see file for paper requirements
Instructions for 1st paper
After you have read about the Heidelberg BAT factory in Chapter 15 of the Bluen book, please respond to the following:
Create a visual that shows five of the most important globalization issues specific to this employer and rank them in importance to their business success. Your visual can be a chart, a flyer, or a drawing, as long as it is in a format that is accepted in TLC.
Then discuss in detail the top (#1) and bottom globalization issues (#5) and explain why you ranked them as you did.
Finally, look up the company/industry in each of the following:
a. IBISWorld (under library search box on TLC page, click “Additional Library Resources,” then click IBISWorld and search by company or industry).
b. Company’s website
c. Locate two high-quality articles related to globalization at this company (peer-reviewed high-quality references are found in the online library).
Review what you have learned from your research in a-c above, especially as it updates the case information in Bluen’s book. Bring in information from Chapter 2 of the Bluen book, too.
Remember to provide an introduction to your paper and a conclusion. Also cite sources and include a References page.
Your assignment (at least 4 to 5 pages, not counting the cover page and References page), should be submitted to the dropbox on or before the module due date.
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019
1
IBISWorld Industry Report 4249
4
Cigarette & Tobacco Products
Wholesaling in the US
October 2019 Griffin Holcomb
Kicking the habit: Rising excise taxes and declining
smoking rates will likely singe wholesalers
2
About this Industry
2
Industry Definition
2
Main Activities
2
Similar Industries
3 Additional Resources
4 Industry at a Glanc
e
5
Industry Performance
5 Executive Summary
7 Current Performance
9 Industry Outlook
12 Industry Life Cycle
14 Products and Markets
14
Supply Chain
14 Products and Services
16 Demand Determinants
17
Major Markets
18 International Trade
19 Business Locatio
ns
21
Competitive Landscape
21 Market Share Concentration
22 Cost Structure Benchmarks
24
Basis of Competition
26 Barriers to Entry
26 Industry Globalization
27
Major Companies
27 McLane Company Inc.
28 Altria Group Inc.
29 British American Tobacco PLC
30 Core-Mark Holding Company Inc.
32 Eby-Brown
32 AMCON Distributing Company
32 H.T. Hackney Company
33 PYXUS International, Inc.
34
Operating Conditions
34
Capital Intensity
35 Technology and Systems
35 Revenue Volatility
37 Regulation and Policy
38 Industry Assistance
39 Key Statistics
39
Industry Data
39
Annual Change
39
Key Ratios
40
Industry Financial Ratios
41
Jargon & Glossary
www.ibisworld.com | 1-800-330-3772 | info@ibisworld.com
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019
2
Companies in this industry acquire
packaged cigarettes and other tobacco
products from manufacturers and sell the
goods to retailers such as convenience
stores, supermarkets, specialized tobacco
stores, street vendors or internet tobacco
retailers. In addition, they may also sell to
other wholesalers. The sales and distribution
offices of tobacco product manufacturers are
included in this industry.
The primary activities of this industry are
Distributing cigarettes
Distributing cigars
Distributing loose and pipe tobacco
Distributing smokeless tobacco products such as snuff or snus
Distributing modern tobacco products such as e-cigarettes or vaporizers
Distributing accessories such as lighters, hookahs (water pipes) or ashtrays
11191 Tobacco Growing in the US
Establishments in this industry produce tobacco for cigarette and tobacco products.
31222 Cigarette & Tobacco Manufacturing in the US
Establishments in this industry manufacture cigarettes, cigars, smokeless tobacco and reconstituted tobacco
products.
44511 Supermarkets & Grocery Stores in the US
Establishments in this industry retail food, beverage and tobacco products to consumers.
44512 Convenience Stores in the US
Establishments in this industry retail basic food, beverage and tobacco products at accessible locations and
times.
44531 Beer, Wine & Liquor Stores in the US
Operators in this industry include retail stores specifically licensed to sell alcoholic beverages for off-premises
consumption.
Industry Definition
Main Activities
Similar Industries
About this Industry
The major products and services in this industry are
Cigars
Menthol cigarettes
Nontobacco products
Regular cigarettes
Other tobacco products
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019
3
About this Industry
Additional Resources For additional information on this industry
www.ttb.gov
Alcohol and Tobacco Tax and Trade Bureau
www.cdc.gov/tobacco
Centers for Disease Control and Prevention – Smoking & Tobacco Use
www.ownitvoiceit.com
Own It Voice I
t
www.ftc.gov
US Federal Trade Commission
IBISWorld writes over 1000 US
industry reports, which are updated
up to four times a year. To see all
reports, go to www.ibisworld.com
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 4
$
4.
0
2.0
2.
5
3.0
3.5
2511 13 15 17 19 21 23Year
Excise tax on tobacco products
SOURCE: WWW.IBISWORLD.COM
%
c
ha
ng
e
12
–
8
-4
0
4
8
2511 13 15 17 19 21 23Year
Revenue Employment
Revenue vs. employment growth
Products and services segmentation (2019)
46.3%
Regular cigarettes
26.1%
Menthol cigarettes
17.4%
Nontobacco products
5.4%
Other tobacco products
4.8%
Cigars
Key Statistics
Snapshot
Industry at a Glance
Cigarette & Tobacco Products Wholesaling in 201
9
Industry Structure
Life Cycle Stage
Decline
Revenue Volatility Medium
Capital Intensity Low
Industry Assistance Low
Concentration Level Medium
Regulation Level Heavy
Technology Change Medium
Barriers to Entry Medium
Industry Globalization Low
Competition Level High
Revenue
$131.0bn
Profit
$1.3bn
Wages
$2.8bn
Businesses
3,321
Annual Growth 19–24
-1.0%
Annual Growth 14–19
0.3%
Key External Drivers
Excise tax on
tobacco products
Percentage of smokers
Regulation for the
Cigarette and Tobacco
Production industry
Consumer spending
Market Share
McLane Company
Inc.
20.3%
Altria Group Inc.
18.5%
British American
Tobacco PLC
8.7%
Core-Mark
Holding Company
Inc.
8.4%
p. 2
7
p. 5
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 39
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 5
Key External Drivers Excise tax on tobacco products
Tobacco manufacturers are required to
pay federal excise taxes under chapter 52
of the Internal Revenue Code. The US
Alcohol and Tobacco Tax and Trade
Bureau is responsible for the collection of
tobacco excise taxes. Excise taxes are
passed down from manufacturer to
wholesaler in the form of higher purchase
prices (i.e. the cost of goods sold).
Additionally, individual states also levy
their own taxes on tobacco products,
which further drives up per-unit prices
and reduces demand for industry
products. The excise tax on tobacco
products is expected to increase in 2019.
Percentage of smokers
Per capita consumption of tobacco
products is falling due to increased
Executive Summary The Cigarette and Tobacco Products
Wholesaling industry has experienced
increasing sales over the five years to
2019, despite contending with growing
regulatory, economic and operational
challenges. During the current period,
the industry has experienced a spark in
the introduction of e-cigarettes into the
market as major players raced to grab
market share. For example, in 2018,
Altria Group Inc. purchased a 35.0%
stake in Juul Labs Inc. worth an
estimated $12.8 billion. Additionally,
PYXUS International Inc. purchased
51.0% of Humble Juice Co., an e-liquid
company. Nevertheless, over the past five
years, cigarettes and other tobacco
products have experienced intense
regulatory scrutiny from both the
government and public.
Federal excise taxes on cigarettes were
raised to historic highs immediately prior
to the current five-year period, while
rising levels of tobacco smuggling across
state lines continued to undermine the
efforts of regulators and bypass the
supply chain of tobacco wholesalers.
Meanwhile, cigarette consumption levels
have continued to decline steadily,
further reducing demand for the
industry’s largest product segment.
Nonetheless, falling demand for
cigarettes during the current period has
been more than offset by sustained
demand for noncigarette tobacco
products such as snuff, cigarillos,
e-cigarettes and premium cigars. Due in
part to revitalizing demand for smokeless
tobacco products and higher per-unit
prices on cigarettes, industry revenue has
increased at a modest annualized rate of
0.3% to $131.0 billion over the five years
to 2019. However, industry revenue is
expected to decline 0.6% in 2019 alone as
rising selling prices are offset by
declining volume sales of cigarettes.
Furthermore, the average industry profit
margin, measured as earnings before
interest and taxes, is expected to
comprise just 1.0% of industry revenue in
2019, down from 1.5% in 2014.
An increasingly stringent regulatory
environment and rising social stigma
against smoking and public tobacco use are
projected to further reduce consumption of
all tobacco products, which would ultimately
hurt industry revenue. Industry revenue is
forecast to decline at an annualized rate of
1.0% to $124.8 billion over the five years
to 2024. As revenue declines, total
industry participation growth is projected
to slow as well. Over the next five years,
the number of industry operators is
forecast to decline at an annualized rate of
0.4% to 3,247 companies.
Industry Performance
Executive Summary | Key External Drivers | Current Performance
Industry Outlook | Life Cycle Stage
Cigarettes and other tobacco products have
experienced intense regulatory scrutiny from
both the government and the public
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019
6
Industry Performance
Key External Drivers
continued
awareness of the adverse effects of
smoking. Additionally, hikes in federal or
state excise tax rates on cigarettes and
other tobacco products have played a role
in decreasing the number of smokers. In
general, a decrease in the percentage of
smokers leads to a lower sales volume of
cigarettes, which may reduce industry
revenue if per-unit prices are kept
constant. The percentage of smokers is
expected to continue decreasing in 2019,
posing a potential threat to the industry.
Regulation for the Cigarette and
Tobacco Production industry
Industry policy, with respect to the
distribution of these products, affects
issues such as product packaging,
restrictions on advertising and remittance
of state level excise taxes, which are levied
on distributors rather than tobacco
manufacturers. In general, increased
regulation at the manufacturing level
increases compliance costs for
manufacturers, which are almost always
passed down to distributors in the form of
higher purchase prices. In turn, higher
purchase prices reduce profit margins for
wholesalers, thereby hurting industry
performance. Regulation for the Cigarette
and Tobacco Production industry is
expected to increase substantially in 2019
due to the effects of the US Food and Drug
Administration’s New Tobacco Rule.
Consumer spending
Consumer spending on goods, including
cigarettes and other tobacco products,
typically expands as disposable income
levels rise and the economic outlook
improves. Higher consumer spending
encourages smokers to purchase cigarettes
more frequently and trade up to premium
brands, boosting industry revenue. Higher
consumer spending also tends to increase
foot traffic at convenience stores, a major
market for this industry. Consumer
spending is anticipated to increase in
2019, representing a potential opportunity
for the industry.
%
20
12
14
16
18
2511 13 15 17 19 21 23Year
Percentage of smokers
SOURCE: WWW.IBISWORLD.COM
$
4.0
2.0
2.5
3.0
3.5
2511 13 15 17 19 21 23Year
Excise tax on tobacco products
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 7
Industry Performance
Current
Performance
The Cigarette and Tobacco Products
Wholesaling industry distributes cigarettes,
cigars, e-cigarettes, smokeless tobacco
products and smoking accessories from
manufacturers to retailers. Despite
grappling with various regulatory, economic
and structural challenges, the industry has
performed surprisingly well over the five
years to 2019, with revenue having
increased an annualized 0.3% to $131.0
billion. However, this growth includes an
expected 0.6% decline in 2019 alone as
falling volume sales will likely continue to
weigh down on industry operators.
The number of establishments and
enterprises have grown significantly over the
five years to 2019, due in part to the
introduction of e-cigarettes and other
nonconventional markets. However, this
growth is mostly attributable to a significant
influx of nonemployer distributors.
Nonemployers generally purchase tobacco
products from larger national or regional
wholesalers and resell to local tobacco
shops, independent convenience stores and
small street vendors. The industry includes a
considerable number of self-employed
operators, which represent an estimated
56.2% of all establishments in 2019, but only
generate 0.2% of total industry sales. Many
of these smaller distributors have entered
the industry to serve the growing electronic
vapor products market. However, in 2018,
the US Food and Drug Administration
(FDA) declared a youth vaping epidemic
and demanded action from e-cigarette
manufacturers to halt sales of flavored
electronic cigarettes if major companies
could not prove they are doing enough to
keep age restricted products out of the
hands of teenagers. Overall, the number of
establishments has increased at an
annualized rate of 4.9% to 4,206 locations
over the five years to 2019. Consequently,
the number of enterprises has also increased
an annualized 1.3% to 3,321 companies over
the past five years. In addition, industry
employment has expanded at an annualized
rate of 2.1% to 56,243 workers during the
same period.
