Nat Sherman Competition
Now Viewing Nat Sherman's competition in: Tobacco Manufacture (primary)
Call Preparation Questions
Customers, Marketing, Pricing, Competition
Which brands does the company emphasize in its marketing? - Cigarette makers generally focus marketing efforts on three to four key premium brands, allowing non-performing brands to die out or lay dormant.
How large is the company’s sales force? - Tobacco contracts, whether between processor and manufacturer or manufacturer and distributor, are often long-standing relationships that require a minimal sales force.
What new demographic segments is the company looking to attract? - Marketing to specific demographics can be tricky for cigarette makers, whose marketing practices are under constant scrutiny by anti-smoking groups. Currently, 18 percent of US women and over 23 percent of US men smoke.
What companies represent the greatest competitive threat? - The four “Big Tobacco” companies compete against one another, but an increasing global market results in competitive threats from companies such as British American Tobacco, Imperial Tobacco, and Japan Tobacco.
Who are the company’s largest wholesale customers? - Large distributors and warehouse clubs typically represent the bulk of a cigarette manufacturer’s sales.
What marketing vehicles have been most effective for the company? - Because of regulatory restrictions on TV and radio advertising, marketing focuses on advertising in print media and on billboards, and on event sponsorships. Manufacturers also promote cigarette brands through buy-one-get-one free offers, coupons, and point-of-sale advertising.
What is the company doing to improve the public image of smoking? - The typical 1950s image of the sophisticated smoker has been replaced by the stereotype of a smoker less educated and oblivious to the health dangers of smoking.
Competitive Landscape
Demand is driven by discretionary consumer spending and 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 capital-intensive: average annual revenue per worker for a typical company is $1.5 million.
Business Challenges
CRITICAL ISSUES
Government Regulation - Government oversight of the tobacco industry significantly impacts the profitability of individual companies. Federal regulation of tobacco advertising, state and local excise taxes, restrictions on public and workplace smoking, and the 1998 Master Settlement Agreement (MSA) have led to significant declines in tobacco production and smoking rates. FDA regulation of tobacco products and additional federal restrictions are possible.
Litigation Poses Ongoing Threat - While the MSA effectively ended state lawsuits against the tobacco industry, major cigarette manufacturers still face hundreds of individual and class action lawsuits. Philip Morris USA has nearly 200 lawsuits pending regarding individual smoking and health, and another 20 claiming misuse of the terms “light” and “ultra light.” A loss in any one of could cost a cigarette maker billions.
Industries Where Nat Sherman Competes
- Consumer Products Manufacturers
- Tobacco
- Cigarettes, Cigars, & Smokeless Tobacco Products(primary)
- Tobacco
- Retail
- Tobacco Retail
