Illicit trade in the EU

A problem without borders

The independent 2022 KPMG annual study on illicit cigarette consumption in the EU, U.K., Norway, Switzerland, Moldova, and Ukraine has revealed alarming levels of counterfeit cigarettes within the EU, with organized criminal groups continuing to set up illicit production facilities within its borders, mainly targeting Western European, high-priced markets such as France. “Fake cigarettes are being manufactured, distributed, sold, and consumed in countries within the EU, undermining efforts to reduce and eliminate cigarette smoking—and public health goals altogether,” said Gregoire Verdeaux, Senior Vice President, External Affairs, PMI.

However, the illegal cigarette trade is not confined within the EU’s borders. In fact, illicit cigarettes continue to enter from outside the regional bloc. That’s why concerted action within the EU can have a global impact. We’re committed to encouraging open dialogue about the most effective ways to combat illicit trade in tobacco products by involving manufacturers, suppliers of key components, technology providers, customs authorities, and other law-enforcement agencies.

We strongly support the objectives and principles of the WHO Framework Convention on Tobacco Control’s (FCTC’s) Protocol to Eliminate Illicit Trade in Tobacco Products (“the Protocol”) and are encouraged by the growing number of countries joining this international treaty. We are convinced that the FCTC Protocol will help the EU gain the upper hand in fighting the black market in tobacco products and will pave the way for controls in tracking and tracing, licensing, and due diligence.

Illicit cigarette consumption in the EU, U.K., Norway, Switzerland, Moldova, and Ukraine in 2022

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

The KPMG annual study noted that 35.8 billion illicit cigarettes were consumed across the EU alone in 2022, causing governments the loss of an estimated EUR 11.3 billion in tax revenue—8.5 percent more than in 2021. The growth of the illicit market in the EU was partly driven by the continued rise of counterfeit consumption, which reached its highest level ever recorded. Notably, the vast majority of counterfeits (61.5 percent) were consumed in France.

According to interviews with law-enforcement agencies included in the KPMG report, the production and distribution of counterfeit cigarettes within EU borders is increasing—with criminal organizations centering their activities toward higher-taxed and higher-priced EU member states—and gaining larger profits. Countries such as Belgium, Denmark, France, and Germany are witnessing a growth in cigarette seizures and raids on clandestine manufacturing operations.

Despite the overall illicit consumption increase, the KPMG study notes that the majority of EU members—21 out of 27 countries—experienced a stable or declining share of illicit cigarette consumption in 2022. Excluding France, overall illicit consumption in the EU member states declined by 7.5 percent, largely due to decreases in Greece, the Netherlands, Portugal, and Romania. Notably, in countries such as Poland and Romania, illicit consumption reached the lowest-ever incidence since KPMG began publishing its annual studies.

“Effective policymaking, fiscal calendars, deterrent penalties, and impactful enforcement are enabling several EU member states to experience a decline in the consumption of illicit cigarettes,” said Massimo Andolina, President, Europe Region at PMI. “In other countries, it is unfortunate to witness the legal market shifting toward one that is run by criminal networks. The KPMG report should serve as a wake-up call for regulators and policymakers in the EU to consider that millions of consumers are relying on the black market to continue smoking.”

“The KPMG report clearly shows how the growth of the illicit cigarette market poses an existential threat to the industry’s sustainability and transformation in Europe,” stated Verdeaux. “We can observe how the illicit cigarette problem in the EU has become highly concentrated in a handful of countries, where governments have not embraced innovative approaches to effectively deter millions from continued smoking,” he added.

For PMI, eliminating the illicit tobacco trade has been a long-standing priority. We rely on the latest technology to secure our supply chain and protect our products, while implementing preventive and protective measures to fight illicit trade and working with public and private sectors to advance efforts against this global issue. PMI continues to support relevant regulations like the FCTC Protocol to Eliminate Illicit Trade in Tobacco Products and the EU Tobacco Products Directives’ tracking-and-tracing provisions.

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

These measures include: