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

                              Dec 4, 2022 - “Click-by” Lawsuits Are Increasing
                              • A steadily rising wave of litigation based on infractions of Americans With Disabilities Act (AwDA) rules is impacting many small businesses. Many of these lawsuits are grounded in physical barriers to access, but “click by” lawsuits are being filed in increasing numbers against businesses for digital violations. Click-by lawsuits are initiated when prospective plaintiffs and their lawyers scan websites in search of site designs that violate AwDA rules. The aim in nearly all cases is to reach a cash settlement with the business owner in lieu of going to court. Experts say that the practice has led to numerous cases filed by super-litigious groups of plaintiffs and law firms. AwDA compliance can be complicated, and experts say that small business websites are low-hanging fruit for predatory litigation. Minimum damages for a first offense in California are $4,000 and can multiply for every site revisit.
                              • Michigan may be the next state to regulate kratom, a substance marketed as an alternative medicine or natural remedy for pain and stress. The US Food and Drug Administration (FDA) warns against use, noting that kratom “affects the same opioid brain receptors as morphine.” Six states have banned kratom, while others have regulated it. Most states have not yet regulated or restricted its use, according to Derek Sova, a legislative specialist with Michigan’s Cannabis Regulatory Agency. Many addiction specialists, health experts, and the FDA warn that kratom can have psychoactive (mind-altering) effects on the brain and carries the risk of “addiction, abuse, and dependence.”
                              • The Food and Drug Administration (FDA) has explicitly ordered hundreds of products like cotton candy-flavored vape liquids, vapes made to look like fidget spinners, and disposables filled with more nicotine than 200 cigarettes off the market, but vape companies and smoke shops are regularly ignoring the FDA’s orders, according to STAT News. The agency has sweeping legal authorities to crack down on companies that ignore its bans, ranging from levying seven-figure fines to physically pulling products off shelves, but has never used those powers, according to its own data. It has dropped several cases against companies that it knows are still selling illegal products. Vape shops argue that the FDA’s orders aren’t clear enough, according to STAT News. Most shops plan to continue offering the products until they understand exactly what’s illegal and what’s not.
                              • The head of the Food and Drug Administration requested a review of the agency’s food and tobacco programs following months of criticism over the handling of the recent e-cigarette reviews and a baby formula shortage. The agency’s tobacco center, which regulates traditional cigarettes and vaping products, is facing challenges navigating policy and enforcement issues from “an increasing number of novel products that could potentially have significant consequences for public health,” FDA Commissioner Robert Califf said. Califf cited funding challenges, noting that the FDA cannot collect user fees from vaping companies who submit their products. The agency has asked Congress for that authority. “I don’t think anyone anticipated that there would be 6.7 million vaping product applications that came rolling in during a pandemic that was stressing the entire agency.”
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