Illicit trade in Europe

A problem without borders

The independent 2023 KPMG annual study on illicit cigarette consumption in Europe has revealed alarming levels of contraband and counterfeit cigarettes across 38 European countries, with organized criminal groups moving their operations closer to higher-taxed and higher-priced Western nations, such as France.

Illicit consumption has grown for the fifth consecutive year in Europe, reaching 52.2 billion cigarettes across the 38 countries included in this study. Today, nearly one in 10 cigarettes on the continent are illicit.

In the European Union (EU), an estimated 35.2 billion illicit cigarettes were consumed in 2023, accounting for 8.3 percent of total consumption in the EU, an increase of 0.1ppt compared to 2022. Overall, governments in the EU lost an estimated EUR 11.6 billion in tax revenue, up from EUR 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 EUR 7.3 billion in tax revenues lost.

Counterfeit cigarettes remain one of the main sources of illicit consumption in the EU, with 12.7 billion (36 percent) cigarettes consumed—as criminal networks increasingly target higher-taxes and higher-priced markets. 

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: Criminals have expanded the setup of illegal factories, targeting smokers in EU member states that currently struggle with purchasing power. In 2023 alone, law enforcement data shows that 113 clandestine cigarette manufacturing sites in 22 European countries were disrupted by regional and local authorities. 

“We are witnessing an evolution of organized crime groups in Europe,” said Christos Harpantidis, Senior Vice President of External Affairs, PMI. “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 is putting consumers, governments, legitimate businesses, and society alike at risk.

“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 educations 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.”

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 switching to smoke-free products.  

Concerted action in Europe, and beyond, can have long-lasting impact. We’re committed to encouraging open dialogue about the most effective ways to combat illicit trade in tobacco and other nicotine-containing products by involving manufacturers, suppliers of key components, technology providers, customs authorities, and other law-enforcement agencies.

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 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.

Illicit cigarette consumption in Europe in 2023

(Click on a country or use the magnifying glass to see figures from each country)

KPMG revealed that in 26 European countries, illicit consumption share was less than 10 percent of total consumption. Of these, 16 markets had an illicit consumption share of less than 5 percent. 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 such as 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,” said Massimo Andolina, President of the Europe region at PMI. “Illicit trade undermines efforts to reduce smoking prevalence. 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.”

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 help facilitate other serious crimes such as human trafficking, corruption, and money laundering.

For PMI, eliminating illicit 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.

Effective supply chain controls are key to how we run our business in the EU and beyond

These measures include:

*Gregoire Verdeaux left PMI in April 2024.