What's behind a spike in illicit tobacco use in Europe?

Smokers in the EU consumed 38.9bn illicit cigarettes in 2024, a 10.8% increase on the prior year, according to the latest illicit trade report from KPMG.

The new analysis (PDF), commissioned by tobacco giant Philip Morris International (PMI), suggests that the sharp increase – to 9.2 per cent of total cigarette consumption – has been caused by "steep and abrupt tax increases, benefitting criminals who supply unregulated, untaxed and inferior products, including counterfeits, at a lower price."

So-called 'illicit whites' – legally manufactured cigarettes smuggled across borders to countries where they have limited or no distribution – accounted for 8.2bn of the total, up 15.1 per cent on 2023.

Overall, the illicit trade cost governments an estimated €14.9bn ($17.1bn) in lost tax revenues at a time when many countries face intense economic pressures, according to PMI, which claims that excessive tobacco control policies may be driving smokers to the black market.

France was once again the largest market for illicit tobacco in Europe, accounting for 18.7bn (nearly 38 per cent) of the total consumption, while the Netherlands saw the largest increase and there were declines in Bulgaria, Greece, Italy, Portugal and Ukraine, albeit from fairly high levels. In volume terms, counterfeit consumption was highest in France, the UK, Greece and Ukraine.

Among the trends identified in the report are that counterfeit packs increasingly carry duty-free labelling rather than country-specific labels, shadowing the situation with illicit whites, and that makes identification of source markets difficult.

Law enforcement agencies polled for the report said organised crime gangs (OCGs) continue to shift production close to end markets, and are focusing on longer production runs of specific brands to meet the demands of local markets.

In addition, they are refining their inventory management strategies to maximise cash flow, holding less stock and accelerating distribution, as evidenced by a decrease in the size of illicit cigarette seizures.

Distribution channels are also being expanded to include new methods like drones and high-frequency smuggling of smaller shipments via budget airlines, with customers found using direct channels like online sites and social media rather than conventional retail.

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