%
c
ha
ng
e
6
-6
-4
-2
0
2
4
2511 13 15 17 19 21 23Year
Industry revenue
SOURCE: WWW.IBISWORLD.COM
Tobacco regulation,
excise taxes and
demand for industry
products
Over the past 50 years, tobacco
manufacturers and wholesalers alike have
experienced increased regulatory scrutiny
and social stigma. Over the past 10 years
alone, state-level excise taxes on tobacco
products were raised more than 100 times
by almost every state, according to data
from Campaign for Tobacco-Free Kids. In
addition, the Family Smoking Prevention
and Tobacco Control Act was enacted in
2009, which placed more-stringent
marketing restrictions on tobacco products,
banned the sale of flavored cigarettes and
prohibited the use of terms such as light or
mild on tobacco packaging. This law was
followed by the unprecedented April 2009
federal excise tax hike, which raised the
federal tax on cigarettes from $0.39 to
$1.01 per pack. In 2012, Congress passed
the Prevent All Cigarette Trafficking act,
which increased the burden on tobacco
distributors and retailers to prevent
interstate smuggling and illicit online sales
of tobacco products. Although most of
these regulations were drafted prior to the
current period, they have had a major
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 8
Industry Performance
influence on industry operators over the
past five years.
Recently, the FDA extended its regulatory
control overall all tobacco products, but
primarily focused on the e-cigarette segment
during the current period. Prior to 2016,
regulation in the electronic cigarette market
varied across the United States. The FDA
previously classified electronic cigarettes as
drug delivery devices rather than a tobacco
product. The classification was challenged in
court and overruled in 2010 by Federal
District Court Judge Richard J. Leon,
explaining that, “the devices should be
regulated as tobacco products rather than
drug or medical products.” In April 2014,
the FDA proposed new regulations for
tobacco products, including e-cigarettes.
These new regulations require the disclosure
of ingredients used in e-cigarette liquids,
proof of safety of those ingredients and
regulation of the devices used to vaporize
and deliver the liquid. Additionally, in
2014, attorney generals from over two
dozen states pushed the FDA to enact
restrictions on entry level e-cigarette
flavors, such as candy and beverage flavors.
It was not until May 2018 that the FDA
began to crack down on e-liquid and
e-cigarette brands with packaging that
resembled candy, juice boxes and other
products intended to appeal to children.
Due to higher federal and tax rates on
cigarettes, per capita cigarette consumption
has declined steadily over the past two
decades, causing sales volumes to fall and
reducing demand for the industry’s largest,
most profitable product segment. Similarly,
widening disparities in tax rates between
states caused tobacco smuggling to rise at
alarming rates, further undermining the
efforts of regulators and tobacco wholesalers
alike. Cigarette carton sales have been on
the decline for over a decade. According to
data from the US Federal Trade
Commission Cigarette Report, total carton
sales fell an annualized 3.5% between 2011
and 2016 (latest data available).
Additionally, cigarette shipments declined at
an annualized rate of 1.1% between 2014
and 2016, according to retail sales data from
Management Science Associates Inc.
In response to the increased regulation of
cigarettes and declining consumption levels,
industry operators focused on marketing
and distributing noncigarette tobacco
products such as snus, chewing tobacco,
cigars and cigarillos, pipe tobacco and
e-cigarettes. Consequently, demand for
these alternative products has increased
over the five years to 2019, somewhat
offsetting the decline in cigarette sales. For
example, annual retail sales of smokeless
products, including e-cigarettes, grew at a
rapid annualized rate of 7.2% between 2013
and 2017 (latest data available) according to
major player Altria Group Inc. (Altria).
Moreover, noncigarette tobacco products
are generally sold at a higher margin than
cigarettes, which further encouraged
industry operators to purchase and
distribute a greater share of these products
relative to cigarettes to offset a declining
profit margin.
Tobacco regulation,
excise taxes and
demand for industry
products continued
Industry structure The Cigarette and Tobacco Products
Wholesaling industry is dominated by a
combination of national players and
regional operators. Altria and British
American Tobacco PLC (British
American Tobacco), the second- and
third-largest operators in this industry,
both produce and distribute cigarette and
tobacco products. Meanwhile, the four
largest independent tobacco distributors,
McLane Company Inc., Core-Mark
Holding Company Inc. (Core-Mark),
Operators are expected to
derive a greater share of
revenue from noncigarette
tobacco products
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 9
Industry Performance
Industry structure
continued
Eby-Brown and H.T. Hackney Company,
account for only 45.0% of merchant
wholesaler revenue in 2019. Over the past
five years, market share concentration has
increased significantly due to heightened
merger and acquisition activity. For
example, California-based wholesaler
Core-Mark acquired JT Davenport & Sons
Inc. in 2012, increasing the company’s
presence in the Southeast region of the
United States. Core-Mark completed
several other acquisitions over the
following years, ultimately causing the
company’s industry-relevant revenue to
rise an annualized 10.3% over the five years
to 2019. More recently, Reynolds American
Inc. (RAI) completed its acquisition of
major tobacco company Lorillard Inc.,
which further boosted the company’s share
of the industry. However, in mid-2017, RAI
itself was acquired by British American
Tobacco, one of the leading global
manufacturers of tobacco products.
Similar to most other nondurable
goods wholesalers, this industry has
traditionally been characterized by
high trade volumes and razor-thin
operating margins. As a result,
wholesale distributors of tobacco
products are pressured to mark up
their prices as little as possible to
ensure adequate sales volumes,
especially as tobacco product prices
have increased through higher federal
and state excise tax rates.
Consequently, the average industry
profit margin, measured as earnings
before interest and taxes, has fallen
from 1.5% of revenue in 2014 to an
estimated 1.0% in 2019. As profit from
cigarette sales continues to decline,
industry operators are expected to
derive a greater share of revenue from
noncigarette tobacco products such as
e-cigarettes or smokeless tobacco.
These products are relatively more
profitable because they are currently
subject to lower excise tax rates and
continue to experience less regulatory
scrutiny than cigarettes.
Industry
Outlook
The Cigarette and Tobacco Products
Wholesaling industry will likely continue
to contend with major challenges over
the five years to 2024, including gradual
drops in smoking rates, rising excise
taxes and illicit trade across state lines.
However, unlike the five-year period to
2019, industry revenue is not anticipated
to expand over the next five years.
Demand for all product segments will
likely begin to slow down in response to
broader regulatory pressure from the US
Food and Drug Administration (FDA),
Federal Trade Commission, Alcohol and
Tobacco Tax and Trade Bureau and other
public and private institutions.
Competition and
threats
Operators have experienced a threat from
both retailers and manufacturers in recent
years. Several major tobacco product
manufacturers have their own wholesale
distribution operations, while larger
operators with an established national
presence, such as McLane Company Inc.
and Core-Mark Holding Company Inc.,
continue to consolidate their distribution
networks. These trends have made smaller
merchant wholesalers, particularly those
operating at the regional level,
increasingly obsolete. As a result, industry
revenue is forecast to contract at an
Operators have experienced
a threat from both retailers
and manufacturers
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019
10
Industry Performance
Competition and
threats continued
annualized rate of 1.0% to $124.8
billion over the five years to 2024, as
continued price markups across all
tobacco categories will likely be offset
by significant declines in volume sales
of cigarettes.
Over the next five years, the trajectory
of establishment and enterprise growth
will likely reverse course from the
previous period. The number of
establishments is forecast to decrease at
an annualized rate of 0.6% to 4,086
locations during the outlook period, while
industry employment is projected to
decline an annualized 0.5% to 54,869
workers. Industry participation is
expected to decrease because newly
enacted FDA regulations on electronic
nicotine delivery products will likely make
operating conditions less favorable for
smaller merchant wholesalers that have
experienced good fortune in the past.
Smoking rates on the
way down
Despite major efforts to curb smoking
and regulate the tobacco industry over
the past few decades, smoking remains
the leading cause of preventable
disease in the United States according
to the Office of the Surgeon General.
Furthermore, the Centers for Disease
Control and Prevention’s Youth Risk
Behavior Survey found that, although
the percentage of youth who smoke
cigarettes fell to 15.7% in 2014, the
share of young Americans who still
experiment with other tobacco
products, especially e-cigarettes and
smokeless tobacco, has remained
relatively high. Accordingly, anti-
smoking organizations will likely
increasingly focus on reducing
smoking rates among younger people,
especially adults under the age of 21,
because they are much less likely to
experiment with tobacco later in life.
Negative attitudes toward smoking are
a major factor that will likely affect
this industry over the next five years
and continued antismoking campaigns
are likely to lower tobacco
consumption among adults between
the ages of 18 and 26.
Overall, cigarette smoking rates are
forecast to continue to decline over the
coming years. In particular, IBISWorld
expects the percentage of smokers to
drop from 15.2% in 2019 to a projected
13.3% in 2024. Additionally, federal,
state and provincial excise taxes on
tobacco products are expected to
continue increasing, which is projected
to further raise the price of tobacco
products and drive down demand.
Tobacco wholesalers, which already
experience a very low profit margin, are
likely to endure an even lower operating
margin in the future as they focus on
sustaining high sales volume despite
rising prices. Over the past two years,
manufacturers such as Altria Group Inc.
have reduced wholesale promotional
allowances and initiated significant price
markups on tobacco products to sustain
profit. These actions will likely continue
over the coming years and ultimately
take a toll on the average profit margin
for this industry.
Cigarette smoking rates
are forecast to continue to
decline over the coming
years
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 11
Industry Performance
Regulatory
environment
While regulations that restrict the use of
e-cigarettes were recently implemented at
the federal level by the FDA,
implementing new regulations will likely
remain a top priority for state and local
authorities over the five years to 2024.
New warning label requirements and
increasing pressure to raise the minimum
smoking age from 18 to 21 in many states
will likely be enacted over the next five
years. However, these proposed new
regulations are more likely to affect the
manufacturers of tobacco products rather
than the distributors. Nonetheless, a more
stringent regulatory environment
increases compliance costs for
manufacturers. These costs are then
passed off to distributors in the form of
higher product prices, which increases
purchase costs for industry operators and
lowers profitability. Similarly, rising excise
taxes will likely have an increasingly
adverse effect on industry participants
over the next five years by lowering overall
consumption of tobacco, leading to
reduced volume sales and profitability.
Rising excise taxes will
likely have an increasingly
adverse effect on industry
participants
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 12
Industry Performance
Industry value added is expected to decline over the 10 years to 2024
Per capita and total consumption of cigarettes has
declined in all but two years since 1994
Cigarette manufacturers are reducing
promotional allowances for wholesalers
Tobacco-related regulation at the manufacturing, wholesaling and
retailing levels is expected to rise significantly over the coming years
Life Cycle Stage
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 13
Industry Performance
Industry Life Cycle The Cigarette and Tobacco Products
Wholesaling industry is in the decline
phase of its life cycle. Over the 10 years to
2024, industry value added (IVA), which
measures an industry’s contribution to
the economy, is projected to decline at an
annualized rate of 1.2%. In comparison,
US GDP is forecast to grow an annualized
2.0% during the same period. While
there was some positive movement in
IVA during the first half of the five-year
period to 2019, it is expected to shrink
steadily over the five years to 2024. This
is due primarily to the increasing health
consciousness of American consumers
and rising excise taxes on tobacco, both
of which have dampened demand for
industry products. Over the past decade,
tobacco companies have largely been able
to apply price markups that effectively
offset volume declines in tobacco
consumption. This trend has started to
reverse during the past two years and is
likely to move unfavorably in tobacco’s
direction during the latter half of the
10-year period.
Per capita consumption of all tobacco
products has continued to decline over
the five years to 2019. Although demand
for noncigarette tobacco products, such
as smokeless tobacco or e-cigarettes, has
somewhat offset declines in cigarette
consumption, this trend is very unlikely
to generate further industry expansion
during the second five-year period. The
industry is also undergoing a period of
consolidation and concentration as
operators streamline their distribution
facilities and lay off employees to salvage
razor-thin profit margins. Consequently,
the number of establishments, individual
enterprises and employment are all
expected to decline during the latter half
of the 10-year period in response to
falling profit margins, declining sales
volume and higher purchase costs.
This industry is
in Decline
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 14
Products and Services Despite falling consumption figures,
cigarettes remain the largest product
category distributed by the Cigarette and
Tobacco Products Wholesaling industry,
accounting for an estimated 72.4% of
total revenue in 2019. This segment
consists of non-menthol cigarettes and
menthol cigarettes, which account for
46.3% and 26.1% of industry revenue,
respectively, in 2019. Volumes of
cigarettes consumed domestically had
fallen every year between 1994 and 2007,
but picked up again in 2008 and 2009
due to the effects and stresses of the
recession such as high unemployment.
However, according to data from the
Federal Trade Commission, domestic
consumption of cigarettes declined from
274.4 billion units in 2011 to 240.5 billion
units in 2016 (latest available data).
Furthermore, according to retail sales data
from Management Science Associates
Inc., cigarette shipments declined an
annualized 1.1% between 2013 and 2016
(latest data available). The market for
cigarettes is heavily concentrated, with
Altria Group Inc.’s Marlboro brand alone
accounting for a 43.1% share of revenue,
followed by Reynold American Inc.’s
respective top brands, which are now
rolled up into British American Tobacco
PLC (34.0%), according to retail sales data
from Management Science Associates Inc.
in 2017 (latest data available).
