The illicit cigarette market in the EU exceeds 10% for the first time since 2014 due to counterfeit products
A KPMG report commissioned by Philip Morris International identifies a fiscal and security challenge, but also shows that balanced policies are already reducing illegal trade in several European markets.
More than 41.8 billion illicit cigarettes were consumed in the European Union in 2025, a figure equivalent to 10.3% of the total market, pushing the problem above the 10% threshold for the first time since 2014. The data is significant. But the annual KPMG report commissioned by Philip Morris International also offers a constructive reading: Europe already has evidence, regulatory tools, and national examples to correct the trend. Estimated fiscal losses reach €16.7 billion in the EU and €22.4 billion across the 38 countries analyzed, making the fight against the illicit market an economic, budgetary, and security priority.
The advance of illicit trade is no longer solely due to classic smuggling flows. The study confirms a structural transformation: counterfeits manufactured near final markets are gaining weight compared to traditional east-west routes. This shift, far from being a sign of institutional impotence, allows for a more refined public response.
Counterfeits now represent 44% of illicit cigarette consumption in the EU, with 18.3 billion units and an interannual growth of over 20%. The consequence is clear: the problem has become more industrialized, more local, and more sophisticated. However, it has also become more identifiable. Authorities can concentrate resources on logistical hubs, clandestine manufacturing sites, and distribution networks operating close to the consumer.
Western Europe, the main focus
The report identifies France, Belgium, and the Netherlands as the most affected markets. France reaches an illicit share of 41.4%, with 20.5 billion illegal cigarettes and nearly 9.7 billion counterfeit units. Belgium hovers around 25% and the Netherlands exceeds 22%, levels that explain why Western Europe has become the epicenter of the phenomenon.
The contrast also helps prioritize. Six member states already exceed a 20% illicit share, a concentration that facilitates coordinated action among customs, security forces, tax administrations, and companies. Most importantly, the report does not present a static picture but an operational map to act with precision.
Spain maintains room for action
In Spain, illicit cigarette trade increased almost 10% year-on-year, and fiscal losses reached €284 million, up 8%. This figure demands vigilance but remains far from the critical levels observed in France, Belgium, or the Netherlands.
This reveals a window of opportunity. Spain can anticipate before the phenomenon becomes structural. The experience of other markets shows that when fiscal pressure, police enforcement, and regulation advance without coordination, the black market exploits gaps. When there is predictability, effective control, and cooperation, the margin for illicit networks shrinks.
What does work
The most positive point in the report appears in countries that have managed to reduce the problem. Greece, with an illicit share of 14.1%, recorded one of the largest year-on-year declines of 3.4 percentage points. Ukraine, despite a war environment and maximum operational tension, reduced the volume of illicit cigarettes by nearly 1 billion.
The diagnosis is unequivocal: evidence-based policies work better than extreme responses. A predictable fiscal framework, proportionate regulation, and consistent law enforcement reduce illegal trade without disrupting the market or penalizing legitimate activity. The lesson is especially valuable for Europe at a time of budgetary pressure, accumulated inflation, and increased security needs.
Public-private cooperation
Philip Morris International advocates for a coordinated response based on data, public-private cooperation, and effective law enforcement. The company underscores that combating the illicit market requires operational intelligence, information exchange, and the ability to dismantle counterfeiting networks before they consolidate their channels.
The approach has an economic impact. According to estimates cited in the note, the tobacco and nicotine value chain in Europe supports over 2.1 million jobs and generates €224 billion in value, in addition to nearly €24 billion in annual exports. Protecting this ecosystem means protecting employment, revenue, investment, and innovation.
Innovation and a smoke-free future
The report also incorporates a relevant reading on new categories. In heated tobacco products, smuggling represents only 1.2% of total consumption in the analyzed markets, and no counterfeit product flows were identified. This is significant: it shows that regulated, traceable markets with controlled alternatives can better limit illicit penetration.
PMI links this strategy to its transition toward a smoke-free future. Its smoke-free products are present in over 105 markets, and the company estimates that over 43 million adults use them worldwide. Additionally, the smoke-free business represented 43% of its net revenues in the first quarter of 2026. In a sector under high regulatory pressure, innovation appears as a way to strengthen control, traceability, and reduction of the illegal market.
