Tobacco Product Manufacturing Industry Overview

Excerpt from Tobacco Product Manufacturing Report

Companies in this industry stem and redry tobacco and manufacture cigarettes and other tobacco products. Major companies include Altria (owner of Philip Morris USA and UST), Lorillard, and Reynolds American (all based in the US), as well as British American Tobacco and Imperial Tobacco Group (both headquartered in the UK) and Japan Tobacco.

Competitive Landscape

Demand is driven by discretionary consumer spending and mitigated by awareness of the health effects of smoking. The profitability of individual companies depends on effective marketing. Large companies enjoy economies of scale in manufacturing and in their ability to offer wider ranges of products. Small companies can compete effectively through heavy discounting, through clever branding and packaging, and by exploiting niche categories such as pipe tobacco and additive-free cigarettes. The industry is highly concentrated: the eight largest companies generate about 90 percent of revenue.

Products, Operations & Technology

Cigarettes account for more than 80 percent of industry revenue. Other products include chewing tobacco, snuff, and cigars (about 10 percent of revenue). Tobacco stemming and redrying accounts for the remainder of industry revenue.