Products & Markets
Supply Chain | Products and Services | Demand Determinants
Major Markets | International Trade | Business Locations
KEY BUYING INDUSTRIES
44511 Supermarkets & Grocery Stores in the US
Supermarket chains are a major purchaser of tobacco products since they are a key link to
final consumers.
44512 Convenience Stores in the US
These stores are convenient sources of cigarette and other tobacco product purchases
44531 Beer, Wine & Liquor Stores in the US
Liquor stores are another key link in selling brands to end-users.
44611 Pharmacies & Drug Stores in the US
Pharmacies and drug stores are a relatively minor source of sales for wholesalers, but they are
another link to consumers.
44711 Gas Stations with Convenience Stores in the US
These stores are convenient sources of cigarette and other tobacco product purchases
45399 Small Specialty Retail Stores in the US
This industry includes specialist tobacco stores, which purchase such products via distributors.
71321 Non-Hotel Casinos in the US
Non-hotel casinos operate bars and typically sell tobacco products alongside alcoholic
beverages.
71391 Golf Courses & Country Clubs in the US
These private clubs are responsible for a small portion of cigar and pipe tobacco sales, either
directly from the manufacturer or through a wholesaler.
72241 Bars & Nightclubs in the US
Such establishments also sell cigarettes, cigars and loose tobacco to customers, so they are an
important source of sales for wholesalers.
KEY SELLING INDUSTRIES
31222 Cigarette & Tobacco Manufacturing in the US
All products purchased for further sale onto retailers are sourced from cigarette and other
tobacco product makers.
Supply Chain
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 15
Products & Markets
Products and Services
continued
Factors that have reduced cigarette
consumption include greater awareness
over the potential health risks associated
with smoking, rising excise taxes at both
the federal and state levels, increasing
social stigma against smoking and
stricter restrictions on where people can
smoke (i.e. bars and other
establishments). IBISWorld anticipates
this product segment’s share of industry
revenue to shrink over the five years to
2024, as per capita cigarette
consumption continues declining in
response to ongoing regulatory and
societal pressure against smoking.
Other tobacco products
Other tobacco products include
smokeless and pipe tobacco, cigars and
other noncigarette tobacco products.
Cigars are a small niche market in terms
of sales volume and value, accounting for
an estimated 4.8% of industry revenue in
2019. Relatively lower excise taxes on
both large and small cigars (also known
as cigarillos) have helped boost this
product category over the five years to
2019. Furthermore, cigars are not subject
to the same regulations as cigarettes and
can therefore be sold individually (rather
than by the pack) or flavored with mint
or fruit flavors. The recent ruling on
machine-made and premium cigars by
the US Food and Drug Administration
(FDA) has yet to have a significant effect
on this product category’s performance.
Chewing tobacco and other smokeless
tobacco products are a small but rapidly
growing product category for this industry,
representing an estimated 5.4% of industry
revenue in 2019. This growth can be
attributed to growing numbers of smokers
switching from cigarettes to smokeless
tobacco products. Over the past five years,
smokeless tobacco has experienced fewer
hikes in federal or state tax rates than
cigarettes have, which has kept the per-unit
price of smokeless tobacco relatively lower
than a pack of cigarettes. Furthermore,
smokeless tobacco products are generally
perceived to be a less harmful alternative to
cigarettes, although multiple studies have
shown that smokeless tobacco can lead to
major health issues such as gum disease or
mouth cancer. IBISWorld expects
consumption of smokeless tobacco
products to continue rising over the next
five years, partially offsetting declining
cigarette consumption. Manufacturers are
heavily promoting smokeless tobacco
products, while demand for these products
will continue to rise as smokers
increasingly look for new alternatives to
satisfy their nicotine habit.
Products and services segmentation (2019)
Total $131.0bn
46.3%
Regular cigarettes
26.1%
Menthol cigarettes
17.4%
Nontobacco products
5.4%
Other tobacco products
4.8%
Cigars
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 16
Products & Markets
Demand
Determinants
Demand for the Cigarette and Tobacco
Products Wholesaling industry is
dependent on downstream demand from
retailers, which in turn is dependent on
overall demand for tobacco products from
American consumers. From a scientific
standpoint, consumers primarily demand
cigarettes and other tobacco goods
because of its naturally high nicotine
content, which has been shown to cause
long-term addiction in tobacco users.
Partly due to tobacco’s inherently
addictive nature, dollar sales of tobacco
products have remained surprisingly high
over the past two decades, despite growing
efforts to curb smoking and further
regulate the tobacco industry.
Although industry revenue has
actually increased over the five years to
2019, per-unit consumption of cigarettes
has nonetheless steadily declined,
mostly in response to steps taken by the
federal and state governments to
discourage consumption of tobacco
products. These measures include
restricting advertising and sales
promotion activities, requiring health
warnings be printed on cigarette
packets, bans on smoking in specified
locations and public anti-smoking
campaigns funded by annual payments
from the largest tobacco manufacturers
(See Industry Assistance and Regulation
and Policy).
Products and Services
continued
Nontobacco products
Electronic cigarettes, better known as
e-cigarettes, are electronic devices
designed to simulate the experience of
smoking a conventional cigarette by
heating a liquid solution or aerosol,
which then produces a smoke-like vapor
that delivers a dose of nicotine to the
user. Unlike conventional tobacco
products, e-cigarettes not regulated by
FDA for most of the five-year period,
although the FDA recently extended its
regulatory control over e-cigs and other
similar novel products in mid-2016.
IBISWorld estimates that wholesale
revenue from the distribution of e-cigs
has grown from less than 0.1% of
industry revenue in 2014 to an
estimated 2.0% in 2019. The largest
operators in this industry mostly
distribute e-vapor products to
convenience stores and generally do not
serve e-vapor shops and other
independent tobacco stores. In 2015,
the leading e-vapor product sold at
convenience stores was Reynold
American’s VUSE brand, which
generated $221.1 million in retail sales
that year. However, in 2018, the leading
product was an electronic cigarette from
JUUL Labs, a spinoff of PAX labs. According
to Bonnie Herzog, a senior analyst at Wells
Fargo, JUUL Labs recorded $2.0 billion in
revenue in 2018 (latest data available).
Other leading e-vapor brands include blu,
Logic and Nu Mark.
In addition to e-cigarettes, industry
wholesalers also purchase and distribute
a variety of smoking accessories and
other products, ranging from lighters,
ashtrays and water pipes (hookahs) to
vaporizers and nicotine replacement
therapy solutions. Industry operators
also distribute nontobacco products,
such as breath-freshening gum,
lozenges, candy, beverages and snacks to
convenience stores, pharmacies and a
variety of other retail outlets; sales of
these products are expected to account
for the remaining 17.4% of industry
revenue in 2019. The largest categories
within this miscellaneous segment are
candy and chocolate (6.5% of the
industry), snacks (less than a 3.5%
share) and frozen food products (less
than 1.5% share).
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 17
Products & Markets
Major Markets
Tobacco companies sell their products to
intermediary distributors, which then resell
the products to retailers such as convenience
stores, grocery stores, supermarkets,
pharmacies and specialty tobacco shops.
Since the Cigarette and Tobacco Products
Wholesaling industry includes the sales and
distribution branches of tobacco product
manufacturers (formally known as MSBOs),
wholesalers represent the single largest
market for industry products. This market
segment consists of two broad types of
wholesalers: candy and tobacco distributors
and broadline grocery distributors. At the
retail level, convenience stores represent the
single-largest market for tobacco products,
followed by supermarkets and grocery
stores, pharmacies and discount stores and
other retailers.
Wholesalers
The wholesale distribution branches of
major tobacco companies such as Altria
Group Inc. and British American Tobacco
PLC sell substantially all of their products to
intermediary national and regional
wholesalers. None of the leading tobacco
manufacturers sells directly to consumers.
In fact, IBISWorld estimates that MSBOs
generate over 99.6% of sales from direct
shipments to domestic wholesalers, with
export sales and sales to military bases and
certain retailers accounting for the balance.
As a result, this industry experiences very
little, if any, external competition from
wholesalers. In contrast, wholesalers do
present a significant threat to many other
nondurable goods wholesalers (IBISWorld
reports 42445 and 42449). In 2019, sales
associated with MSBO-to-wholesaler and
wholesaler-to-wholesaler distribution
operations are expected to account for
46.5% of total industry revenue.
Convenience stores
Cigarettes and other tobacco products are
sold through a variety of outlets, with
convenience stores and supermarkets
representing the largest retail channels for
tobacco products. Cigarette and other
tobacco products contribute over 40.0% to
average convenience store’s annual sales,
according to the Association for
Convenience and Fuel Retailing.
Convenience stores are the largest market
for industry sales other than wholesalers
because they are located throughout urban
areas and are often attached to gas stations,
thereby making them a highly visible and
convenient place to purchase cigarettes and
other tobacco products. Most of these
locations are served by convenience store
wholesalers, which include national leaders
such as Core-Mark International, as well as
Major market segmentation (2019)
Total $131.0bn
46.5%
Wholesalers
40.1%
Convenience stores and gas stations
8.7%
Supermarkets, pharmacies and grocery stores
4.7%
Other retail
channels
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 18
Products & Markets
Major Markets
continued
regional leaders such as Eby-Brown, HT
Hackney and AMCON Distributing Co. This
market has been the fastest-growing
segment in the Cigarette and Tobacco
Product Wholesaling industry over the past
five years. IBISWorld estimates convenience
stores to account for 40.1% of industry
revenue in 2019.
Grocery stores and supermarkets
Although the grocery store and supermarket
segment has traditionally been a major
market for tobacco wholesalers, a growing
number of well-known grocery store chains
are choosing to remove cigarettes and other
tobacco products from their shelves in
response to negative scrutiny over their
effects on consumer health. This market
segment also includes pharmacies, discount
stores (e.g. dollar stores), department stores
and mass merchandisers (e.g. Walmart).
For example, CVS Pharmacy, which
operates over 7,700 locations nationwide,
set a new precedent by removing all
tobacco items from its shelves on October
1, 2014. CVS’s move is likely to pressure
other large pharmacy or grocery chains to
follow suit in the near future. As a result,
IBISWorld estimates that this segment
accounts for an estimated 8.7% of industry
revenue in 2019, having declined steadily
since 2014 and anticipated to continue
declining as a share of revenue during the
next five-year period.
Other retail channels
Other outlets, which include specialty
tobacco stores (e.g. cigar bars, hookah bars
and e-vapor shops), street vendors and
online retailers account for the remaining
4.7% of industry revenue in 2019. This
segment has remained stable over the past
five years, with expanding sales to street
vendors and specialty tobacco stores offset
by declining sales to online tobacco sellers.
Despite widespread expansion in internet
sales within other wholesale and retail
industries, the number of online tobacco
retailers has actually decreased over this
period. This trend is primarily caused by the
increasingly uncertain regulatory
environment surrounding online tobacco
sales, which has discouraged most internet
retailers from further expanding their
business operations. The majority of
online tobacco distributors sell premium
handmade cigars, premium snuff or snus
products imported from abroad, smokers’
accessories and other noncigarette
tobacco products. Wholesaler shipments
to online retailers of cigarettes currently
account for a negligible share of revenue
and are likely to remain insignificant over
the five years to 2024.
International Trade No trade data is recorded for the
Cigarette and Tobacco Products
Wholesaling industry since it is
accounted for exclusively at the
manufacturer level (IBISWorld report
31222). Some wholesalers are involved in
importing and exporting tobacco
products across Canada, although
substantial tariffs that target tobacco
trade across international lines and the
overall regulatory environment
discourages most operators from directly
importing or exporting tobacco products
to other countries. Certain cigar
distributors, most of which are situated
in Florida, may also import premium
cigars from Nicaragua, the Dominican
Republic and other countries.
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 19
Products & Markets
Business Locations 2019
MO
2.0
West
West
West
Rocky
Mountains Plains
Southwest
Southeast
New
England
VT
0.4
MA
1.5
RI
0.1
NJ
4.2
DE
0.3
NH
0.4
CT
1.2
MD
1.0
DC
0.0
1
5
3
7
2
6
4
8 9
Additional States (as marked on map)
AZ
0.8
CA
11.6
NV
1.0
OR
0.4
WA
1.8
MT
0.4
NE
0.7
MN
2.0
IA
1.0
OH
2.8
VA
2.4
FL
10.9
KS
0.5
CO
0.9
UT
0.4
ID
0.5
TX
6.4
OK
0.9
NC
3.4
AK
0.4
WY
0.1
TN
2.3
KY
2.2
GA
2.2
IL
4.5
ME
0.3
ND
0.3
WI
1.2 MI
2.9
PA
6.4
WV
0.7
SD
0.3
NM
0.4
AR
1.2
MS
1.0
AL
1.3
SC
1.7
LA
1.4
HI
0.4
IN
2.0
NY
7.4 5
6
7
8
3
21
4
9
SOURCE: WWW.IBISWORLD.COM
Mid-
Atlantic
Establishments
(%)
Less than 3%
3% to less than 10%
10% to less than 20%
20% or more
Great
Lakes
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 20
Products & Markets
Business Locations The spread of establishments in the
Cigarette and Tobacco Products
Wholesaling industry generally follows
the spread of upstream tobacco product
manufacturers and downstream retailers.
