Tobacco Manufacturing

Tobacco Manufacturing

Brief Excerpt from Industry Overview Chapter:

Companies in this industry stem and redry tobacco and manufacture cigarettes and other tobacco products. Major companies include Altria, Philip Morris International, and Reynolds American (based in the US); China National Tobacco; British American Tobacco and Imperial Brands (both based 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 US industry is highly concentrated: the eight largest companies generate about 95% of revenue.

PRODUCTS, OPERATIONS & TECHNOLOGY

Cigarettes account for about 80% of US industry revenue. Smoking tobacco (such as pipe tobacco) and chewing tobacco combine for about 15%, while cigars make up less than 5%. Many companies in the industry also manufacture electronic cigarettes and similar products that vaporize nicotine without burning tobacco. The global revenue in the cigarette segment accounts for about $720 billion in 2022, according to Statista.