A smoking milestone: EU cigarette consumption below 500 billion

Marking a milestone for the European smoking world, the number of cigarettes consumed fell below the 500 billion mark last year for the first time in decades, causing a similar dip in production. This according to analysis from KPMG, which also highlighted that the illicit cigarette trade remains a pressing issue.

The KPMG report was commissioned by Philip Morris International (PMI), and used data from all 28 European Union (EU) member states to gauge the state of cigarette consumption in the region. The report highlights that cigarette consumption has already been on a steady decline for a number of years now, but 2019 marked a significant milestone.

Where the number of manufactured cigarettes consumed across the EU stood at just over 505 billion in 2018, a 2.4% dip in consumption last year took the figure down to 493 billion manufactured cigarettes. Promising news for the anti-smoking lobby, but there was some good news too for the tobacco industry – the growing majority of these cigarettes were legally manufactured and sold.

In fact, the number of illicit cigarettes consumed decreased by 5%, to make up 8% of the total number consumed. However, the 8% illicit consumption still adds up to more than £9.5 billion in lost tax revenue for the European Union according to KPMG, representing an issue that must be dealt with more effectively.

Nearly 39 billion illicitly manufactured or sold cigarettes were consumed across Europe last year. In their report, the researchers provide a detailed breakdown of the illicit consumption market, taking into consideration counterfeit, contraband and illicit whites – all clubbed together under the C&C bracket.

Counterfeit cigarettes, as the name suggests, are fake branded cigarettes manufactured to evade tax and trick customers. Contraband cigarettes are authentic, but are smuggled and sold illegally without paying duties. Illicit whites are cigarettes that are manufactured legitimately in a foreign market, but with the intention of selling illegally in other markets.

The last of the three categories appears to be the most common in the illicit cigarette trade, with more than 9 billion illicit whites being sold last year, amounting to more than 23% of total illicit consumption. In fact, when illicit whites are taken out of the equation, KPMG reports that C&C consumption fell by as much as 31%.

Nevertheless, counterfeit consumption is also increasing year on year, a trend that has policy makers and tobacco producers worried. KPMG reports that the number of counterfeit cigarettes consumed last year increased by more than 2 billion, while illicit whites and counterfeits together account for well over half of all illicit consumption.

“The continued decline of illicit tobacco trade in the EU is a positive development and reinforces the importance of supply chain control measures, strict enforcement, and collaboration in combating this issue. We must remain focused on these collective efforts, as there continue to be worrying trends like the increase of counterfeit cigarettes and the persisting problem of illicit whites,” said Alvise Giustiniani, vice president of Illicit Trade Prevention at PMI.Crucial to the success of such preventive measures is understanding where illicit cigarettes are coming from. According to the report, C&C has traditionally been sourced from markets outside the EU, most of which are unidentified. Of those source markets on record, most notable are Ukraine, Belarus, Algeria and Moldova.

The good news is that C&C from across these regions declined last year. The bad news is that the volume of C&C sourced from within the EU jumped by nearly a percentage point over the same period. “A significant proportion of illicit whites with no country-specific labelling and counterfeit may be manufactured in illegal factories within the EU,” states the KPMG report.