Based on data from the US Census
Bureau, tobacco product wholesalers are
heavily concentrated in the Southeast,
Mid-Atlantic and the Great Lakes
regions. A large share of cigarette
manufacturing establishments is also
located in these regions. The Southeast
region accounts for the largest share of
industry establishments, with Florida
and North Carolina being most
significant states in this region at 10.9%
and 3.4% of establishments, respectively,
in 2019. Likewise, almost two-thirds of
tobacco product manufacturing
establishments are also based in this
region, and the region is major tobacco
growing area. The region is also home to
about one-third of all convenience stores,
a major downstream market for this
industry’s products. Overall, the
Southeast region accounts for 30.5% of
industry establishments in 2019.
The Mid-Atlantic region represents
the second-largest region in terms of
tobacco product wholesaling
establishments, accounting for an
estimated 19.2% of the total in 2019.
Furthermore, the Great Lakes accounts
for 13.4% of wholesaling establishments
in 2019, but less than 5.0% of all
manufacturing facilities. This indicates
that wholesalers are primarily located in
the Great Lakes and New England (with
3.9% of establishments in 2019) regions
to service local area customers. Almost
one-quarter of all of convenience stores
in the United States are located in these
two regions.
The Southwest and West regions
account for an estimated 8.5% and 15.6%
of industry establishments, respectively,
in 2019. These establishments are also
located close to both tobacco product
makers and farming areas. In 2019,
California accounts for 12.1% of the
population and 11.6% of establishments.
These establishments position
themselves where they will likely have
greater access to a larger portion of the
population and the markets that have a
higher demand.
%
40
0
10
20
30
So
ut
hw
es
t
W
es
t
G
re
at
L
ak
es
M
id
-A
tl
an
ti
c
N
ew
E
ng
la
nd
Pl
ai
ns
R
oc
ky
M
ou
nt
ai
ns
So
ut
he
as
t
Establishments
Population
Distribution of establishments vs. population
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 21
Key Success Factors Economies of scale
Achieving scale economies through
investment in large warehouse facilities can
maximize profitability if the wholesaler
operates at peak volume processing
capacity. This is critical in an industry that
operates at a razor thin gross profit margin.
Having relationships with key markets
Linkages with large convenience store
or supermarket chains, which generate
the majority of sales, are paramount to
ensuring a continuous demand for the
tobacco products traded.
Automation – reduces
costs, particularly those
associated with labor
The ability to improve and
invest in warehousing and
order processing technology
will likely reduce processing
Market Share
Concentration
The Cigarette and Tobacco Products
Wholesaling industry as a whole is
characterized by a medium level of market
share concentration, with the four largest
operators expected to account for just over
55.0% of industry revenue in 2019. This
industry can be categorized into two
distinct classes of operators: merchant
wholesalers, otherwise known as
independent tobacco distributors; and the
wholly owned distribution subsidiaries of
tobacco product manufacturers, formally
known as manufacturers’ sales branches
and offices (MSBOs). Despite representing
the vast majority of industry enterprises,
establishments and employees, tobacco
distributors are expected to generate just
three-fourths of industry revenue in 2019.
Market share concentration is
considerably higher among MSBOs, where
just the top two operators account for
almost 90.0% of total manufacturer
wholesaling revenue. Among merchant
wholesalers, which only distribute and do
not produce any tobacco products, the top
four companies account for a 46.6% share of
total merchant wholesaling revenue.
Nonetheless, market share concentration
drops quickly after accounting for the top
four operators, with the next four largest
companies combined (including both
MSBOs and merchant wholesalers)
accounting for under 10.0% of total revenue.
In terms of overall competitive
landscape, this industry is characterized
by four major players that manufacture or
distribute tobacco products on a national
level, followed by four distributors that
operate on a regional level. In turn, these
eight large players are trailed by hundreds
of small distributors that operate at the
state or local level. In fact, nonemployers,
or one-person businesses, comprise 56.2%
of all industry establishments, although
they are anticipated to generate less than
0.2% of total industry revenue. Moreover,
individual businesses with more than 500
workers comprise only 2.0% of all
industry operators, although they generate
more than three-fourths of total revenue.
IBISWorld forecasts market share
concentration to increase considerably in
the upcoming years because of industry
consolidation among both manufacturing
distributors and merchant wholesalers.
In fact, the third-largest company, British
American Tobacco PLC (British
American Tobacco), recently completed
its acquisition of Reynolds American Inc.,
which boosted the company’s market
share from 3.7% in 2014 to an estimated
8.7% in 2019. Merchant wholesalers (e.g.
Core-Mark Holding Company Inc. and
Eby-Brown) have also increased their
share of the market via acquisitions in
recent years. While acquisition activity
among MSBOs will likely be limited in
the coming years, consolidation activity
among merchant wholesalers is expected
to increase as national operators continue
to expand their distribution capacity
reach via acquisitions.
Competitive Landscape
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks
Basis of Competition | Barriers to Entry | Industry Globalization
Level
Concentration in this
industry is Medium
IBISWorld identifies
250 Key Success
Factors for a
business. The most
important for this
industry are:
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 22
Competitive Landscape
Cost Structure
Benchmarks
Except for mandatory remittance of excise
taxes at the state or local levels, the
Cigarette and Tobacco Products
Wholesaling industry’s cost structure is
mostly consistent with those of other
nondurable goods wholesaling industries.
Purchases make up the majority of
operating expenses, while depreciation
rates and profit margins are
characteristically low despite very high
sales volume.
Wages
Labor represents a very small share,
estimated to account for only 2.1% of
revenue in 2019. Wage’s share of revenue
has increased slightly over the past five years
from 2.0% in 2014, primarily due to
increased capital expenditures on
automated inventory control systems, which
has enabled operators to manage their
distribution networks more efficiently and
effectively, but requires higher skilled labor
Key Success Factors
continued
and labor costs while maximizing total
volume sold.
Optimum capacity utilization
Using up all warehouse capacity
is essential to maximize the
economic efficiency of an operation,
thereby reducing the ratio of
overhead costs to revenue.
Operators experience a
comprehensive and increasingly
tougher regulatory environment
The success of industry operators
depends heavily on compliance with
broad, comprehensive regulation of
tobacco products, which can vary
widely across states lines and different
tobacco product types.
Sector vs. Industry Costs
n Profi t
n Wages
n Purchases
n Depreciation
n Marketing
n Rent & Utilities
n Other
Average Costs of
all Industries in
sector (2019)
Industry Costs
(2019)
0
20
40
60
Pe
rc
en
ta
ge
o
f
re
ve
nu
e
80
100
SOURCE: WWW.IBISWORLD.COM
3.6 1.0
15.9
0.5
0.2
0.2
80.1
2.1
14.0
0.60.3
0.6
75.6
5.3
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 23
Competitive Landscape
Cost Structure
Benchmarks
continued
to operate. In turn, this has lowered the
average number of employees per
establishment, while slightly increasing
wages. As competition for talented
employees intensifies, workers will gain
more bargaining power for corporate
reputation and benefits. Nonetheless,
overall industry employment has remained
relatively flat during the five-year period at
56,243 workers in 2019. Over the next five
years, wages’ share of revenue will likely
remain low as anticipated future spikes in
federal or state excise taxes, coupled with
declining tobacco consumption, pressure
operators to minimize labor costs to
remain profitable.
Purchases
Purchases of tobacco products from
manufacturers are the largest expense for
industry participants, accounting for 80.1%
of revenue in 2019. This cost category also
includes purchases of diesel, liquefied
petroleum gas (LPG) and other fuels used to
operate distribution vehicles. Industry
operators purchase most of their tobacco
products from the three largest tobacco
manufacturers: Altria, British American
Tobacco PLC and Imperial Brands PLC.
These manufacturers have raised their unit
prices significantly over the past five years to
compensate for falling sales volume,
increases in per-unit excise taxes at the
federal level, ongoing payments as part of
the Master Settlement Agreement
(MSA), and to pay for tobacco-related
litigation expenses not covered by the
MSA. In general, federal excise taxes on
tobacco products are remitted by
tobacco manufacturers to the
appropriate federal agencies. As a result,
changes in federal excise taxes are
directly reflected in the per-unit price
charged by manufacturers to
downstream wholesalers. In other
words, federal excise taxes are included
in the purchases category for this
industry, while state and local excise
taxes are included in the other category.
Profit
The average industry profit margin,
measured as earnings before interest and
taxes, is estimated to account for only 1.0%
on revenue in 2019, having decreased
slightly from 1.5% in 2014 due to rising
federal and state-level excise taxes and
declining per capita cigarette consumption.
Despite increasing regulatory scrutiny over
all tobacco products, industry operators
were able to maintain profitability by
streamlining their distribution networks and
minimizing operational costs associated
with order fulfillment. In general,
companies that have both manufacturing
and distribution segments have a
considerably higher profit margin compared
with merchant wholesalers that exclusively
purchase and distribute tobacco products
from other manufacturers. Tobacco
manufacturer Altria Group Inc. (Altria), for
example, sustained an average operating
margin of 36.4% over the five years to 2019
(excluding the value of federal excise taxes),
while merchant wholesaler Core-Mark
Holding Company Inc. (Core-Mark)
sustained an average operating margin of
only 0.4% during the same period.
Depreciation
Depreciation costs are expected to account
for just 0.2% of revenue in 2019, which is
common for wholesaling industries.
Depreciation expenses have remained
relatively stable over the past five years.
Conversely, distribution and logistics
expenses have increased slightly over the
past five years, reflecting the increased costs
associated with vehicle fleet upgrades,
maintenance and repair.
Marketing
Marketing is expected to account for 0.2% of
industry revenue in 2019. Tobacco
wholesalers allocate very little or no funds to
marketing because tobacco product
advertising is conducted almost exclusively
at the manufacturing level. Furthermore,
federal and state-level regulations effectively
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 24
Competitive Landscape
Cost Structure
Benchmarks
continued
prohibit tobacco-affiliated businesses from
engaging in traditional methods of
advertising such as billboards, TV or radio
commercials, attractive product packaging
and banners (IBISWorld report 31222).
Rent
Rent expenses are estimated to account for
0.4% of industry revenue in 2019, slightly
down from 0.6% in 2014.
Utilities
Utilities are estimated to account for only
0.1% of industry revenue in 2019.
Utilities include heat, electricity, water
and other expenses required for day-to-
day operations.
Other
In 2019, all other expenses account for the
remaining 15.9% of industry revenue and
include taxes, administrative and legal fees,
among others. Other expenses have slightly
decreased from 16.1% of industry revenue in
2014. The most important category of
expenses that is unique to tobacco
wholesalers is state or local excise taxes.
Federal excise taxes on tobacco products are
levied exclusively on the manufacturers,
which collect the appropriate per-unit tax on
their products and pass down the added
expense to wholesalers in the form of higher
purchase costs. Conversely, excise taxes at
the state, county or provincial levels are
levied on wholesalers, that are in turn,
obligated to calculate the applicable tax level
per unit sold/distributed and remit the
collected taxes to the appropriate public
agency. Unlike federal taxes, which are
currently set at $1.01 per pack of cigarettes
across the country, state excise taxes vary
widely across different states, counties and
cities. As of January 2019, state-level tax
rates for a pack of cigarettes ranged from a
low of $0.17 per pack in Missouri to a high
of $4.35 per pack in New York State.
Certain localities, such as New York City
and Chicago, have implemented even
higher excise taxes on tobacco products
sold within their city limits. The median
excise taxes on tobacco products across all
states reached $1.65 in early 2019,
according to latest figures from the
Campaign for Tobacco-Free Kids.
In general, state excise taxes are only
relevant for large wholesalers with
operations spanning across multiple states.
Smaller wholesalers typically do not directly
purchase tobacco products from the
manufacturer, but rather from larger
distributors such as McLane that have
already remitted the appropriate taxes.
Consequently, this tax burden is reflected in
higher purchase costs for smaller
wholesalers. Overall, remittance of excise
taxes at the local and state levels is estimated
to account for 13.6% of total industry
revenue, with the greatest burden incurred
by national wholesalers. For example, excise
taxes accounted for 22.0% of Core-Mark’s
industry-relevant revenue representing $3.5
billion in the most recent reporting period.
Basis of Competition
Level & Trend
Competition in
this industry is
High and the trend
is Increasing
Internal competition
Competition within the Cigarette and
Tobacco Products Wholesaling industry
has traditionally been high because of
the large number of operators and
typically low profit. In recent years,
however, the level of competition has
increased even more due to declining
sales volume associated with lower per
capita cigarette consumption, and
higher taxes, which have caused
cigarette prices to rise significantly.
