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 Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 11,600 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 3-4 workers, and generates about $810,000 annually.

    • The tobacco and smoke shop industry consists of about 11,600 establishments that employ 42,900 workers and generate $9 billion annually.
    • The industry is fragmented; the top 50 companies account for 20% of industry revenue.
    • Large firms include Smoker Friendly, Admiral Discount Tobacco, and Tobacco Superstores. Most large firms are chains that operate regionally.
    • Nearly 14% 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

                              Coronavirus Update

                              May 8, 2022 - Ban On Menthol Cigarettes Proposed
                              • The Biden administration has proposed a national ban on menthol cigarettes, which account for more than one-third of all cigarettes sold in the US each year. The US Food and Drug Administration said in a statement at the end of April that putting menthol flavor in cigarettes can increase nicotine’s addictiveness and make it harder to quit smoking. Canada banned menthols in 2017, and average annual declines in the number of cigarette smokers accelerated to twice the previous rate in the three years afterward. Total nicotine users, which include smokeless products like e-cigarettes, fell just 0.4%, however, a Jefferies analysis shows.
                              • Legislation allowing the US Food and Drug Administration to regulate synthetic nicotine, which is used in vape products, was signed into law in March. E-cigarettes or vapes typically contain as much or more nicotine than traditional cigarettes, but manufacturers avoided government regulations by using a synthetic version of the chemical. Industry experts say that the law could dramatically change the US vaping industry, potentially taking products from market-leaders like Puff Bar and from smaller brands, off store shelves.
                              • Electronic vaping device users who contract COVID-19 are more likely to experience symptoms, according to a study published in the Journal of Primary Care & Community Health. Increased lung tissue inflammation induced by COVID-19 infection and vaping may increase the chances of systemic inflammation. Robert Vassallo, MD, a Mayo Clinic pulmonologist, critical care specialist, and study coauthor, said, “"During a pandemic with a highly transmissible respiratory pathogen like SARS-CoV-2, it is highly advisable to reduce or stop vaping and e-cigarette use, and minimize the potential for increased symptoms and lung injury.”
                              • Cigarette sales increased for the first time in two decades in 2020, according to The Federal Trade Commission's annual Cigarette Report. Manufacturers sold 203.7 billion cigarettes in 2020, up from 202.9 billion in 2019 — an increase of 0.4%. The companies, the report said, increased advertising and promotion to $7.84 billion in 2020 from $7.62 billion the previous year, concentrating the bulk of their spending in "price discounts paid to cigarette retailers in order to reduce the price of cigarettes to customers," the FTC said.
                              • Scientists who study aerosols, air flow, and ventilation say that barriers intended to protect against coronavirus transmission rarely help and probably give people a false sense of security, according to The New York Times. Research suggests that in some instances, a barrier protecting a clerk behind a checkout counter may redirect the germs to another worker or to a customer. Rows of clear plastic shields, like those installed in some stores, can also impede normal air flow and ventilation. Erecting plastic barriers can change air flow in a room, disrupt normal ventilation, and create “dead zones,” where viral aerosol particles can build up and become highly concentrated. A study published in June and led by researchers from Johns Hopkins, for example, showed that desk screens in classrooms were associated with an increased risk of coronavirus infection.
                              • Disrupted production, overloaded supply chains, and rising demand have caused a cigar shortage. Many manufacturers have stopped making slower-selling items and are focusing production on their top-selling items and brands. “The most popular ones for us are two-for-99-cents, three-for-$1.29, and save-on-two,” noted Chad Owen, president of distributor Chambers & Owen.
                              • Smoking increases the risk of severe illness from COVID-19 by 34%, according to a review and meta-analysis of 18 studies conducted by the Cardiology Clinic of Athens University in Greece. Patients that smoked also had more symptoms (fever, cough, and breathing difficulties) and were more likely to be hospitalized than non-smokers.
                              • Store lockdowns had different impacts on the use of cigarettes and e-cigarettes, according to Columbia University researchers. Cigarettes were widely available in essential businesses, such as convenience stores and gas stations, but access to vaping products was more limited because vape shops were considered nonessential and forced to close. That led some e-cigarette users to buy products online. Some people who used both cigarettes and e-cigarettes increased their smoking rates, as a result, the researchers said. "Pandemic response policies that intentionally or inadvertently restrict access to lower risk products -- through availability, supply chains or even postal service slowdowns -- while leaving more harmful products widely accessible may have unintended consequences that should be considered during policy development," study lead author Daniel Giovenco, assistant professor of socio-medical sciences, said in a Columbia news release.
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