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Home > Consumer Products > Consumer Products & Retail > Tobacco Products
Tobacco Manufacture
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| Published Date:
October 2009
Published By:
First Research, Inc.
Page Count:
10
Order Code:
R3470-3106
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The US tobacco manufacturing industry includes about 100 companies with combined annual revenue of nearly $40 billion. Major companies include Lorillard, Philip Morris USA, Reynolds American, UST, and Vector Group. The industry is highly concentrated: the 50 largest companies hold nearly 100 percent of the market.
COMPETITIVE LANDSCAPE
Demand is driven by discretionary consumer spending and awareness of the health effects of smoking. The profitability of individual companies depends on effective marketing. Large companies enjoy economies of scale in manufacturing and in their ability to offer wider ranges of products. Small companies can compete effectively through heavy discounting, through clever branding and packaging, and by exploiting niche categories such as pipe tobacco and additive-free cigarettes. The industry is highly capital-intensive: average annual revenue per worker for a typical company is $1.5 million.
PRODUCTS, OPERATIONS & TECHNOLOGY
Major consumer tobacco products include cigarettes, chewing tobacco and snuff, and cigars. Cigarettes account for 90 percent of all US-produced tobacco products, chewing tobacco and snuff for 6 percent, and cigars for 2 percent. Tobacco processing, an initial step in the production process, is a $1 billion industry.
Tobacco is an annual plant with leaves that are hand- or machine-cut and then cured. Curing removes all moisture from the leaf and enhances flavor. Flue-curing takes about a week; air-curing takes two months. Cured tobacco is cleaned and sorted in tobacco processing plants, where stems are removed in a process called ...
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