Tobacco and Smoke Shops
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 12,400 tobacco and smoke shops in the US sell cigarettes, cigars, tobacco, pipes and other smokers’ supplies and accessories. Cigars, cigarettes, tobacco, and smokers’ accessories account for 84% of industry sales. For some firms, e-cigarettes and vaporizers are accounting for an increasing percentage of sales (as much as 30%). Some shops also sell packaged alcoholic beverages (liquor, beer, wine), groceries, and fuel.
Shrinking Customer Base
Despite the addictive nature of tobacco products, the number of Americans that smoke continues to decline.
Competition From Alternative Retailers
Tobacco and smoke shops compete with a variety of alternative retailers, including gas stations, convenience stores, grocery stores, pharmacies, liquor stores, dollar stores, and online retailers.
Industry size & Structure
The average tobacco and smoke shop operates out of a single location, employs fewer than 10 workers, and generates over $800,000 annually.
- The tobacco and smoke shop industry consists of about 12,400 establishments that employ 107,900 workers and generate about $10 billion annually.
- The industry is fragmented; the top 50 companies account for 20% of industry revenue.
- Large firms include Smoker Friendly and Admiral Discount Tobacco. Most large firms are chains that operate regionally.
- Nearly 12% of US adults are cigarette smokers, according to the CDC.
- Some "vape shops", which sell primarily vaporizers and e-cigarettes, operate out of kiosks and may be excluded from the official tobacco and smoke shop retail category by the Census.
Industry Forecast
Tobacco and Smoke Shops Industry Growth
Recent Developments
Jan 10, 2025 - Stricter Illinois Laws Regarding Vaping Take Effect
- Several new Illinois laws strengthening rules related to the use, promotion, and shipping of electronic cigarettes go into effect on January 1, 2025, according to a report in Tobacco Reporter. One law that went into effect prohibits the advertising, marketing, or promoting of an electronic cigarette in a manner that could cause a consumer to mistake it for an object that is anything other than a tobacco product. Some e-cigarettes are designed to look like school supplies, such as highlighters and erasers, to allow students to hide the products from school officials. Another new law prohibits electronic cigarettes purchased through remote sales methods such as mail or online from being shipped to anyone other than a retailer or distributor. A law that bans e-cigarettes from being used in indoor public spaces also became effective in January. More states may follow suit with similar advertising and shipping prohibitions.
- Tobacco and smoke shops will have to monitor minimum wage changes in 2025, as 21 states and 50 local jurisdictions increased their minimum wages, according to Chain Store Age. States with the highest minimum wage in the US are Washington ($16.66 per hour), California ($16.50), and New York ($16.50). Nearly 30 cities in California and seven towns in Washington will raise minimum wages in 2025, with Tukwila, Washington, offering the highest minimum hourly wage in the US at $21.10. According to the Economic Policy Institute, the minimum wage change will affect more than $9 million workers and raise pay by a combined $5.7 billion. Unchanged since 2009, the federal minimum wage is $7.25 an hour, and some 20 states, primarily located in the South and the Midwest, use the federal minimum as their wage floor.
- The US tobacco and smoke shops industry is projected to grow at a CAGR of 1.2% between 2024 and 2028, according to a forecast from Inforum and the Interindustry Economic Research Fund, Inc. The expected growth rate is slower than the overall economy‘s anticipated growth. The report noted that consumer confidence is expected to improve in the forecast period, which bodes well for the retail and wholesale industries. Factors that continue to limit consumer spending are lower consumer sentiment levels, higher interest levels, and elevated price levels. On a positive note, inflation is subsiding, which supports a moderate increase of real disposable income by about 1.9% in 2024 and 2.4% in 2025. Retailers have seen internet sales increasingly grow in share since the pandemic, growing from 12.8% of total sales in February 2020 to 17.9% in April 2024.
- A new rule from the US Food and Drug Administration (FDA) has raised the age for photo verification needed for tobacco products, according to Reuters. The new regulation requires that retailers verify the age of anyone under 30 buying tobacco products, three years older than the previous mandate. The requirement is part of a rule finalized by the FDA in late August. The FDA has also updated rules around the sale of tobacco products via vending machines. Retailers are not permitted to sell tobacco products via vending machines in places where individuals under 21 are present or permitted to enter, an increase from 18 years previously. The changes are part of a directive from the Further Consolidated Appropriations Act, signed into law in 2019, which increased the federal minimum age for the sale of tobacco products from 18 to 21 in the US. The FDA says the new rules help protect the youth in the US from the health risks of tobacco products. According to Brian King, the director of the FDA's Center for Tobacco Products, "Decades of science have shown that keeping tobacco products away from youth is critical to reducing the number of people who ultimately become addicted to these products and suffer from tobacco-related disease and death."
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