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Tobacco Manufacture Industry Profile Excerpt
| SIC Codes: 2111, 2121, 2131, 2141 NAICS Codes: 3122 Page Length: 10-12 Last Quarterly Update: 9/15/2008 View Sample Industry Profile |
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The tobacco manufacturing industry includes about 100 companies with combined annual revenue of nearly $40 billion. Major companies include Philip Morris, Reynolds American, Lorillard, and Liggett. 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 have advantages in economies of scale in manufacturing and product loyalty. Small companies can compete effectively through heavy discounting, 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 threshing. The tobacco is then re-dried, compressed into boxes or wooden vats, and aged ...
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