The basis for competition varies
significantly between tobacco manufacturers
with sales offices (MSBOs) and traditional
merchant wholesalers. Overall, the market
for tobacco products is highly competitive,
characterized by brand recognition and
loyalty, with product quality, taste, price,
product innovation, marketing, packaging
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 25
Competitive Landscape
Basis of Competition
continued
and distribution constituting the significant
methods of competition. Promotional
activities include, in certain instances and
where permitted by law, allowances, the
distribution of incentive items, price
promotions, product promotions, coupons
and other discounts. Merchant wholesalers,
which purchase products from tobacco
manufacturers or other distributors for
resale, can differentiate themselves based on
range of products offered, quality and
efficiency of their respective distribution
networks and relations with suppliers.
Recent vertical integration initiatives and
other changes in customer buying patterns
have resulted in a more dynamic and
competitive operating environment.
Conversely, tobacco manufacturers, which
operate in this industry via their
respective sales and distribution offices,
compete primarily based on price,
promotional activity, brand recognition
and product quality.
Although stringent federal and state
regulations effectively ban conventional
methods of advertising, industry operators
can somewhat market their products
through price promotions, discounts and
members-only loyalty programs and
benefits. Nonetheless, major tobacco
manufacturers that have previously
established customer loyalty have a
considerable advantage over smaller,
newer operators with products and brands
that are not well recognized by consumers.
Likewise, larger merchant wholesalers
typically have greater economies of scale
than smaller operators, which enable them
to obtain favorable agreements with both
suppliers and customers more easily than
distributors with less purchasing power.
Larger operators also have more resources
to invest in new technology and capital,
which can lower operating expenses and
increase profitability.
External competition
Industry operators contend with
increasing competition from the illicit
trade (smuggling) of tobacco products
across state lines, sales of counterfeit
cigarettes, unlawful sale of tobacco
products over the internet and sales
through various other channels intended
to circumvent the collection of federal,
state or local excise taxes. Euromonitor
International estimates that 456.0 billion
cigarettes a year are smuggled,
counterfeited or manufactured illegally.
Although illegal, smuggling of tobacco
products has become a highly lucrative
business in recent years because of rising
tobacco taxes. Large disparities in excise
tax rates between states enable
individuals or criminal organizations to
purchase tobacco products in states with
lower tax rates to resell in states with
higher tax rates. To the extent that an
illicit market continues with respect to
the products produced by these
businesses, the costs incurred by these
businesses to comply with regulatory
requirements, as well as applicable excise
and sales taxes, may make it difficult to
compete with the illicit market or may
dampen growth opportunities.
Furthermore, according to a 2016 study
sponsored by the Mackinac Center for
Public Policy (latest data available),
smuggled cigarettes accounted for a
considerable share of all cigarettes sold in
several states. For example, the study
concludes that an estimated 55.4% of all
cigarettes consumed in New York were
illegally imported from neighboring states
with lower taxes such as Pennsylvania or
Delaware. Similar studies, such as those
published in the November 2017 Tax
Foundation or the January 2018 MIT
Press Journal of Health Economics have
also concluded that interstate tobacco
smuggling presents a growing challenge
for tobacco manufacturers, wholesalers
and regulators. The Federal Trade
Commission Protocol to Eliminate Illicit
Trade in Tobacco Products went into
effect on September 25, 2018, with the
aim to eliminate illegal tobacco trade.
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 26
Competitive Landscape
Industry
Globalization
Globalization for the Cigarette and
Tobacco Products Wholesaling industry
is low because domestic tobacco
manufacturers almost exclusively rely on
domestic distributors to reach end use
customers. Additionally, the wholesale
industry’s profit margins have historically
remained very low, while industry-
relevant regulations and taxes have
increased extensively over the past two
decades. As a result, foreign companies
have little incentive to enter the domestic
wholesaling market.
Despite the domestic focus of this
industry, some companies do have
operations abroad. For example, McLane
Company Inc. (McLane) provides
distribution services throughout the
United States, Canada, and more than
50,000 customer locations across the
world. In the international market,
McLane operates several distribution
centers, providing third party logistics
services to large multi-national companies
in Brazil and Taiwan. Similarly, Core-
Mark International has increasingly
focused on expanding its Canadian
operations, which accounted for about
9.0% of industry revenue in 2018 (latest
data available). Nonetheless, globalization
remains low for this industry and is not
expected to rise over the coming years.
Barriers to Entry The Cigarette and Tobacco Products
Wholesaling industry has moderate
barriers to entry. Unlike tobacco
manufacturers, which must obtain
permits from the Alcohol and Tobacco
Tax and Trade Bureau (TTB) and licenses
from other federal and state agencies
prior to entering the market, tobacco
wholesalers experience few technical
barriers to entry. Conversely, intensifying
levels of competition, rapidly expanding
market share concentration, sinking
demand for the industry’s major products
and an increasingly stringent regulatory
environment restricts the ability of new
entrants to compete with already-
established operators. One major barrier
to entry is the development of well-
entrenched supplier-buyer agreements
between the largest tobacco
manufacturers and distributors. The top
two national tobacco distributors,
McLane Company and Core-Mark, have
spent decades developing their national
distribution networks while establishing
stronger relations with Philip Morris USA
(Altria Group), British American
Tobacco, Vector Group and other key
tobacco product manufacturers. As a
result, even though operators frequently
enter and exit the industry, new entrants
generally fail to grow their business to a
level where they can compete effectively
against the top players.
Barriers to Entry checklist
Competition High
Concentration Medium
Life Cycle Stage Decline
Capital Intensity Low
Technology Change Medium
Regulation and Policy Heavy
Industry Assistance Low
SOURCE: WWW.IBISWORLD.COM
Level & Trend
Barriers to Entry
in this industry
are Medium and
Increasing
Level & Trend
Globalization in this
industry is Low and
the trend is Steady
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 27
Player Performance Founded in 1894 and headquartered in
Temple, TX, McLane Company Inc.
(McLane) is a major supply-chain
services company and distributor of
grocery, food service and nonfood items
to over 90,000 retail locations across the
United States from its 59 distribution
centers. McLane has historically been the
largest merchant wholesaler operating in
the Cigarette and Tobacco Products
Wholesaling industry, representing the
single largest customer of the top five
tobacco product manufacturers. Philip
Morris (Altria Group Inc.), Reynolds
American Inc. (RAI), Lorillard Inc. (prior
to its merger with RAI), Commonwealth
Brands and Liggett Group. RAI and
Lorillard are now rolled up into British
American Tobacco PLC.
Since 2003, the company has been a
wholly owned subsidiary of Berkshire
Hathaway Inc. (Berkshire). Berkshire
employs about 46,000 individuals through
its service business, which McLane is part
of. McLane operates through its main
subsidiaries, which include McLane
Grocery and McLane Foodservice.
Industry-relevant revenue is derived from
the company’s Grocery subsidiary, which
distributes cigarettes and tobacco products
to convenience stores, grocery stores,
supermarkets and pharmacies across the
United States. The company is the largest
distributor of tobacco products to Walmart
Inc. and 7-Eleven Inc. stores across the
United States.
Financial performance
McLane’s industry-relevant revenue is
expected to increase an annualized 6.1%
to $26.2 billion over the five years to
2019. Similar to Core-Mark Holding
Company Inc., McLane experienced
higher revenue growth than the overall
Major Companies
McLane Company Inc. | Altria Group Inc.
British American Tobacco PLC | Core-Mark Holding Company Inc. | Other Companies
44.1%
Other
McLane Company Inc. 20.3%
Altria Group Inc. 18.5%
British American Tobacco PLC 8.7%
Core-Mark Holding Company Inc. 8.4%
SOURCE: WWW.IBISWORLD.COM
Major Players
(Market Share)
McLane Company Inc. (US industry-specifi c segment) – fi nancial
performance*
Year
Revenue
($ million) (% change)
Operating Income
($ million) (% change)
2014 19,517.1 N/C 182.0 N/C
2015 23,943.3 22.7 249.2 41.8
2016 24,327.3 1.6 218.1 -12.5
2017 25,683.7 5.6 228.7 4.9
2018 25,459.2 -4.24 218.6 -7.7
2019 26,201.3 2.92 223.4 2.17
*Estimates
SOURCE: ANNUAL REPORT AND IBISWORLD
McLane Company
Inc.
Market Share: 20.3%
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 28
Major Companies
Player Performance Altria Group Inc. (Altria), formerly known
as Philip Morris Companies Inc., is a
Virginia-based holding company with
subsidiaries that engage in the production
and distribution of cigarettes, cigars, pipe
tobacco, smokeless tobacco products and
wine. While the company was originally
incorporated in 1985, its involvement in
manufacturing tobacco products dates back
to 19th-century London, and the company’s
cigarettes have been sold in the United
States since 1902. Its production
subsidiaries include Philip Morris USA Inc.,
US Smokeless Tobacco Company (UST),
John Middleton Co. and Ste. Michelle Wine
Estates Ltd.
The company has several leading tobacco
product brands: Marlboro (the top-selling
cigarette brand in the United States since
the 1970s), Black & Mild Cigars,
Copenhagen and Skoal smokeless tobacco
brands, as well as smaller cigarette brands
such as Benson & Hedges and Virginia
Slims. According to the company’s latest
annual report, Marlboro accounted for
43.1% of cigarette retail sales in 2018, while
the Copenhagen and Skoal brands make up
a combined 50.6% share of the smokeless
tobacco retail sales. In 2018, the company as
a whole shipped 109.8 billion cigarettes
from its domestic production facilities,
representing a 5.8% decline from 2017
(latest data available). Across all operating
segments, the company generated net sales
of $25.6 billion in 2018 (latest data
available). The company participates in this
industry through its wholly owned
subsidiary Altria Group Distribution
Company, which directly sells the company’s
tobacco products to wholesale distributors,
large retail chains and military bases across
the United States.
Just prior to the current period, the
company acquired UST, the largest
Player Performance
continued
industry. This growth can be attributed to
more favorable purchase agreements
between McLane and the top three tobacco
manufacturers. Additionally, strong sales
to smaller grocery and discount store
chains, such as Family Dollar Stores Inc.
(Family Dollar) locations, have boosted
industry-relevant revenue. In particular,
Family Dollar signed an agreement with
McLane in 2012 to supply over 6,000 of its
locations with cigarette and smokeless
tobacco products. Strong demand for
tobacco products from convenience stores,
relative to other retail channels, has also
helped drive the company’s financial
performance over the past five years.
Altria Group Inc.
Market Share: 18.5%
Industry Brand Names
Phillip Morris, USA
Middleton, Co.
U.S. Smokeless Tobacco
Company
Ste. Michelle Wine Estates
Alta Group Distribution
Company
Altria Group Inc. (US industry-specifi c segment) – fi nancial performance*
Year
Revenue
($ million) (% change)
Operating Income
($ million) (% change)
2014 23,748.0 N/C 7,379.5 N/C
2015 24,742.0 4.2 8,133.5 10.2
2016 24,998.0 1.0 8,508.1 4.6
2017 24,878.0 -0.5 9,295.2 9.3
2018 24,559.0 -1.3 8,825.7 -5.1
2019 24,230.6 -1.3 9,523.7 7.9
*Estimates; operating income refl ects profi t at the manufacturing level
SOURCE: ANNUAL REPORT AND IBISWORLD
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 29
Major Companies
Player Performance British American Tobacco PLC (British
American) was founded in 1904 when the
United Kingdom’s Imperial Tobacco
Company and United States’ American
Tobacco Company agreed to form a joint
venture, the British American Tobacco
Company Ltd. In 2017, the company went
through a restructuring and acquired
Reynolds American Inc. (RAI). Following
this merger, British American became the
second-largest US manufacturer of
cigarette and smokeless tobacco
products, with a brand portfolio that
includes three of the top four best-selling
cigarettes in the United States: Newport,
Camel and Pall Mall.
The deal to acquire RAI not only
created a stronger, global tobacco
footprint for British American, but it also
enabled the company to leverage
complementary skills from the new,
enlarged workforce. Consequently,
British American now has a balanced
presence across emerging markets and
developed markets, including the US
market. With more than 5,000
employees in the United States, British
American cigarette packing and making
can reach between 500 and 1,000
cigarette packs per minute through its
main manufacturing facilities, which are
located in Winston-Salem, NC. The
Player Performance
continued
producer of smokeless tobacco in the
United States. With growth in its core
cigarette business in decline, the UST
acquisition helped Altria diversify its
product portfolio to include faster-growing
tobacco products, such as moist smokeless
tobacco. In 2012, the company reorganized
its operations to reduce costs and achieve
operational efficiencies by combining its
former cigarettes and cigars segments into
a single smokable products segment. Altria
now divides its operations into smokable
products, smokeless products, wine and
financial services. In 2014, the company
formally entered the electronic cigarette
category by acquiring the e-vapor segment
of Green Smoke Inc. for $130.0 million. In
mid-2015, Altria announced plans to
collaborate with its global counterpart,
Philip Morris International, to jointly
develop and market new e-vapor products
within the United States. More recently, in
January 2017, Altria acquired Sherman
Group Holdings LLC, the producer of
super-premium Nat Sherman cigarettes
and premium cigars. In December 2018,
Altria entered into a stock purchase
agreement with Juul Labs Inc. (Juul) for a
$12.8 billion purchase of Juul’s class C
common stock. Upon antitrust clearance,
Altria will possess 35.0% of Juul’s
outstanding voting power.
