35bn illicit cigarettes were consumed in EU in 2023

Illicit cigarette consumption in the EU is still at "worrying levels" and there is evidence that the organised crime networks behind much of the trade are moving their operations closer to Western countries.

That is the conclusion of the latest edition of an annual KPMG report – commissioned by tobacco giant Philip Morris International (PMI) – which estimates that more than 35bn illicit cigarettes were smoked in 2023, roughly in line with the previous year's level, of which 12.7bn were counterfeit.

That is equivalent to 8.3 per cent of the total cigarette market, roughly in line with the 2022 level, and robbed national treasures across the EU of €11.6bn ($12.9bn) in tax revenue, around €300m more than in 2022.

At the same time, overall illicit consumption – which includes legally produced cigarettes that are smuggled and traded illegally known as illicit 'whites – has grown for the fifth consecutive year in Europe, rising 3 per cent to reach 52.2bn cigarettes across the 38 countries included in KPMG's analysis.

Had these cigarettes been legally purchased in the markets in which they were consumed, an additional €16.6bn in taxes would have been raised. The increase in illicit consumption was predominantly due to Ukraine, the UK and Greece, while France remained the biggest consumer.

Within the 27 EU member states, there are signs that illicit cigarette prediction is moving from east to west as criminal organisations shorten and de-risk their supply chains and move closer to higher-priced and more profitable target markets, according to KPMG.

"Ongoing geopolitical drivers may also be playing a role, with continuing restrictions on the movements of people and goods across the Belarus border is reducing illicit flows from a major historical source market, and the ongoing war in Ukraine continuing to disrupt illicit cigarette flows to other European markets," says the report.

Other trends identified in the new edition include that the networks are increasingly targeting legitimate cigarette brands for the specific higher-priced European markets, ramping up the sophistication of their manufacturing, and moving into adjacent areas like water pipe tobacco, tobacco/nicotine pouches and rolling tobacco. More than 110 clandestine cigarette factories were dismantled in 2023.

The top three most commonly counterfeited brands were Marlboro, Winston and Richmond,  accounting for 57 per cent of all counterfeit consumption across the 38 markets, but their share is reducing as fakes of other brands like L&M and Lambert & Butler increase.