Illicit tobacco consumption rises again in Europe

In 2022, an estimated 35.8bn illicit cigarettes were consumed in Europe, a small (0.7 per cent) increase on the previous year, with France once again driving the rise.

The latest KPMG report (PDF) commissioned by tobacco giant Philip Morris International estimates that 8.2% of total cigarette consumption in the EU was either counterfeit or contraband (C&C), equivalent to around 35.8bn cigarettes and depriving EU member states of around €11.3bn ($12.4bn) in taxes.

France saw the greatest increase in C&C consumption, with a rise of 1.6bn units to 16.9bn and illicit products accounting for almost half (47 per cent) of total C&C consumption across the EU. C&C made up almost one-third (32 per cent) of all cigarettes consumed.

Other countries with a high proportion of C&C included Ireland (24 per cent), the UK and Greece (21 per cent each), Ukraine (20 per cent) and Lithuania (19 per cent).

Taking France out of the equation, there was overall a 7.5 per cent decline in illicit consumption in the remaining EU27 nations largely due to decreases in Greece, the Netherlands, Portugal, and Romania.

Growth in the subcategory of counterfeit cigarettes was also a major driver, reaching the highest level ever recorded, and the vast majority of them (61.5%) were consumed in France.

According to interviews with law enforcement agencies included in the report, the production and distribution of counterfeit cigarettes within EU borders is increasing, with criminal organisations focusing on higher-taxed and higher-priced EU member states.

That is in part a result of the ongoing war in Ukraine, which is making imports from traditional illicit cigarette source markets such as Ukraine and Belarus more difficult.

As a result, countries such as Belgium, Denmark, France, and Germany are witnessing a growth in cigarette seizures and raids on clandestine manufacturing operations.

Organised crime groups (OCGs) are focusing on increasing profit margins by producing counterfeits of premium brands, says the report, which also notes that direct sale to the end-user is an increasingly important channel.

Main image courtesy of Europol