Financial performance
Altria’s industry-relevant revenue is
expected to expand an annualized 0.4% to
$24.2 billion over the five years to 2019.
Altria has only experienced slight growth
during the current period, which is largely
the result of stagnating sales of cigarettes.
This has only been partially offset by
increased sales of noncigarette products
such as Middleton cigars and smokeless
tobacco. Despite the 2009 hike in federal
excise taxes and rising tobacco-related
litigation costs, the company was able to
pass on increased operating expenses to
consumers, enabling Altria to sustain a high
profit margin during the five-year period.
Although currently a small share of total
group revenue, Altria’s smokeless tobacco
segment was a key driver of growth over the
past five years due to the product segment’s
lower effective tax rate and per-unit cost
relative to cigarettes. Altria is expected to
hover at current levels in 2019, as volatility
remains relatively stagnant due to increased
pricing on premium cigarettes and
sustained demand for the company’s
smokeless tobacco brands.
British American
Tobacco PLC
Market Share: 8.7%
Industry Brand Names
Newport
Camel
RJ Reynolds Tobacco
Company
Santa Fe Natural Tobacco
Company
American Snuff Company
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 30
Major Companies
Player Performance Headquartered in Westlake, TX, Core-
Mark Holding Company Inc. (Core-
Mark) is a national distributor of
tobacco products, candy, snacks,
nonalcoholic beverages, health and
beauty aids to over 45,000 convenience
stores, drug stores, grocery stores and
cigarette and tobacco shops nationwide.
The company operates 32 distribution
centers across the United States and
Canada, 25 of which are located
domestically. In 2014, Core-Mark
opened a new distribution facility in
Ohio, which began to serve 1,600
additional customer locations in 2015.
Within the United States, the company
has a fleet of over 870 trucks and
employs 7,432 workers, 1,491 of whom
are involved in sales and marketing and
4,992 of whom are involved in direct
warehousing and distribution
operations. Along with McLane, Core-
Mark is one of only two convenience
store wholesalers that operates across all
50 states.
Similar to other major tobacco
distributors, state level excise taxes
account for a large share of the
company’s annual costs, representing
21.3% of total net sales in 2018 (latest
data available).
Over the past five years, the company
has increasingly focused on distributing
Player Performance
continued
company’s main US manufacturing
facilities, central distribution center and
corporate headquarters are all located in
North Carolina.
Financial performance
British American’s industry-specific
operations have performed well over
the five years to 2019, driven primarily
by its recent merger with Lorillard Inc.
and RAI, as well as sustained demand
for the company’s existing smokeless
and alternative tobacco brands.
Similar to the overall tobacco market,
the company has experienced declining
volume sales of cigarettes over the past
five years. However, growing demand
for smokeless tobacco products and
increased pricing on premium
cigarette brands has helped offset this
negative trend. Overall, following the
company’s acquisitions, British
American’s industry-specific revenue
is expected to grow at an annualized
rate of 20.7% to $11.3 billion over the
five years to 2019.
British American Tobacco PLC (US industry-specifi c segment) – fi nancial
performance*
Year
Revenue
($ million) (% change)
Operating Income
($ million) (% change)
2014 4,431.3 N/C 1,441.9 N/C
2015 3,016.7 -31.9 1,049.1 -27.2
2016 3,333.9 10.5 1,238.6 18.1
2017 4,745.3 42.3 1,382.1 11.6
2018 11,215.8 136.4 4,264.8 208.6
2019 11,343.0 1.1 4,069.9 -4.6
*Estimates
SOURCE: ANNUAL REPORT
Core-Mark Holding
Company Inc.
Market Share: 8.4%
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 31
Major Companies
Player Performance
continued
fresh products, such as milk, produce
and bread, to convenience stores and
pharmacies. In 2014, the company
signed a contract with major pharmacy
chain Rite Aid Corporation to distribute
fresh products to over 4,500 retail
locations. However, this new
partnership has not significantly
affected the company’s industry-
relevant tobacco distribution
operations. In 2013, the company
acquired JT Davenport & Sons Inc.,
which further expanded Core-Mark’s
reach into the Southeast region of the
United States. More recently, the
company has relied less on acquisitions
and more on expanding distribution
networks and boosting same-store sales
to drive revenue. For example, the
company signed significant distributor
agreements with two major convenience
store chains in 2015. These agreements
will extend Core-Mark’s distribution
network to an additional 1,300 Murphy
USA Inc. (Murphy USA) locations and
900 7-Eleven Inc. (7-Eleven) locations
over the coming years.
Financial performance
Core-Mark’s industry-relevant revenue
is anticipated to grow an annualized
10.3% to $11.1 billion over the five years
to 2019. During the current period,
Core-Mark has experienced significantly
faster revenue growth than the overall
industry, primarily due to aggressive
acquisition and organic expansion
activity. More specifically, acquisitions
of regional distributors in the highly
populated Southeast and Mid-Atlantic
regions have helped Core-Mark serve a
much greater number of convenience
store chains. Additionally, double-digit
growth in the downstream convenience
store market, of which Core-Mark is a
major supplier alongside McLane, has
also helped boost company sales despite
declining levels of cigarette consumption
and a falling profit margin. The company
will likely continue to experience
exceptionally strong performance in
2019, driven primarily by expanded
distribution relationships with Murphy
USA, 7-Eleven and other major
convenience store chains.
Core-Mark Holding Company Inc. (US industry-specifi c segment) –
fi nancial performance*
Year
Revenue
($ million) (% change)
Operating Income
($ million) (% change)
2014 6,793.7 N/C 45.1 N/C
2015 7,458.2 9.8 58.4 29.5
2016 10,367.2 39.0 64.3 10.1
2017 11,042.1 6.5 26.5 -58.8
2018 10,580.3 -4.2 46.3 74.7
2019 11,068.8 4.6 82.3 77.8
*Estimates
SOURCE: ANNUAL REPORT AND IBISWORLD
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 32
Major Companies
AMCON Distributing Company is a
leading distributor of over 17,000
consumer-packaged goods (e.g. snacks,
beauty and personal items), tobacco
products, candy and beverages to the
convenience store and small grocery
store markets. The company serves over
4,000 retail locations across 25 states
and employs an estimated 790 workers,
primarily within the Rocky Mountains
and Central regions of the United States.
Sales of cigarettes and other tobacco
products represented 83.7% of the
company’s gross revenue in 2018 (latest
data available). Across all business
segments and geographic regions, the
company generated total net sales of $1.3
billion in 2018 (latest data available).
H.T. Hackney Company (H.T. Hackney) is
a privately owned regional distributor of
tobacco products, which distributes to
over 30,000 retailers across the Southeast
region of the United States. Founded in
1891, the company employed about 3,400
workers and generated an estimated $3.8
billion in total company revenue in 2018
(latest data available). The company’s
distribution network encompasses
convenience stores and gas stations, drug
stores and small grocery stores across 22
states. Along with its candy and tobacco
distribution business, the company owns
various subsidiaries that are not industry
relevant, including Uncle Rays, Neuro
Fuel and Hackney Home Furnishings.
The company also operates a small chain
of gas stations along the East Coast. Over
the five years to 2019, H.T. Hackney’s
industry-relevant operations have
performed well, primarily driven by
strong demand from the convenience
stores market segment and expansion via
many small acquisitions. Overall,
IBISWorld estimates the company’s
industry-relevant revenue to reach $3.9
billion in 2019.
Other Company
Performance
Eby-Brown is the largest privately owned
distributor of tobacco products in the
United States. The company has about
2,300 employees and six distribution
centers that serve over 13,500 retail
locations across 18 states within the
Midwest and Mid-Atlantic regions. The
company’s main distribution products
include cigarettes, smokeless tobacco,
candy and general merchandise. Total
annual sales are projected to reach an
estimated $5.6 billion in 2019; however,
industry-relevant revenue for tobacco
product sales is estimated to account for
$4.8 billion that same year, representing an
estimated 85.0% of total company revenue.
Other Companies The highly competitive Cigarette and
Tobacco Products Wholesaling industry
comprises about 3,200 other companies
that operate throughout the United
States. In general, the industry landscape
includes some large, diversified
wholesalers and vertically integrated
tobacco product companies, along with
smaller regional distributors and
nonemployer operations. Important
regional tobacco distributors with less
than a 5.0% share of the market include
Eby-Brown, H.T. Hackney Company,
AMCON Distributing Company and
PYXUS International Inc. Other notable
tobacco manufacturers that account for
less than 5.0% of the industry include
ITG Brands LLC, a subsidiary of Imperial
Brands PLC, and Liggett Vector Brands
PLC, a subsidiary of Vector Group Ltd.
Eby-Brown
Market Share: 3.7%
H.T. Hackney
Company
Market Share: 3.0%
AMCON
Distributing
Company
Market Share: 1.1%
Other Company
Performance
Other Company
Performance
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 33
Major Companies
PYXUS International Inc. (PYXUS),
formerly Alliance One International Inc.,
is a 145-year-old agricultural company
that provides responsibility produced,
independently verified, sustainable and
traceable agricultural products to
businesses and customers.
Headquartered in North Carolina, the
company contracts growers across five
continents to help them produce
sustainable and compliant crops. The
company’s core business is packing,
processing, storing and shipping tobacco
to large manufacturers of cigarettes and
other tobacco products worldwide.
PYXUS deals primarily in flue-cured,
burley and oriental tobaccos that are
used in international brand cigarettes.
Revenue from the company’s tobacco
segment is primarily comprised of sales
of processed tobacco and fees charged for
processing and related services to these
manufacturers of tobacco products.
However, processing and other revenue
account for less than 5.0% of the
company’s total revenue. In fiscal year
2019 (year-end March 31), the company
acquired 51.0% of Humble Juice Co., an
e-liquid company. Additionally, in
January of fiscal 2019, the company
acquired 71.0% of FIGR East, a medical
cannabis producer in the Canadian
Province of Prince Edward Island.
In fiscal 2019 (latest data available), the
company employed 3,347 people in the
United States, excluding an estimated 6,039
seasonal employees, and generated $285.0
million in industry-relevant revenue,
representing 15.8% of overall revenue for
the company. IBISWorld expects the
company’s industry-relevant revenue to
reach $271.0 million in fiscal 2020.
Similar to other major tobacco
distributors, state level excise taxes
account for a large share of the
company’s annual costs, representing
roughly 36.0% of total company sales in
2018 (latest data available). IBISWorld
expects the company’s industry-relevant
revenue to reach $1.4 billion in 2019.
PYXUS
International, Inc.
Market Share: 0.2%
Other Company
Performance
continued
Other Company
Performance
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 34
Capital Intensity Similar to most other distribution
industries, the Cigarette and Tobacco
Products Wholesaling industry has a low
level of capital intensity. Using wages to
represent labor costs and depreciation as
a proxy for capital, IBISWorld estimates
that for every dollar spent on wages,
industry operators will likely spend $0.09
on machinery, equipment and other
capital expenses in 2019. Similar to most
other wholesaling industries, the most
significant capital costs come from
expenditures on computerized logistics
equipment, inventory management
software and warehouse expenses related
to the purchase and maintenance of
trucks and distribution centers.
Over the five years to 2019, capital
intensity has increased marginally, with
depreciation as a share of sales hovering
under 0.2% while total wages as a share
of sales remained flat during this period.
Operating Conditions
Capital Intensity | Technology & Systems | Revenue Volatility
Regulation & Policy | Industry Assistance
Capital Intensity
0.5
0.0
0.1
0.2
0.3
0.4
SOURCE: WWW.IBISWORLD.COM
Dotted line shows a high level of capital intensity
Capital units per labor unit
Cigarette &
Tobacco Products
Wholesaling
Wholesale
Trade
Economy
Level
The level of capital
intensity is Low
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 35
Operating Conditions
Revenue Volatility The Cigarette and Tobacco Products
Wholesaling industry exhibits a moderate
level of revenue volatility. Industry
revenue has grown marginally over the
five years to 2019, growing by as much as
4.0% in 2016 and declining as much as
4.0% in 2014. This industry has
traditionally exhibited very little revenue
volatility because of the addictive and
appealing nature of tobacco products,
especially cigarettes and chewing tobacco.
In fact, tobacco products have colloquially
been known as ‘recession-proof’ products
because their sales are not significantly
tied to short-term changes in economic
factors such as per capita disposable
income or unemployment. However, due
to the general stigma of tobacco, and the
increase of tobacco quitting campaigns,
volatility has become moderate.
Technology and
Systems
The Cigarette and Tobacco Products
Wholesaling industry experiences a
moderate level of technological change.
Tobacco products are agricultural
products under US law and are not
technological or strategic in nature.
Therefore, there has been marginal
changes in technology during the five-
year period to 2019, with advancements
mainly related to the ongoing
development of cloud-based distribution
network mapping, increased adoption of
just-in-time inventory control systems
and more efficient stock-keeping-unit
(SKU) management solutions. Larger
wholesalers that operate across state
lines have also invested heavily in
developing new computer systems to
track cigarette shipments, remit excise
taxes to the appropriate agencies and
better serve the needs of independent
convenience stores.
