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 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

                              Recent Developments

                              Mar 3, 2023 - FDA Rules on Flavored Cigars and Menthol Cigarettes Expected Fall 2023
                              • The US Food and Drug Administration (FDA) is expected to finalize proposed rules that would ban or limit the sales of flavored cigars and menthol cigarettes by fall 2023, according to a report in Halfwheel. The timeline was shared by Brian King, the director of FDA’s Center for Tobacco Products, at the Society for Research on Nicotine and Tobacco’s 2023 forum. The agency is working through the approximately 250,000 comments submitted on the two proposed rules; the flavored cigar and menthol cigarettes rules are being considered separately. The FDA announced plans to ban menthol cigarettes and flavored cigars two years ago.
                              • Consumer confidence levels declined in February 2023 for the second consecutive month, according to data from The Conference Board. The Conference Board’s consumer confidence index fell to 102.9 in February 2023 from 106 in January 2023, as high prices and rising interest rates affected consumers’ willingness to spend. According to Ataman Ozyildirim, a senior director of economics at The Conference Board, “Consumer confidence declined again in February. The decrease reflected large drops in confidence for households aged 35 to 54 and for households earning $35,000 or more.” Plans to purchase homes, vehicles, and appliances have cooled, in addition to a drop in vacation intentions, per Ozyildirim.
                              • Maine may be the next state to ban the sale of flavored tobacco products statewide, according to a C-Store Dive report. State Senator Jill Duson submitted the bill proposing the ban in December 2022, citing the popularity of the products with the youth market. Flavored tobacco has continued to be a topic of debate with lawmakers nationwide. Massachusetts implemented a flavored tobacco ban in 2020. In November 2022, California voters approved a statewide ban on flavored tobacco products, including flavored e-cigarettes, menthol cigarettes, and tobacco product flavor enhancers. Many municipalities across the US have also prohibited flavored tobacco sales. The topic has come to a head in Ohio as the state legislature passed a bill prohibiting cities from imposing harsher tobacco restrictions than the state’s rules. However, Gov. Mike DeWine vetoed the bill in January 2023 and called for a statewide ban on flavored tobacco.
                              • A survey recently released by the Centers for Disease Control and Prevention shows that the majority of US adults support policies prohibiting the sale of menthol cigarettes and all tobacco products, according to USA Today. The study, published in February 2022 in the peer-reviewed journal Preventing Chronic Disease, surveyed nearly 6,500 US adults in 2021. More than 60% supported a policy prohibiting the sale of menthol cigarettes, and 57% supported a policy banning the sale of all tobacco products. According to the study, "A majority of adults supported tobacco retail policies aimed at preventing initiation, promoting quitting, and reducing tobacco-related disparities. These findings can help inform federal, state, and local efforts to prohibit the sale of tobacco products, including menthol cigarettes."
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