Cigarette value sales growth slows in response to declining volume sales
The consumption of cigarettes, the dominant form of tobacco use in the US, continues its downward trajectory. Contributing to these declines are the steady efforts of anti-smoking organisations and health campaigns, increased regulation, especially at the state or local level, greater competition and consistently growing prices. Price increases are in part due to higher taxes, but have also been regularly implemented by cigarette manufacturers to turn a profit in light of dramatically falling volume sales. However, this strategy has also driven a greater number of consumers to less expensive economy-priced brands or to the use of alternative tobacco products and vapour devices. As a result, cigarette value sales growth has slowed considerably and value sales even declined in 2013 for the first time in over a decade.
Vapour devices flourish in the US, more than doubling value sales again in 2014
Retail value sales of vapour devices have doubled each year since 2008, when the products came to market. Their nascence, coupled with perceived safety and limited regulation relative to traditional cigarettes, have allowed vapour devices such staggering growth. While cig-a-likes have long dominated vapour devices, the recent proliferation of tank system devices in 2013 and 2014 has encroached on cig-a-likes’ share of vapour devices and is expected to represent a majority of vapour device value sales in 2015. Tank systems, while less representative of traditional cigarettes in look, appeal to consumers as the vapour created is more reminiscent of cigarette smoke.
Reynolds American Inc to bolster its competitive position through the acquisition of Lorillard Inc
In mid-2014, Reynolds American announced that it had reached an agreement to acquire Lorillard in a cash and stock transaction valued at US$27.4 billion. This transaction, which is expected to be completed in the first half of 2015, will add Newport, the second bestselling brand of cigarettes in the US, to the Reynolds American portfolio, which already includes such iconic brands as Camel and Pall Mall. To avoid potential antitrust issues and more readily gain approval from the Federal Trade Commission (FTC), Reynolds American is likely to divest several brands, including Winston, Kool and Salem, to Imperial Tobacco Group Plc. These transactions are expected to significantly close the competitive gaps between Altria, the leading manufacturer of tobacco products in the US, and Reynolds American, as well as solidify Imperial Tobacco’s third place position.
CVS Health halts the sale of tobacco products while discounters reinforce supplies
In September 2014, the major health and beauty specialist retailer CVS Health discontinued the sale of all tobacco products in an unprecedented move. CVS, the second largest chain of parapharmacies/drugstores in the US, cited the inconsistency in its commitment to personal wellbeing and the sale of tobacco products, which are detrimental to health. Though unlikely in the near future, other leading drugstore chains like Walgreens and Rite Aid have received significant pressure to follow CVS’s example and discontinue the sale of tobacco. On the other hand, discount retailers continue to account for a greater portion of tobacco sales since chains like Family Dollar and Dollar General began stocking the products in late-2012. Forecourt retailers and convenience stores, however, continue to account for the majority of tobacco sales in the US.
E-cigs support the tobacco market
Total tobacco products are expected to grow by 16% over the forecast period in constant value terms, with vapour devices underpinning 74% of this growth. While vapour devices performed incredibly over the review period, its value sales in 2014 made up a mere 3% of total tobacco value sales. By 2019, however, vapour device value sales are expected increase more than five-fold to represent 16% of total tobacco value sales, making it the driving force in an otherwise mature industry.
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The Tobacco in USA market research report includes:
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Our market research reports answer questions such as:
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This industry report originates from Passport, our Tobacco market research database.