A fully automated inventory control
system records inventories in real time,
determines minimum order quantities
and prepares the products for dispatch to
customers. A greater share of retail
customers is using continuous
replenishment practices, where their
computer terminals are linked directly to
the wholesaler’s inventory system. These
systems enable retailers to re-order
products automatically and quickly with
little human input, thereby saving on
labor costs and making inventory
management more efficient.
Other technological developments,
such as electronic data interchange, have
permitted wholesalers to manage their
distribution networks more efficiently
and to comply with tobacco-related
regulation and taxes more effectively.
Although tobacco manufacturers are
responsible for remitting the required
tobacco taxes at the federal level,
wholesalers that operate across state
borders are responsible for accurately
calculating the appropriate excise taxes at
the state or county level. Mainstream
adoption of advanced inventory control
systems has enabled wholesalers to
minimize their tax liability to state-level
regulators, while decreasing the quantity
of tobacco products illegally diverted
(smuggled) from states with lower excise
taxes to states with higher excise taxes.
Capital Intensity
continued
However, with computerization and
larger operations, capital intensity is
expected to increase, albeit slightly, over
the coming years. Anticipated merger
and acquisition activity among the largest
merchant distributors, including McLane
Company Inc., Core-Mark Holding
Company Inc., Eby-Brown and H.T.
Hackney Company, is likely to increase
capital intensity further.
Level
The level of
technology change
is Medium
Level
The level of volatility
is Medium
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 36
Operating Conditions
Revenue Volatility
continued
Unlike sales for most other non-
durable goods, sales of tobacco actually
increased during the recession, and have
surprisingly endured despite major
public efforts to curb smoking among
Americans over the past several decades.
For example, the April 2009 national tax
hike on tobacco, which raised the federal
excise tax per pack of cigarettes from
$0.39 to $1.01, was expected to
encourage over one million smokers
nationwide to quit. Even though this
159.0% spike in cigarette taxes has
moderately reduced per capita cigarette
consumption over this five-year period
(according to 2013 figures from the
Centers for Disease Control and
Prevention), it has yet to have a
significantly negative effect on either the
Tobacco Manufacturing or Wholesaling
industries’ sales performance. Although
total shipments of cigarettes have fallen
steadily over the past five years, tobacco
manufacturers have been able to offset
this decline by increasing the per-unit
price of their products or by focusing
their marketing resources on alternative
tobacco products, such as smokeless
tobacco or e-cigarettes, which currently
experience less regulatory scrutiny than
regular cigarettes, despite the recent FDA
ruling on innovative tobacco products.
Indeed, tobacco manufacturers have
historically been able to raise prices on
tobacco products in line with increased
excise taxes without suffering significant
losses in sales volume.
IBISWorld estimates that revenue
volatility will remain moderate in the
coming years. While revenue is
expected to contract during the latter
half of the next five-year period, sales
are expected to drop at a steady rate as
unit sales of cigarettes begin to fall at a
faster rate than manufacturers’ ability
to raise prices. Conversely, the
continued innovation of noncigarette
tobacco products such as e-cigarettes
and strong demand for smokeless
tobacco is likely to help the Tobacco
Wholesaling industry endure, despite
an increasingly unfavorable regulatory
environment and growing social stigma
against tobacco use.
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 37
Operating Conditions
Regulation and Policy The tobacco industry as a whole operates
in a highly regulated environment. The
well-known risks of smoking have led
regulators to impose significant
restrictions and high excise taxes on
cigarettes. Most tobacco-related
regulation is aimed at regulating tobacco
manufacturers, although operators in the
Cigarette and Tobacco Products
Wholesaling industry are indirectly
affected by changes in regulation at the
manufacturing level (IBISWorld report
31222). Much of the regulation that
shapes the environment for industry
operators is driven by the World Health
Organization’s Framework Convention
on Tobacco Control which entered into
force in 2005.
The US Alcohol and Tobacco Tax and
Trade Bureau (TTB) aims to ensure the
collection of tobacco federal excise taxes
and to qualify applicants for permits to
import tobacco products or to operate
tobacco export warehouses. They
undertake tobacco inspections to verify an
applicant’s qualification information, check
the security of the premises, and ensure tax
compliance. The Bureau of Alcohol,
Tobacco, Firearms and Explosives
investigates trafficking of contraband
tobacco products in violation of Federal law
and sections of the Internal Revenue Code.
These requirements add significantly to
administrative duties and costs within the
Tobacco and Tobacco Product Wholesalers
industry to ensure compliance.
The Federal Trade Commission
enforces the Surgeon General’s warning
on certain tobacco products. There are
also laws regulating the age of individuals
who can purchase, use, possess, or sell
tobacco products; and regulations
regarding smoking in public places. The
Center for Disease Control and Prevention
describes several of these regulations,
such as: smoking bans on domestic flights;
and, smoking and at locations, which
provide federally funded children services.
While these do not directly affect the
Cigarette and Tobacco Products
Wholesaling industry, they do affect the
end consumers of tobacco products.
The Masters Settlement Agreement
(MSA) was signed between the Attorney
General’s Office and the largest tobacco
manufacturers in 1998. In exchange for
indemnification against individual
tobacco-related lawsuits, the signatory
manufacturers are required to pay a
minimum $206.0 billion by 2025 to the
signatory states. The MSA also placed
certain marketing regulations against the
tobacco industry, including a complete
ban on traditional marketing and
promotional activity (e.g. commercials or
billboard ads). However, this agreement
also indemnifies tobacco distributors
from class action suits arising from these
states, which ultimately minimizes
potential litigation costs for non-
manufacturing operators such as McLane
Company and Core-Mark International.
In mid-2009, the government granted
the Food and Drug Administration broad
authority to regulate cigarettes and other
tobacco products in the US. The bill
includes complete prohibition of flavored
cigarettes other than menthol, requiring
the inclusion of graphic warnings on
cigarette packages; banning the use of the
term “light” or “mild” to describe tobacco
products and full disclosure of the
quantities of certain ingredients in
tobacco products. These regulations are
mostly relevant to tobacco companies;
see Report 31222 for more information.
In October 2018, the Framework
Convention on Tobacco Control
governing body, the Conference of the
Parties (CoP), has adopted non-binding
guidelines and policy recommendations
that go beyond the original outline of the
original policy. The CoP recognized the
need for more scientific assessment and
improved reporting to define policy on
heated tobacco products, e-liquids and
e-cigarettes. The CoP invites countries to
regulate, restrict or prohibit heated
Level & Trend
The level of
Regulation is Heavy
and the trend
is Increasing
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 38
Operating Conditions
Industry Assistance Tobacco industry protection is mostly
applicable to manufacturers, although
restricting the importation of foreign
brands or imposing import quotas on
tobacco has assisted US wholesalers to
sell greater volumes of locally made
products. Additionally, several tariffs
apply to imported tobacco products,
according to the US International Trade
Commission. For more information on
applicable tariffs, please refer to the
Cigarette and Tobacco Manufacturing
industry (IBISWorld report 31222).
Most national tobacco-related trade
organizations and advocacy groups also
focus more on serving tobacco
manufacturers than wholesalers.
Conversely, groups such as Transforming
Tobacco, which is funded by Reynolds
American Inc., offer legal and business
resources to help wholesalers and retailers
comply with federal or state regulations
and sell tobacco products responsibly.
Other relevant trade organizations include
the Tobacco Vapor Electronic Cigarette
Association (TVECA) and the American
Wholesale Marketers Association.
The Tobacco Master Settlement
Agreement (MSA), signed in November
1998 between the four largest tobacco
manufacturers of the time and the US
Attorney General’s office, acts as a
blanket settlement to prevent future
litigation suits against the tobacco
industry in exchange for annual
payments to 46 states to compensate for
tobacco-related public health issues and
expenses. The settlement also placed
substantial limitations on tobacco
advertising and marketing, while
dissolving the largest tobacco advocacy
groups such as the Tobacco Institute and
Council for Tobacco Research. The
outcome of this settlement has been a
major setback for tobacco
manufacturers, forcing the largest
companies, which include present-day
Altria Group and Reynolds American
Inc., to pay a minimum of $206.0 billion
to the 46 signatory states by 2025. In
contrast, the MSA has actually been
favorable to merchant wholesalers
operating in this industry because the
settlement forever indemnifies tobacco
wholesalers from any litigation arising
from the sale or distribution of tobacco
products, instead transferring the
liability to the manufacturers.
Regulation and Policy
continued
tobacco products as appropriate under
their national laws.
Furthermore, the US Food and Drug
Administration (FDA) extended its
regulatory control overall all tobacco
products, but primarily focused on the
e-cigarette segment during the period.
The new regulations require disclosure of
ingredients used in e-cigarette liquids,
proof of safety of those ingredients and
regulation of the devices used to vaporize
and deliver the liquid. In 2014, attorney
generals from over two dozen states
pushed the FDA to enact restrictions on
entry level e-cigarette flavors such as
candy and beverage flavors. It was not
until May of 2018 until the FDA began to
crack down on e-liquid and e-cigarette
brands whose packaging resembled that
of candy, juice boxes and other products
intended to appeal to children. It is
impossible to forecast whether or to what
extent measures or guidelines
recommended by regulatory agencies will
be implemented and what effect they will
have on industry operators.
Level & Trend
The level of
Industry Assistance
is Low and the
trend is Steady
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 39
Key Statistics
Revenue
($m)
Industry
Value Added
($m)
Establish-
ments Enterprises Employment Exports Imports
Wages
($m)
Domestic
Demand
Percentage
of smokers
(%)
2010 125,392.3 4,420.6 2,532 2,304 51,186 — — 2,665.1 N/A 19.3
2011 124,077.5 5,380.4 2,766 2,541 49,067 — — 2,650.7 N/A 19.0
2012 131,121.4 5,697.9 2,917 2,703 49,948 — — 2,550.9 N/A 18.1
2013 134,331.3 4,711.1 3,096 2,884 50,444 — — 2,561.8 N/A 17.8
2014 129,016.9 4,724.2 3,316 3,113 50,700 — — 2,531.0 N/A 16.9
2015 133,142.8 5,476.4 3,365 3,134 52,633 — — 2,680.4 N/A 15.2
2016 138,534.8 4,869.4 3,418 3,152 57,093 — — 3,207.1 N/A 15.5
2017 132,666.3 3,514.6 3,551 3,275 56,186 — — 2,718.7 N/A 16.0
2018 131,874.5 4,408.9 4,195 3,305 56,205 — — 2,777.9 N/A 15.6
2019 131,030.4 4,387.9 4,206 3,321 56,243 — — 2,774.8 N/A 15.2
2020 129,869.9 4,357.0 4,194 3,318 56,111 — — 2,763.7 N/A 14.8
2021 128,573.6 4,320.7 4,175 3,308 55,902 — — 2,749.1 N/A 14.4
2022 127,304.1 4,284.6 4,153 3,295 55,673 — — 2,733.9 N/A 14.0
2023 126,045.1 4,246.4 4,121 3,273 55,352 — — 2,715.3 N/A 13.7
2024 124,755.2 4,203.5 4,086 3,247 54,869 — — 2,690.6 N/A 13.3
Sector Rank 18/67 48/67 49/67 49/67 38/67 N/A N/A 48/67 N/A N/A
Economy Rank 87/694 436/694 412/694 400/694 420/694 N/A N/A 418/694 N/A N/A
IVA/
Revenue
(%)
Imports/
Demand
(%)
Exports/
Revenue
(%)
Revenue per
Employee
($’000)
Wages/Revenue
(%)
Employees
per Est.
Average Wage
($)
Share of the
Economy
(%)
2010 3.53 N/A N/A 2,449.74 2.13 20.22 52,066.97 0.03
2011 4.34 N/A N/A 2,528.74 2.14 17.74 54,022.05 0.03
2012 4.35 N/A N/A 2,625.16 1.95 17.12 51,071.11 0.04
2013 3.51 N/A N/A 2,662.98 1.91 16.29 50,785.03 0.03
2014 3.66 N/A N/A 2,544.71 1.96 15.29 49,921.10 0.03
2015 4.11 N/A N/A 2,529.64 2.01 15.64 50,926.22 0.03
2016 3.51 N/A N/A 2,426.48 2.32 16.70 56,173.26 0.03
2017 2.65 N/A N/A 2,361.20 2.05 15.82 48,387.50 0.02
2018 3.34 N/A N/A 2,346.31 2.11 13.40 49,424.43 0.02
2019 3.35 N/A N/A 2,329.72 2.12 13.37 49,335.92 0.02
2020 3.35 N/A N/A 2,314.52 2.13 13.38 49,254.16 0.02
2021 3.36 N/A N/A 2,299.98 2.14 13.39 49,177.13 0.02
2022 3.37 N/A N/A 2,286.64 2.15 13.41 49,106.39 0.02
2023 3.37 N/A N/A 2,277.16 2.15 13.43 49,055.14 0.02
2024 3.37 N/A N/A 2,273.69 2.16 13.43 49,036.80 0.02
Sector Rank 65/67 N/A N/A 8/67 62/67 18/67 58/67 48/67
Economy Rank 692/694 N/A N/A 21/694 683/694 308/694 391/694 436/694
Figures are in inflation-adjusted 2019 dollars. Rank refers to 2019 data.
