New KPMG Report Exhibits Illicit Cigarette Consumption Nonetheless at Worrying Ranges within the European Union, With Organized Crime Transferring Operations Nearer to Western International locations

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• Greater than 35 billion illicit cigarettes have been consumed throughout the 27 EU member states in 2023, near 2022 figures.
• France continues to be the biggest illicit market within the EU, and now accounts for 47.7% of complete illicit cigarette consumption within the area.
• Illicit consumption has grown for the fifth consecutive yr in Europe, reaching 52.2 billion cigarettes throughout the 38 international locations included on this examine. Almost one in 10 cigarettes within the continent are illicit.
• Greater than 110 clandestine cigarette factories have been dismantled in 2023, as unlawful manufacturing websites are being arrange nearer massive finish markets.

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LAUSANNE, Switzerland — Philip Morris Worldwide Inc. (PMI) (NYSE: PM) at the moment warns in regards to the excessive ranges of contraband and counterfeit cigarettes within the European Union (EU) yr over yr, with 35.2 billion illicit cigarettes consumed within the area in 2023, accounting for 8.3% of complete consumption within the EU, a rise of 0.1 share level in comparison with 2022.

PMI praises European legislation enforcement companies for his or her continued crackdown on legal networks that revenue from the illicit tobacco commerce, and calls on regulators to advance a smart, data-driven coverage method that places shoppers—and public well being—entrance and heart and that successfully addresses the challenges posed by the tens of millions of grownup people who smoke who’re turning to the black market slightly than quitting or, for many who don’t stop, switching to smoke-free merchandise.

The outcomes of the 2023 KPMG annual examine on illicit cigarette consumption, commissioned by Philip Morris Merchandise SA, revealed that the illicit market within the EU continues to be a significant risk for public well being, public safety, and states’ economies. Counterfeit cigarettes stay one of many major sources of illicit consumption within the area, with 12.7 billion (36%) cigarettes consumed—as legal networks more and more goal higher-taxed and higher-priced markets. General, governments within the EU misplaced an estimated €11.6 billion in tax income, up from €11.3 billion in 2022. France remains to be main the rating because the nation with the biggest illicit consumption in all of Europe, with 16.8 billion illicit cigarettes and an estimated €7.3 billion in tax revenues misplaced.

“We’re witnessing an evolution of organized crime teams in Europe, as they’re more and more finding manufacturing services nearer Western European international locations. We contemplate this phenomenon to be a direct consequence of failed coverage approaches that haven’t completed sufficient to curb illicit commerce and cut back smoking prevalence, and it’s placing shoppers, governments, authentic companies, and society alike in danger,” stated Christos Harpantidis, Senior Vice President of Exterior Affairs, PMI. “Regulation enforcement companies have performed an instrumental function in disrupting crime rings dealing in clandestine cigarette manufacturing throughout Europe, in addition to cross-border contraband operations. Nevertheless, if we wish to curb illicit commerce within the area altogether, we’d like a holistic method that enhances robust penalties and powerful legislation enforcement with consciousness and training campaigns in regards to the real-life influence of illicit commerce, a predictable fiscal and regulatory surroundings the place grownup people who smoke aren’t being pushed to the black market, and coordinated and dedicated public-private partnerships.”

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Interviews with legislation enforcement companies included within the KPMG report shed mild onto transnational organized crime’s professionalization of their function within the provide chain of illicit cigarettes. Based on data from legislation enforcement companies, publicly out there media articles, and PMI estimates, criminals have expanded the setup of unlawful cigarette factories; in 2023 alone, legislation enforcement information reveals that not less than 113 clandestine cigarette manufacturing websites in 22 European international locations have been disrupted by regional and native authorities.

The regular enhance of counterfeit cigarette consumption for the fourth consecutive yr throughout Europe—primarily pushed by the U.Okay. and Ukraine—is now coupled with the rise of all different illicit commerce classes, together with illicit whites and contraband. Mixed with the continued restoration of cross-border authorized volumes, after COVID-related journey restrictions resulted in 2022, complete non-domestic consumption throughout the 38 European international locations within the examine has additionally reached its highest stage ever (15.5%), equal to a couple of cigarette out of six.

