatives to cigarettes. It has
serious consequences for consumers, as these illegal goods are
produced in substandard conditions, in complete disregard of the
rule of law and applicable tobacco control regulations.
To better understand societal views regarding illicit trade, PMI
commissioned independent public opinion research firm Povaddo to
conduct a survey among adults in 14 European countries. The survey,
which was executed in January 2024, found that:
- More than half (60%) believe their country (and the EU as a
whole) has a problem with illicit tobacco and illicit
nicotine-containing products.
- Almost three quarters (74%) agree that governments must
consider illicit trade as an unintended consequence when deciding
how to regulate and tax tobacco and nicotine-containing
products.
- 77% agree that illicit trade robs governments of significant
tax revenue.
Illicit trade fuels ruthless criminal gangs, often impacting the
most vulnerable communities and populations. It deprives
governments of tax revenue needed to provide public services,
including security. The proceeds from illicit trade often help
facilitate other serious crimes such as human trafficking,
corruption, and money laundering.
For PMI, eliminating the illicit tobacco trade has been a
long-standing priority. We implement preventive and protective
measures to fight illicit trade and work with public and private
sectors to advance efforts against this global issue.
As we advance on our journey toward delivering a smoke-free
future, we are increasing our efforts to secure both our supply
chain and the products we sell and to protect consumers and our
brands from smugglers and counterfeiters. We collaborate with law
enforcement agencies and other organizations all over the world to
root out and shut down illegal activities, including counterfeiting
and smuggling operations. PMI also continues to support relevant
European regulations, such as the EU Tobacco Products Directives’
tracking-and-tracing provisions.
A detailed overview of the results and methodology of the KPMG
report is available here.
For more information about PMI’s illicit trade prevention
efforts, visit PMI.com.
Note to editors
Definitions of illicit cigarette categories, as detailed in the
KPMG report
- Counterfeit: Illegally manufactured and sold by a party other
than the original trademark owner. In the KPMG report, counterfeit
volumes are reported from the participating manufacturers of BAT,
IB, JTI, and PMI.
- Illicit whites: Usually manufactured legally in one
country/market, but which the evidence suggests have been smuggled
across borders during their transit to the destination market under
review, where they have limited or no legal distribution and are
sold without payment of tax.
- Other C&C: Mainly contraband, i.e., genuine products that
have been either bought in a lower-tax country and that exceed
indicative quantities/limits or acquired without taxes for export
purposes to be illegally resold (for financial profit) in a
higher-priced market. This category may also contain counterfeits
of brands that are not trademark-owned by empty pack survey
participant manufacturers.
Povaddo survey methodology
PMI commissioned Povaddo LLC to field the survey in the
following countries: Belgium, Bulgaria, Croatia, Czech Republic,
France, Greece, Italy, Lithuania, Poland, Portugal, Romania,
Slovakia, Spain, and Ukraine. A total of 14,119 interviews were
conducted among legal age, general population adults (approximately
1,000 per country) between Dec. 29, 2023, and Jan. 31, 2024. The
data has been weighted at a country level by age, gender, and
tobacco/nicotine product consumption to reflect national population
statistics. The survey carries an overall margin of error of +/- 1%
at the 95% confidence interval. Results are available both at an
overall level (14 countries) and at an individual country level.
Country-level results carry a margin of error of +/- 3.2% at the
95% confidence interval.
Philip Morris International: Delivering a Smoke-Free
Future
Philip Morris International (PMI) is a leading international
tobacco company, actively delivering a smoke-free future and
evolving its portfolio for the long term to include products
outside of the tobacco and nicotine sector. The company’s current
product portfolio primarily consists of cigarettes and smoke-free
products. Since 2008, PMI has invested over $12.5 billion to
develop, scientifically substantiate and commercialize innovative
smoke-free products for adults who would otherwise continue to
smoke, with the goal of completely ending the sale of cigarettes.
This includes the building of world-class scientific assessment
capabilities, notably in the areas of pre-clinical systems
toxicology, clinical and behavioral research, as well as
post-market studies. In 2022, PMI acquired Swedish Match – a leader
in oral nicotine delivery – creating a global smoke-free champion
led by the companies’ IQOS and ZYN brands. The U.S. Food and Drug
Administration has authorized versions of PMI’s IQOS devices and
consumables and Swedish Match’s General snus as Modified Risk
Tobacco Products and renewal applications for these products are
presently pending before the FDA. As of June 30, 2024, PMI's
smoke-free products were available for sale in 90 markets, and PMI
estimates that 36.5 million adults around the world use PMI's
smoke-free products. Smoke-free business accounted for
approximately 38% of PMI’s total first-half 2024 net revenues. With
a strong foundation and significant expertise in life sciences, PMI
announced in February 2021 its ambition to expand into wellness and
healthcare areas and, through its Vectura Fertin Pharma business,
aims to enhance life through the delivery of seamless health
experiences. "PMI" refers to Philip Morris International Inc. and
its subsidiaries. For more information, please visit www.pmi.com
and www.pmiscience.com
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Philip Morris International David Fraser T. +41 (0)58 242 4500
E. david.fraser@pmi.com
Philip Morris (NYSE:PM)
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