Illicit cigarettes continue to be a concerning issue in the EU. Photo credit: Piotr Drabik, CC2.0.
A new KPMG report commissioned by Philip Morris Products SA on illicit cigarette consumption reveals 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% compared to 2022.
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. 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. France continues to be the largest illicit market in the EU with 16.8 billion illicit cigarettes and an estimated €7.3 billion in tax revenues lost, and now accounts for 47.7% of total illicit cigarette consumption in the region.
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.
However, the KPMG study found 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.
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.