Revenue
(%)
Industry
Value Added
(%)
Establish-
ments
(%)
Enterprises
(%)
Employment
(%)
Exports
(%)
Imports
(%)
Wages
(%)
Domestic
Demand
(%)
Percentage
of smokers
(%)
2011 -1.0 21.7 9.2 10.3 -4.1 N/A N/A -0.5 N/A -1.6
2012 5.7 5.9 5.5 6.4 1.8 N/A N/A -3.8 N/A -4.7
2013 2.4 -17.3 6.1 6.7 1.0 N/A N/A 0.4 N/A -1.7
2014 -4.0 0.3 7.1 7.9 0.5 N/A N/A -1.2 N/A -5.1
2015 3.2 15.9 1.5 0.7 3.8 N/A N/A 5.9 N/A -10.1
2016 4.0 -11.1 1.6 0.6 8.5 N/A N/A 19.7 N/A 2.0
2017 -4.2 -27.8 3.9 3.9 -1.6 N/A N/A -15.2 N/A 3.0
2018 -0.6 25.4 18.1 0.9 0.0 N/A N/A 2.2 N/A -2.2
2019 -0.6 -0.5 0.3 0.5 0.1 N/A N/A -0.1 N/A -2.5
2020 -0.9 -0.7 -0.3 -0.1 -0.2 N/A N/A -0.4 N/A -2.6
2021 -1.0 -0.8 -0.5 -0.3 -0.4 N/A N/A -0.5 N/A -2.6
2022 -1.0 -0.8 -0.5 -0.4 -0.4 N/A N/A -0.6 N/A -2.7
2023 -1.0 -0.9 -0.8 -0.7 -0.6 N/A N/A -0.7 N/A -2.7
2024 -1.0 -1.0 -0.8 -0.8 -0.9 N/A N/A -0.9 N/A -2.8
Sector Rank 49/67 53/67 40/67 32/67 44/67 N/A N/A 47/67 N/A N/A
Economy Rank 577/694 577/694 474/694 419/694 545/694 N/A N/A 553/694 N/A N/A
Annual Change
Key Ratios
Industry Data
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 40
Apr 2017 – Mar 2018 by company revenue
Apr 2014 – Apr 2015 – Apr 2016 – Apr 2017 – Small Medium Large
Mar 2015 Mar 2016 Mar 2017 Mar 2018 (<$10m) ($10-50m) (>$50m)
Liquidity Ratios
Current Ratio 1.9 1.9 1.7 1.8 n/a 1.7 1.7
Quick Ratio 0.7 0.8 0.8 0.9 n/a 0.9 0.7
Sales / Receivables (Trade Receivables
Turnover) 33.0 32.5 29.4 31.3 n/a 28.0 31.3
Days’ Receivables 11.1 11.2 12.4 11.7 n/a 13.0 11.7
Cost of Sales / Inventory (Inventory Turnover) 19.5 20.7 25.2 21.1 n/a 13.0 24.0
Days’ Inventory 18.7 17.6 14.5 17.3 n/a 28.1 15.2
Cost of Sales / Payables (Payables Turnover) 49.9 55.7 58.4 71.0 n/a 49.9 72.1
Days’ Payables 7.3 6.6 6.3 5.1 n/a 7.3 5.1
Sales / Working Capital 25.6 24.8 27.6 25.6 n/a 16.9 33.1
Coverage Ratios
Earnings Before Interest & Taxes (EBIT) /
Interest 4.8 4.3 3.7 3.3 n/a 3.2 3.1
Net Profit + Dep., Depletion, Amort. / Current
Maturities LT Debt 6.4 5.8 6.3 1.7 n/a n/a 2.2
Leverage Ratios
Fixed Assets / Net Worth 0.2 0.1 0.2 0.2 n/a 0.2 0.2
Debt / Net Worth 1.6 1.7 1.6 1.4 n/a 0.8 1.7
Tangible Net Worth 36.7 34.0 32.1 38.0 n/a 43.2 40.1
Operating Ratios
Profit before Taxes / Net Worth, % 14.2 15.0 12.5 9.2 n/a 10.2 7.5
Profit before Taxes / Total Assets, % 4.4 4.8 3.9 2.8 n/a 3.0 2.6
Sales / Net Fixed Assets 144.2 137.9 157.6 120.0 n/a 106.8 116.8
Sales / Total Assets (Asset Turnover) 8.3 8.4 9.1 8.1 n/a 5.7 10.2
Cash Flow & Debt Service Ratios (% of sales)
Cash from Trading 6.3 6.1 5.1 5.8 n/a 11.5 4.5
Cash after Operations 0.8 0.5 0.6 0.6 n/a 2.7 0.3
Net Cash after Operations 1.2 0.6 0.8 0.8 n/a 2.1 0.4
Cash after Debt Amortization 0.3 -0.1 0.3 n/a n/a n/a -0.2
Debt Service P&I Coverage 3.1 1.5 1.8 1.9 n/a 2.2 0.8
Interest Coverage (Operating Cash) 6.3 3.1 3.8 2.5 n/a 4.0 1.6
Assets, %
Cash & Equivalents 13.2 9.4 11.3 13.1 n/a 17.0 8.6
Trade Receivables (net) 24.9 26.8 28.6 26.5 n/a 20.4 31.6
Inventory 41.7 40.9 37.7 37.2 n/a 35.3 39.3
All Other Current Assets 2.6 2.1 3.7 3.8 n/a 1.9 3.2
Total Current Assets 82.3 79.2 81.3 80.6 n/a 74.7 82.7
Fixed Assets (net) 9.7 8.5 10.1 9.1 n/a 8.1 10.2
Intangibles (net) 1.6 3.7 1.8 1.9 n/a 4.0 1.1
All Other Non-Current Assets 6.5 8.6 6.9 8.4 n/a 13.2 5.9
Total Assets 100.0 100.0 100.0 100.0 n/a 100.0 100.0
Total Assets ($m) 2,516.5 2,549.9 1,991.8 2,002.6 4.9 256.8 1,740.9
Liabilities, %
Notes Payable-Short Term 20.2 18.5 24.4 19.3 n/a 14.5 23.1
Current Maturities L/T/D 1.3 2.1 1.8 2.0 n/a 1.8 2.0
Trade Payables 18.9 15.8 14.9 11.9 n/a 12.6 12.5
Income Taxes Payable 0.1 0.1 0.2 0.1 n/a 0.2 0.1
All Other Current Liabilities 7.9 9.9 12.7 14.8 n/a 17.6 8.3
Total Current Liabilities 48.3 46.4 54.0 48.2 n/a 46.7 46.1
Long Term Debt 8.6 10.1 9.2 8.8 n/a 4.6 8.9
Deferred Taxes 0.2 0.4 0.3 0.2 n/a n/a 0.3
All Other Non-Current Liabilities 4.6 5.4 2.6 2.9 n/a 1.5 3.6
Net Worth 38.3 37.7 33.9 39.9 n/a 47.2 41.2
Total Liabilities & Net Worth ($m) 2,516.5 2,549.9 1,991.8 2,002.6 4.9 256.8 1,740.9
Maximum Number of Statements Used 107 94 85 89 7 25 57
Industry Financial Ratios
Source: RMA Annual Statement Studies, rmahq.org. RMA data for all industries is derived directly from more
than 260,000 statements of member financial institutions’ borrowers and prospects.
Note: For a full description of the ratios refer to the Key Statistics chapter online.
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 41
Jargon & Glossary
BARRIERS TO ENTRY High barriers to entry mean that
new companies struggle to enter an industry, while low
barriers mean it is easy for new companies to enter an
industry.
CAPITAL INTENSITY Compares the amount of money
spent on capital (plant, machinery and equipment) with
that spent on labor. IBISWorld uses the ratio of
depreciation to wages as a proxy for capital intensity.
High capital intensity is more than $0.333 of capital to $1
of labor; medium is $0.125 to $0.333 of capital to $1 of
labor; low is less than $0.125 of capital for every $1 of
labor.
CONSTANT PRICES The dollar figures in the Key
Statistics table, including forecasts, are adjusted for
inflation using the current year (i.e. year published) as the
base year. This removes the impact of changes in the
purchasing power of the dollar, leaving only the “real”
growth or decline in industry metrics. The inflation
adjustments in IBISWorld’s reports are made using the
US Bureau of Economic Analysis’ implicit GDP price
deflator.
DOMESTIC DEMAND Spending on industry goods and
services within the United States, regardless of their
country of origin. It is derived by adding imports to
industry revenue, and then subtracting exports.
EMPLOYMENT The number of permanent, part-time,
temporary and seasonal employees, working proprietors,
partners, managers and executives within the industry.
ENTERPRISE A division that is separately managed and
keeps management accounts. Each enterprise consists of
one or more establishments that are under common
ownership or control.
ESTABLISHMENT The smallest type of accounting unit
within an enterprise, an establishment is a single physical
location where business is conducted or where services or
industrial operations are performed. Multiple
establishments under common control make up an
enterprise.
EXPORTS Total value of industry goods and services sold
by US companies to customers abroad.
IMPORTS Total value of industry goods and services
brought in from foreign countries to be sold in the United
States.
INDUSTRY CONCENTRATION An indicator of the
dominance of the top four players in an industry.
Concentration is considered high if the top players
account for more than 70% of industry revenue. Medium
is 40% to 70% of industry revenue. Low is less than 40%.
INDUSTRY REVENUE The total sales of industry goods
and services (exclusive of excise and sales tax); subsidies
on production; all other operating income from outside
the firm (such as commission income, repair and service
income, and rent, leasing and hiring income); and capital
work done by rental or lease. Receipts from interest
royalties, dividends and the sale of fixed tangible assets
are excluded.
INDUSTRY VALUE ADDED (IVA) The market value of
goods and services produced by the industry minus the
cost of goods and services used in production. IVA is also
described as the industry’s contribution to GDP, or profit
plus wages and depreciation.
INTERNATIONAL TRADE The level of international
trade is determined by ratios of exports to revenue and
imports to domestic demand. For exports/revenue: low is
less than 5%, medium is 5% to 20%, and high is more
than 20%. Imports/domestic demand: low is less than
5%, medium is 5% to 35%, and high is more than 35%.
LIFE CYCLE All industries go through periods of growth,
maturity and decline. IBISWorld determines an industry’s
life cycle by considering its growth rate (measured by IVA)
compared with GDP; the growth rate of the number of
establishments; the amount of change the industry’s
products are undergoing; the rate of technological
change; and the level of customer acceptance of industry
products and services.
Industry Jargon
IBISWorld Glossary
BROADLINE DISTRIBUTOR Wholesalers that distribute
a wide range of grocery and nonfood items; tobacco
products generate only a small and incidental share of
these wholesalers’ revenue.
CANDY AND TOBACCO DISTRIBUTOR Wholesalers
that primarily distribute tobacco products and
confectioneries (e.g. candy and snacks); these
companies generate only a small share of revenue from
general grocery and nonfood items.
CIGARILLO A small and narrow cigar that is often
wrapped in leaf tobacco (not paper).
E-CIGARETTE A battery-powered electronic device that
simulates the act of smoking cigarettes by producing
water vapor (which resembles smoke), while delivering
nicotine via the liquid solution when heated.
MANUFACTURERS’ SALES BRANCHES AND OFFICES
(MSBO) The sales and distribution divisions of large
tobacco manufacturers, which sell directly to large,
national wholesalers such as McLane Company Inc. and
Core-Mark Holding Company Inc.
MERCHANT WHOLESALER Traditional distributors that
purchase products from upstream suppliers for
distribution to retailers and other downstream markets.
SNUS A smokeless tobacco product that is placed under
the lip for absorption through the gums rather than
being inhaled or ingested.
WHOLESALE BYPASS A trend whereby producers supply
goods directly to retailers and end users using their own
distribution channels, rather than relying on
intermediary merchant wholesalers.
WWW.IBISWORLD.COM Cigarette & Tobacco Products Wholesaling in the US October 2019 42
Jargon & Glossary
IBISWorld Glossary
continued
NONEMPLOYING ESTABLISHMENT Businesses with no
paid employment or payroll, also known as nonemployers.
These are mostly set up by self-employed individuals.
PROFIT IBISWorld uses earnings before interest and tax
(EBIT) as an indicator of a company’s profitability. It is
calculated as revenue minus expenses, excluding interest
and tax.
VOLATILITY The level of volatility is determined by
averaging the absolute change in revenue in each of the
past five years. Volatility levels: very high is more than
±20%; high volatility is ±10% to ±20%; moderate
volatility is ±3% to ±10%; and low volatility is less than
±3%.
WAGES The gross total wages and salaries of all
employees in the industry. The cost of benefits is also
included in this figure.
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