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  • Belgium Losing €544M from Illegal and Foreign Cigarettes

    Belgium Losing €544M from Illegal and Foreign Cigarettes

    Legal cigarette sales in Belgium continued to fall in 2024, while the volume of counterfeit and smuggled products increased significantly, according to the 19th annual report by consultancy firm KPMG, commissioned by Philip Morris International.

    Nearly 2.4 billion cigarettes consumed in Belgium last year came from non-domestic sources, a 17% increase compared to the previous year, meaning nearly one in three cigarettes smoked in the country were not purchased through Belgian sales channels. While domestically-produced sales declined, 1.1 billion cigarettes in Belgium were legally purchased abroad last year, an increase of 22%. The volume of counterfeit and smuggled cigarettes in the country also grew, by 13%, to 1.3 billion.

    Imports from Bulgaria tripled since 2020 to 770 million cigarettes last year, as did those from Luxembourg at 740 million in 2024. According to KPMG, the shift to illegal or foreign products is estimated to have cost the Belgian government around €544 million in lost tax revenue last year.

  • EU Sees Highest Rate of Illicit Cigarettes Since 2015

    EU Sees Highest Rate of Illicit Cigarettes Since 2015

    According to the 2024 KPMG study, produced annually and commissioned by Philip Morris Products SA, smokers in the European Union consumed 38.9 billion illicit cigarettes in 2024, a 10.8% increase versus 2023, the highest level since 2015. That number accounts for 9.2% of total cigarette consumption, with governments losing as much as €14.9 billion in tax revenues at a time when many countries face intense economic pressures and rising black markets.

    PMI called for effective policymaking to counter the growing threat of illicit trade, and said it believes that steep and abrupt tax increases are exacerbating the issue and benefitting criminals who supply unregulated, untaxed, and inferior products. To combat this growing threat, PMI urges the adoption of evidence-based regulation with balanced and predictable taxation through tax calendars, continued public-private collaboration, and enhanced support of regional and national law enforcement agencies.

    “The illicit tobacco trade threatens the European economy, public health, security, and social stability; today, higher-taxed and higher-priced markets such as France and the Netherlands are especially impacted by illegally imported and counterfeit goods,” said Christos Harpantidis, PMI’s Senior Vice President, External Affairs. “Its massive socioeconomic impact negatively affects tax collection, job creation, and legitimate businesses, the engine of our European economies. The availability of cheap, unregulated cigarettes in the underground economy also impairs efforts to reduce smoking rates and achieve a smoke-free future.”

    France has the largest illicit market in Europe, reaching 18.7 billion illicit cigarettes consumed last year, 37.6% of total consumption. The Netherlands saw the largest increase in illicit cigarettes, which doubled to 17.9% of total consumption.

    A detailed overview of the results, country profiles, and methodology of the KPMG study is available here.

  • Report: Black Marketeers Continue to Evolve with Technology

    Report: Black Marketeers Continue to Evolve with Technology

    Tobacco smugglers and black marketeers are increasingly using technologies such as social media and drones to deliver cigarettes to smokers in Europe and avoid law enforcers, a report found.

    According to the 2024 KPMG study, produced annually and commissioned by Philip Morris Products SA, the illegal networks’ flexible strategies have helped illicit consumption increase 10.8% in the EU from 2023, with criminal groups shifting toward smuggling smaller packages, more often, via budget airlines, railways, and drones. They are also increasingly bypassing physical stores to sell directly to consumers on social media.

    The report showed that criminal groups are holding less inventory, which is reflected in a decrease in the size of illicit cigarette seizures as the gangs mitigate their risks and reduce the impact of raids by law enforcers. The more recent change in tactics follows another shift from 2020, when the groups moved production closer to end-markets, partly in response to the pandemic disruption, and also reducing the chance of detection.

  • Illicit Market Remains a Concern: KPMG

    Illicit Market Remains a Concern: KPMG

    Photo: Europol

    European smokers bought more than 35 billion illicit cigarettes in 2023, accounting for 8.3 percent of total EU cigarette consumption, according to a KPMG study commissioned by Philip Morris Products.

    Counterfeit cigarettes remain one of the main sources of illicit tobacco consumption in the region, with 12.7 billion (36 percent) cigarettes consumed, as criminal networks increasingly target higher-taxed and higher-priced markets. Overall, governments in the EU lost an estimated €11.6 billion (12.82 billion) in tax revenue, up from €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 an estimated €7.3 billion in tax revenues lost.

    “We are witnessing an evolution of organized crime groups in Europe, as they are increasingly locating production facilities nearer Western European countries,” said PMI Senior Vice President of External Affairs Christos Harpantidis in a statement.

    “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 it is putting consumers, governments, legitimate businesses, and society alike at risk.”