Regardless of this situation, KPMG revealed that in 26 European international locations illicit consumption share was lower than 10% of complete consumption. Of those, 16 markets had a bootleg consumption share of lower than 5%. And in 25 of the 38 European international locations included within the examine, the share of illicit cigarette consumption was both steady or declining, in comparison with 2022.

“It’s really encouraging to see a lower in illicit consumption in international locations like Italy, Poland, Romania, and Spain. We have to proceed working along with legislation enforcement companies and governments to make sure that illicit commerce doesn’t change into a fair bigger drawback throughout the EU,” acknowledged Massimo Andolina, President Europe Area, PMI. “Illicit commerce undermines efforts to cut back smoking prevalence; it’s dangerous for public well being and shoppers and creates monetary harm for governments and lawful operators. Regulators should make this combat a prime precedence, whereas on the identical time enabling smoke-free merchandise to be out there and inexpensive for all grownup people who smoke who don’t stop cigarettes.”

“If we wish to deal with illicit commerce, governments should deploy relentless legislation enforcement motion in opposition to criminals making the most of the black market. This has confirmed profitable over extreme taxation on client items, and even prohibition,” added Harpantidis. “So as to finish smoking general, conventional tobacco management insurance policies should be complemented with modern approaches. Governments should acknowledge that embracing options to cigarettes for these adults who would in any other case proceed to smoke will cut back smoking-related hurt a lot quicker than current measures alone.”

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The KPMG report has expanded to 38 European international locations

For the primary time since its publication in 2006, the KPMG annual analysis examine has broadened its scope and included all Balkan international locations. Now, the analysis covers 38 international locations: the 27 EU member states, in addition to Albania, Bosnia and Herzegovina, Kosovo, Moldova, Montenegro, North Macedonia, Norway, Serbia, Switzerland, Ukraine, and the U.Okay.

The Balkan area has proven decrease presence of illicit cigarettes in comparison with a number of the Western European international locations, akin to France or the U.Okay. Ukraine, however, stays the nation with the second highest quantity of illicit cigarettes consumed, at 8.4 billion.

That is the 18th consecutive yr that KPMG has estimated illicit cigarette consumption throughout Europe.

What are Europeans saying?

Illicit commerce has a direct influence on folks’s lives throughout Europe. It makes illegal and inferior-quality tobacco merchandise simply accessible—discouraging smoking cessation efforts, undermining youth entry prevention measures, and stopping grownup people who smoke from contemplating higher options to cigarettes. It has severe penalties for shoppers, as these unlawful items are produced in substandard circumstances, in full disregard of the rule of legislation and relevant tobacco management rules.

To raised perceive societal views relating to illicit commerce, PMI commissioned unbiased public opinion analysis agency Povaddo to conduct a survey amongst adults in 14 European international locations. The survey, which was executed in January 2024, discovered that:

• Greater than half (60%) consider their nation (and the EU as an entire) has an issue with illicit tobacco and illicit nicotine-containing merchandise.
• Nearly three quarters (74%) agree that governments should contemplate illicit commerce as an unintended consequence when deciding learn how to regulate and tax tobacco and nicotine-containing merchandise.
• 77% agree that illicit commerce robs governments of serious tax income.

Illicit commerce fuels ruthless legal gangs, usually impacting probably the most weak communities and populations. It deprives governments of tax income wanted to offer public providers, together with safety. The proceeds from illicit commerce usually assist facilitate different severe crimes akin to human trafficking, corruption, and cash laundering.

For PMI, eliminating the illicit tobacco commerce has been a long-standing precedence. We implement preventive and protecting measures to combat illicit commerce and work with private and non-private sectors to advance efforts in opposition to this international challenge.

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As we advance on our journey towards delivering a smoke-free future, we’re growing our efforts to safe each our provide chain and the merchandise we promote and to guard shoppers and our manufacturers from smugglers and counterfeiters. We collaborate with legislation enforcement companies and different organizations all around the world to root out and shut down unlawful actions, together with counterfeiting and smuggling operations. PMI additionally continues to assist related European rules, such because the EU Tobacco Merchandise Directives’ tracking-and-tracing provisions.

