KPMG response to 'Towards a greater understanding of illicit tobacco trade in Europe: a review of the PMI funded 'Project Star' report', published in Tobacco Control (BMJ) on 11th December 2013

Robin M. Cartwright, Partner,
March 05, 2014

Significant factual inaccuracies relating to KPMG's annual report into the European trade in illicit tobacco were made in a recent article published in Tobacco Control by the BMJ. The report, which KPMG's Strategy Group has been producing since 2005, is recognised by the UK National Audit Office, OLAF and the OECD (and by other numerous national customs authorities and government departments) as the most comprehensive study of its kind. The report has earned its solid, international reputation because it is produced by an independent, professional advisory firm, using a robust and consistently applied methodology.

The central premise of the article was that the KPMG report overstates the illicit tobacco trade. However, KPMG estimates since 2005 have correlated within a range given by other organisations, including the UK National Audit Office, Euromonitor, Joossens and the IARC, amongst many others. For example, in 2007, Joossens estimated total consumption of illicit tobacco within the EU to be 8.5%, while the KPMG report estimated consumption at 8.4%.

Critically, the article misrepresented the methodology KPMG applies in estimating the consumption of illicit tobacco. The research considers a number of factors, including empty pack surveys. It is certainly true that empty pack surveys do not provide the full picture but they do form an important factor in the equation as they rely purely on physical evidence, avoiding the variability of consumer bias in interview based methods. An additional advantage of empty pack surveys is that they provide a statistically robust and comparable volume of data as they are conducted consistently across all European markets. In 2010 approximately 430,000 packs were collected throughout Europe in 1,400 population centres. Additional analysis identifies if the empty pack survey may have over or under-reported the level of non-domestic packs with the samples being re-weighted to correct this.

The KPMG report also factors in consumer surveys (conducted by Ipsos and Nielsen) which drill into the detail of consumers' travel habits, overall consumption, gender and age to assess the level of legal non- domestic purchases. Approximately 10% of the 160,000 survey respondents both travel and purchase cigarettes abroad. These respondents are asked about the country of purchase and brands purchased. This data can also be adjusted where it appears to be under-reporting legal tobacco consumption. For example, correction of under-reporting increased the allocation of legally purchased packs from Spain to France and from Poland and the Czech Republic to Germany.

The article goes on to offer an alternative estimation methodology: the PPACTE study. However, it is prudent to consider the limitations of this study; notably, the reliance on consumer studies which both under- report tobacco consumption overall and, in particular, illicit tobacco consumption. The PPACTE study also uses a substantially smaller sample size e.g. the methodology used to calculate the illicit volumes equates to an average of less than 200 per country.

The consumption of tobacco - illicit or otherwise - is understandably a concerning issue for many people and organisations. While it may be superficially appealing to discount a report funded by a tobacco company, the methodology of the 'Project Star' report is robust and unbiased. This data set is an important source of knowledge for the tobacco industry and health campaigners alike. An issue can only be tackled, whether for commercial or health reasons, if its nature and scale is understood. The Project Star report is widely regarded, by companies and health and government organisations, as the leading source of data on illicit tobacco consumption in the EU.

Conflict of Interest:

Author of the report under examination in the paper published in December 2013, entitled 'Towards a greater understanding of the illicit tobacco trade in Europe: a review of the PMI funded 'Project Star''

Conflict of Interest

None declared