    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 it is putting consumers, governments, legitimate businesses, and society alike at risk.

    Christos Harpantidis, senior vice president, external affairs, PMI

    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. 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 percent), equal to more than one cigarette out of six.

    Despite this scenario, 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.

    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.

    Massimo Andolina, president, Europe region, PMI

    “It’s truly encouraging to see a decrease in illicit consumption in countries like 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,” stated Massimo Andolina, president, Europe region, PMI.

    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.

  • KPMG: Illicit Trade up in Europe

    KPMG: Illicit Trade up in Europe

    Photo: Europol

    Illicit cigarette consumption increased by an estimated 3.9 percent, or 1.3 billion cigarettes, in 2021, reaching 35.5 billion cigarettes consumed across the European Union, according to a KPMG study commissioned by Philip Morris International. Meanwhile, the study estimates that total EU cigarette consumption declined over the same period.

    The increase of illicit consumption was largely driven by an estimated 33 percent increase in counterfeit consumption in France, where it grew to 8 billion cigarettes last year. Overall, France remains the largest market for illicit cigarettes in the EU, with a total of 15.1 billion illicit cigarettes consumed in 2021, comprising 29 percent of total cigarette consumption in the country, which represents a significant growth from 13 percent in 2017.

    “The findings of the KPMG Report should be a real wake-up call. It’s alarming that in countries that maintain high excise taxes on cigarettes, such as France, instead of driving a decrease in smoking prevalence, we see a rise in counterfeit cigarette consumption. In fact, in France in the past five years, while the average price of a pack of legitimate cigarettes has increased by more than half, the number of adult smokers has only marginally decreased,” said Gregoire Verdeaux, senior vice president, external affairs, PMI, In a statement.

    “But there is also hope. Other EU countries have adopted differentiated policies on alternatives to cigarettes that support the continued decline of cigarette consumption while reducing illicit trade, and they are already yielding encouraging results. The European Commission in Brussels should make this the foundation for the future.”

    The annual KPMG report focuses on the consumption and flows of illicit cigarettes in 30 European countries—the 27 EU member states, as well as the United Kingdom, Norway, and Switzerland—and indicates that had these cigarettes been legally purchased, an additional €10.4 billion ($10.93 billion) in taxes would have been collected by governments in the EU.

    Tax revenue losses will limit governments’ ability to invest in areas such as public safety, public services, or infrastructure, at a time when people across Europe are also facing higher prices of many basic goods. The risk that more adult smokers—especially those among the lower-income population—turn to illicit trade is now significant. This creates an even more urgent need to ensure that smoke-free alternatives are available and affordable for all, to enable them to make a better choice instead of buying from the black market,” said Verdeaux.

    Consumers need to be incentivized so that they don’t have to turn to illicit cigarettes. This means focusing on education and awareness, and ensuring the availability of better alternatives.

    Gregoire Verdeaux, senior vice president, external affairs, PMI

    The KPMG report also shows that roughly half—16 out of 27—of the member states experienced declining or stable consumption of illicit cigarettes in 2021. Among these countries, Poland saw one of the largest declines in illicit volumes, showing a 3.7 percentage point decrease in its share of illicit cigarette consumption.

    “The decreasing consumption of illicit cigarettes in countries like Poland is remarkable and reassuring. It showcases the impact of effective law enforcement against criminals profiting from illicit trade in a market where better alternatives to smoking are available and more affordable to adult smokers. These are outcomes other countries should aspire to emulate,” said Alvise Giustiniani, vice president, illicit trade prevention. “It has never been more important to provide in particular the most vulnerable in society with access to information, as well as to develop and implement innovative policies that truly include everyone and facilitate access to better alternatives.”

    Counterfeit consumption was the main driver of illicit trade in the EU; consumption of fake cigarettes reached an estimated total of 12.3 billion—accounting for 34.6 percent of total illicit consumption. The study indicates that due to continued travel and border restrictions related to the Covid-19 pandemic, organized criminal groups shifted their focus toward manufacturing counterfeit cigarettes directly within EU borders. Interviews conducted by KPMG with seven different law enforcement agencies found that illegal manufacturing sites are increasingly moving west in Europe to get closer to higher-priced end markets, such as France and the U.K.

    The continued growth of a black market where fake and unregulated cigarettes are easily available seriously undercuts legitimate efforts to reduce and eventually eliminate cigarette smoking.

    “We are convinced that consumers need to be incentivized so that they don’t have to turn to illicit cigarettes. This means focusing on education and awareness, and ensuring the availability of better alternatives, such as scientifically substantiated smoke-free products,” said Verdeaux. “Making them accessible as a better option for millions of adult smokers in Europe who don’t quit should be our common top priority.”