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.

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.

Shrinking Customer Base

Despite the addictive nature of tobacco products, the number of Americans that smoke continues to decline.

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
                              Source: Vertical IQ and Inforum

                              Recent Developments

                              Mar 2, 2024 - Steady Growth Projected for Smoking Accessories Market
                              • The smoking accessories market is projected to grow at a CAGR of 6.5% from 2021 to 2030, reaching $6.3 billion, according to a new report by Allied Market Research. The report indicates that the market was valued at $3.1 billion in 2020. Online retail platforms are expected to be a major driver of market growth. The 18 to 30-year-old age segment holds the largest market share in the industry and is expected to continue to grow. The Asia-Pacific region accounted for the highest market share in 2020 and is predicted to grow at a significant CAGR during the forecast period.
                              • According to a recent survey by Goldman Sachs, nearly two-thirds of retailers have noticed an increase in promotional efforts from nicotine pouch manufacturers in late 2023, as the smokeless segment posts double-digit sales, according to CStore Decisions. The survey, called “Nicotine Nuggets,” had 67,000 retailer respondents, including convenience stores, in Q4 2023. Respondents expect an estimated 12% growth in smokeless tobacco sales in 2024, with many expecting to allocate more space to display the pouches. Data from the US convenience store channel shows that the smokeless category had sales of $10 billion in 2023, with spitless products marking a 53% increase in dollar sales and a 40% increase in unit sales, per Circana.
                              • Tobacco and smoke shops will have to monitor minimum wage changes, as 22 states increased their minimum wages in January 2024, according to Chain Store Age. About half of the increases are automatic adjustments linked to inflation. States that raised their minimum wages in January 2024 include Hawaii ($14), Maryland ($15), Nebraska ($12), and Washington ($16.28). Several states are set to boost their minimum wage levels later this year, including Florida (up to $13 in September) and Nevada (up to $12 in July). According to the Economic Policy Institute, nearly 40 US cities and counties will increase their minimum wage rates above state levels at the start of the new year. The federal minimum wage is $7.25 an hour, and more than 20 states, primarily located in the South and the Midwest, use the federal minimum as their wage floor.
                              • Consumer confidence levels fell in February 2024 after increasing for three consecutive months, according to data from The Conference Board. The Conference Board’s consumer confidence index fell to 106.7 in February 2024 from 110.9 in January 2024. According to Dana Peterson, Chief Economist at The Conference Board, “The decline in consumer confidence in February interrupted a three-month rise, reflecting persistent uncertainty about the US economy. The drop in confidence was broad-based, affecting all income groups except households earning less than $15,000 and those earning more than $125,000.” Peterson added that the decline in consumer confidence was largest in householders over 55 and those under 35. Plans to purchase homes, autos, and large appliances decreased slightly on a six-month basis.
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