Illegal tobacco manufacturing sites increasingly move further west in Europe to get closer to higher-priced markets such as the UK and France. Credit: JTI
The 2021 KPMG annual study on illicit cigarette consumption, commissioned by Philip Morris International (PMI), reveals that overall illicit cigarette consumption in the EU increased by an estimated 3.9%—or 1.3 billion cigarettes—last year, reaching 35.5 billion cigarettes consumed EU member states. Meanwhile, the study estimates that total EU cigarette consumption declined over the same period.
Based on the report, the increase of illicit consumption in the EU was largely driven by an estimated 33% increase in counterfeit consumption in France, where it grew to 8.0 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% of total cigarette consumption in the country, which represents a significant growth from 13% in 2017.
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 UK, Norway, and Switzerland—and indicates that had these cigarettes been legally purchased, an additional €10.4 billion in taxes would have been collected by governments in the EU.
The 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% decrease in its share of illicit cigarette consumption.
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% 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 UK.