Cigarette market in Luxembourg fuelled by commuters

What if the price of a packet of cigarettes were to rise by 60% in Luxembourg? The idea is far from far-fetched; the European Commission is considering a reform of the tobacco excise duty directive, according to an internal document leaked in June and seen by Virgule.

Both consumers and manufacturers are talking about the commission’s plan, and especially in Luxembourg, a country with attractive cigarette prices and where the tax windfall makes a significant contribution to state coffers.

Stable production in Luxembourg

While the sector’s fortunes have changed considerably since the early 2000s, when cigarette production exceeded 12 billion units, local manufacturer Landewyck Tobacco told Virgule: “This year, we will produce just over 8.3 billion cigarettes at Fridhaff, destined for more than twenty countries, mainly in Europe and beyond.”

“Around one in ten cigarettes sold in the Grand Duchy was manufactured by us, and therefore locally,” the company said. Luxembourg remains the largest market for Landewyck Tobacco.

The Fridhaff factory opened in 2019, consolidating “production that was previously spread across several sites in Luxembourg,” Landewyck Tobacco said. “In 2020, for its first year of operation, production was around 7 billion units, slightly below current output. Nevertheless, our cigarette production ten years ago already varied regularly between 7 and 9 billion units. So it’s fair to say that, despite annual variations, we’ve managed to keep production stable overall over the last decade.”

One million boxes of nicotine produced in Hollerich

Since 2022, Landewyck Tobacco, still a family-owned business, has invested in a new product that is as popular with (young) consumers as it is controversial: nicotine pouches. These are manufactured at a site in Hollerich, in the capital.

“Volumes this year will approach one million packs, destined for around fifteen European countries, including Luxembourg,” the company said.

But the country’s legislation could soon change. Bill 8333, introduced in 2023, plans to regulate heated tobacco products, nicotine pouches and other new nicotine products. Supported by anti-smoking campaigners such as the Cancer Foundation, Landewyck Tobacco is watching the bill’s progress with “great concern and incomprehension”.

Five billion cigarettes sold and counting

The importance of the tobacco market in Luxembourg is also reflected in cigarette sales and consumption figures. A study published by KPMG and commissioned by the Philip Morris International group showed a sharp increase in sales in the Grand Duchy. In 2024, 5.08 billion units were sold in the country, compared with 4.34 billion the previous year, a jump of 17%. In the space of five years, the number of units sold has risen by two billion.

The trend observed in the KPMG study is confirmed by data from Luxembourg’s Customs and Excise Agency (ADA), although its figures differ slightly. It told Virgule that in 2024, it recorded 4.9 billion cigarettes sold in Luxembourg, compared with 4.4 billion in 2023 and 3.3 billion in 2020.

However, the vast majority of these cigarettes are not smoked by residents. According to a 2024 Ilres survey on smoking prevalence in Luxembourg, there were 123,000 smokers aged 16 and older in Luxembourg. This represents 23% of residents, 15% of whom smoke daily and 8% occasionally.

According to figures from the KPMG study, of the 5.08 billion units sold in Luxembourg in 2024, 610,000 units were purchased by residents – that’s just over 10% of the total. This figure is stable compared with 2023.

Nevertheless, the “national consumption” figure has risen sharply – by more than 30% – over the last five years: it was 460,000 cigarettes in 2020. This is despite the Cancer Foundation’s action plan – and the increases in packet prices – which aims to achieve the first “generation of tobacco-free adults” by 2040.

Beyond “national consumption”, it is primarily the inhabitants of neighbouring countries who are making tobacco sellers happy. “There has been a big increase in sales to cross-border commuters in recent years,” said the manager of two cigarette sales outlets in Luxembourg, speaking on condition of anonymity.

The first is in the heart of the capital. “In this shop, sales are fairly stable”, he said. The second is on the outskirts, in a place frequented by large numbers of cross-border commuters. The figures for “this one is really impressive. Since the Covid-19 pandemic, sales have risen by 50% every year. We warn cross-border commuters about the quantities accepted by customs at the border and the risks involved beyond that, but they buy lots and lots and lots.”

Of the 5.08 billion cigarettes sold in Luxembourg, the KPMG report lists 750 million going to Germany, 740 million to Belgium and 660 million to France. That compares to 610,000 smoked in Luxembourg.

This business not only benefits traders but also the state. Revenues from tobacco sales amounted to €1.4 billion in 2024. According to projections, this figure is set to rise to 1.6 billion in 2025 and 1.9 billion in 2028.

(This article was first published by Virgule. Translated using AI, edited by Aaron Grunwald.)