The illicit consumption of heated tobacco products is beginning to surface across Europe, with the UK recording the highest proportion of contraband among ten countries surveyed, according to new data from the 2024 KPMG report commissioned by Philip Morris International (PMI).
For the first time, the annual KPMG study – now in its 19th year – analysed illicit trade in heated tobacco sticks, revealing that 0.4 billion sticks were consumed illicitly across selected European markets. While this represents just 0.9 per cent of total heated tobacco product consumption, PMI has raised concerns that misaligned regulation could fuel an escalation similar to the traditional cigarette black market.
In the UK, 7.8 per cent of all heated tobacco sticks consumed in 2024 were illicit, the highest share among the ten countries examined, which included Germany, Poland, Spain, and Italy. In absolute terms, Germany (0.15 billion sticks) and Poland (0.08 billion) recorded the highest volumes of contraband heated tobacco products.
Critically, the report found no evidence of counterfeit heated tobacco sticks to date, highlighting that the current illicit activity is driven by smuggling rather than fake production.
“Policymakers must recognise that repeating the policy mistakes that drive the illicit cigarette market when regulating smoke-free products – excessive and market-distorting taxation, extreme control measures such as bans, and inadequate law enforcement against illicit activities across the value chain – may and will lead to the same disaster we see today in the cigarette sector in countries adopting such policies, and that we are starting to see in countries banning the legal sale of smoke-free products,” warned Massimo Andolina, PMI’s president, Europe region.
PMI has urged governments to implement balanced tax regimes and robust enforcement to avoid the pitfalls that have plagued the cigarette sector. The company argues that poorly designed regulation could undermine efforts to transition adult smokers to less harmful alternatives.
Traditional illicit tobacco trade hits 9-year high
The findings come as part of a broader analysis of illicit cigarette consumption in Europe. The KPMG study revealed that 38.9 billion illicit cigarettes were consumed in the EU in 2024, the highest level since 2015. This accounted for 9.2 per cent of total consumption and cost EU governments as much as €14.9 billion in lost tax revenues.
France and the Netherlands were identified as the worst-hit markets, with France alone consuming 18.7 billion illicit cigarettes, including 7.8 billion counterfeits. In contrast, countries like Greece, Italy and Portugal made progress in curbing illicit activity – Greece saw a 6.2 percentage point drop in illicit consumption, the largest in a decade.
In the UK, the illicit cigarette market declined slightly by 0.8 billion cigarettes, although total share of consumption remained stable. Still, with 5.9 billion illicit cigarettes smoked, the UK remains the third-largest illicit market in Europe.
PMI said the illicit trade threatens not only public health and safety but also critical state revenues. “Its massive socioeconomic impact negatively affects tax collection, job creation, and legitimate businesses... The availability of cheap, unregulated cigarettes in the underground economy also impairs efforts to reduce smoking rates and achieve a smoke-free future,” said Christos Harpantidis, PMI’s senior vice president, external affairs.