An in depth overview of the outcomes and methodology of the KPMG report is on the market right here.

For extra details about PMI’s illicit commerce prevention efforts, go to PMI.com.

Notice to editors

Definitions of illicit cigarette classes, as detailed within the KPMG report

• Counterfeit: Illegally manufactured and bought by a celebration aside from the unique trademark proprietor. Within the KPMG report, counterfeit volumes are reported from the taking part producers of BAT, IB, JTI, and PMI.
• Illicit whites: Normally manufactured legally in a single nation/market, however which the proof suggests have been smuggled throughout borders throughout their transit to the vacation spot market underneath evaluate, the place they’ve restricted or no authorized distribution and are bought with out fee of tax.
• Different C&C: Primarily contraband, i.e., real merchandise which have been both purchased in a lower-tax nation and that exceed indicative portions/limits or acquired with out taxes for export functions to be illegally resold (for monetary revenue) in a higher-priced market. This class might also include counterfeits of manufacturers that aren’t trademark-owned by empty pack survey participant producers.

Povaddo survey methodology

PMI commissioned Povaddo LLC to subject the survey within the following international locations: Belgium, Bulgaria, Croatia, Czech Republic, France, Greece, Italy, Lithuania, Poland, Portugal, Romania, Slovakia, Spain, and Ukraine. A complete of 14,119 interviews have been carried out amongst authorized age, normal inhabitants adults (roughly 1,000 per nation) between Dec. 29, 2023, and Jan. 31, 2024. The information has been weighted at a rustic stage by age, gender, and tobacco/nicotine product consumption to mirror nationwide inhabitants statistics. The survey carries an general margin of error of +/- 1% on the 95% confidence interval. Outcomes can be found each at an general stage (14 international locations) and at a person nation stage. Nation-level outcomes carry a margin of error of +/- 3.2% on the 95% confidence interval.

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Philip Morris Worldwide: Delivering a Smoke-Free Future

Philip Morris Worldwide (PMI) is a number one worldwide tobacco firm, actively delivering a smoke-free future and evolving its portfolio for the long run to incorporate merchandise exterior of the tobacco and nicotine sector. The corporate’s present product portfolio primarily consists of cigarettes and smoke-free merchandise. Since 2008, PMI has invested over $12.5 billion to develop, scientifically substantiate and commercialize modern smoke-free merchandise for adults who would in any other case proceed to smoke, with the purpose of fully ending the sale of cigarettes. This consists of the constructing of world-class scientific evaluation capabilities, notably within the areas of pre-clinical programs toxicology, scientific and behavioral analysis, in addition to post-market research. In 2022, PMI acquired Swedish Match – a pacesetter in oral nicotine supply – creating a world smoke-free champion led by the businesses’ IQOS and ZYN manufacturers. The U.S. Meals and Drug Administration has approved variations of PMI’s IQOS units and consumables and Swedish Match’s Normal snus as Modified Danger Tobacco Merchandise and renewal purposes for these merchandise are presently pending earlier than the FDA. As of June 30, 2024, PMI’s smoke-free merchandise have been out there on the market in 90 markets, and PMI estimates that 36.5 million adults around the globe use PMI’s smoke-free merchandise. Smoke-free enterprise accounted for roughly 38% of PMI’s complete first-half 2024 web revenues. With a robust basis and vital experience in life sciences, PMI introduced in February 2021 its ambition to increase into wellness and healthcare areas and, via its Vectura Fertin Pharma enterprise, goals to boost life via the supply of seamless well being experiences. “PMI” refers to Philip Morris Worldwide Inc. and its subsidiaries. For extra data, please go to www.pmi.com and www.pmiscience.com

View supply model on businesswire.com: https://www.businesswire.com/information/dwelling/20240909118299/en/

Contacts

Philip Morris Worldwide
David Fraser
T. +41 (0)58 242 4500
E. david.fraser@pmi.com

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