67312448

INDUSTRY PROFILE
Tobacco in the United States

Reference Code: 0072-0817 Publication Date: October 2011
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United States - Tobacco

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EXECUTIVE SUMMARY
EXECUTIVE SUMMARY
Market value
The United States tobacco market grew by 2.2% in 2010 to reach a value of $95,599.9 million.
Market value forecast

In 2015, the United States tobacco market is forecast to have a value of $106,282.5 million, an increase of 11.2% since 2010.
Market segmentation I
Cigarettes is the largest segment of the tobacco market in the United States, accounting for 91.9% of the market's total value.
Market segmentation II
The United States accounts for 13.3% of the global tobacco market value.
Market share
Altria Group, Inc. is the leading player in the United States tobacco market, generating a 53.4% share of the market's value.
Market rivalry
The US tobacco market is highly concentrated, with the top three players collectively accounting for 90% of the total market value.

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CONTENTS
TABLE OF CONTENTS
EXECUTIVE SUMMARY MARKET OVERVIEW Market definition Research highlights Market analysis MARKET VALUE MARKET SEGMENTATION I MARKET SEGMENTATION II MARKET SHARE FIVE FORCES ANALYSIS Summary Buyer power Supplier power New entrants Substitutes Rivalry LEADING COMPANIES Altria Group, Inc. Reynolds American Inc. Lorillard, Inc. MARKET DISTRIBUTION MARKET FORECASTS Market value forecast MACROECONOMIC INDICATORS APPENDIX Methodology Industry associations Related Datamonitor research
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CONTENTS
Disclaimer ABOUT DATAMONITOR Premium Reports Summary Reports Datamonitor consulting
38 39 39 39 39

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CONTENTS
LIST OF TABLES
Table 1: Table 2: Table 3: Table 4: Table 5: Table 6: Table 7: Table 8: Table 9: Table 10: Table 11: Table 12: Table 13: Table 14: Table 15: Table 16: Table 17: Table 18: Table 19: Table 20: Table 21: United States tobacco market value: $ million, 200610(e) United States tobacco market segmentation I:% share, by value, 2010(e) United States tobacco market segmentation II: % share, by value, 2010(e) United States tobacco market share: % share, by value, 2010(e) Altria Group, Inc.: key facts Altria Group, Inc.: key financials ($) Altria Group, Inc.: key financial ratios Reynolds American Inc.: key facts Reynolds American Inc.: key financials ($) Reynolds American Inc.: key financial ratios Lorillard, Inc.: key facts Lorillard, Inc.: key financials ($) Lorillard, Inc.: key financial ratios United States tobacco market distribution: % share, by value, 2010(e) United States tobacco market value forecast: $ million, 201015 United States size of population (million), 200610 United States gdp (constant 2000 prices, $ billion), 200610 United States gdp (current prices, $ billion), 200610 United States inflation, 200610 United States consumer price index (absolute), 200610 United States exchange rate, 200610 10 11 12 13 20 22 22 24 26 26 28 29 29 31 32 33 33 33 34 34 34

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CONTENTS
LIST OF FIGURES
Figure 1: Figure 2: Figure 3: Figure 4: Figure 5: Figure 6: Figure 7: Figure 8: United States tobacco market value: $ million, 200610(e) United States tobacco market segmentation I:% share, by value, 2010(e) United States tobacco market segmentation II: % share, by value, 2010(e) United States tobacco market share: % share, by value, 2010(e) Forces driving competition in the tobacco market in the United States, 2010 Drivers of buyer power in the tobacco market in the United States, 2010 Drivers of supplier power in the tobacco market in the United States, 2010 Factors influencing the likelihood of new entrants in the tobacco market in the United States, 2010 Factors influencing the threat of substitutes in the tobacco market in the United States, 2010 Drivers of degree of rivalry in the tobacco market in the United States, 2010 Altria Group, Inc.: revenues & profitability Altria Group, Inc.: assets & liabilities Reynolds American Inc.: revenues & profitability Reynolds American Inc.: assets & liabilities Lorillard, Inc.: revenues & profitability Lorillard, Inc.: assets & liabilities United States tobacco market distribution: % share, by value, 2010(e) United States tobacco market value forecast: $ million, 201015 10 11 12 13 14 15 16
17
Figure 9:
18 19 23 23 27 27 30 30 31 32
Figure 10: Figure 11: Figure 12: Figure 13: Figure 14: Figure 15: Figure 16: Figure 17: Figure 18:

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MARKET OVERVIEW
MARKET OVERVIEW
Market definition
The tobacco market consists of the retail sale of cigarettes, loose tobacco, chewing tobacco, and cigars and cigarillos. The market is valued according to retail selling price (RSP) and includes any applicable taxes. Any currency conversions used in the creation of this report have been calculated using constant 2010 annual average exchange rates. For the purpose of this report the Americas comprises Argentina, Brazil, Canada, Chile, Colombia, Mexico, Venezuela, Peru, Uruguay and the US.

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MARKET OVERVIEW
Research highlights
The US tobacco market generated total revenues of $95.6 billion in 2010, representing a compound annual growth rate (CAGR) of 2.3% for the period spanning 2006-2010. Cigarettes sales proved the most lucrative for the US tobacco market in 2010, generating total revenues of $87.9 billion, equivalent to 91.9% of the market's overall value. The performance of the market is forecast to decelerate, with an anticipated CAGR of 2.1% for the fiveyear period 2010-2015, which is expected to lead the market to a value of $106.3 billion by the end of 2015.

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MARKET OVERVIEW
Market analysis
The US tobacco market grew at a sluggish rate during the period 2006-2010, as a result of sluggish sales growth in the cigarettes category. Overall market growth is expected to decelerate in the forthcoming five years. The US tobacco market generated total revenues of $95.6 billion in 2010, representing a compound annual growth rate (CAGR) of 2.3% for the period spanning 2006-2010. In comparison, the Chinese market increased with a CAGR of 6%, and the Japanese market declined with a CARC of -1.4%, over the same period, to reach respective values of $266.3 billion and $47.7 billion in 2010. Cigarettes sales proved the most lucrative for the US tobacco market in 2010, generating total revenues of $87.9 billion, equivalent to 91.9% of the market's overall value. In comparison, sales of cigars and cigarillos generated revenues of $3.7 billion in 2010, equating to 3.9% of the market's aggregate revenues. The performance of the market is forecast to decelerate, with an anticipated CAGR of 2.1% for the fiveyear period 2010-2015, which is expected to lead the market to a value of $106.3 billion by the end of 2015. Comparatively, the Chinese market will increase with a CAGR of 6.7%, and the Japanese market will decline with a CARC of -1%, over the same period, to reach respective values of $368 billion and $45.4 billion in 2015.

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MARKET VALUE
MARKET VALUE
The United States tobacco market grew by 2.2% in 2010 to reach a value of $95,599.9 million. The compound annual growth rate of the market in the period 200610 was 2.3%. Table 1: Year 2006 2007 2008 2009 2010(e) CAGR: 200610 Source: Datamonitor United States tobacco market value: $ million, 200610(e) $ million 87,153.9 88,937.1 91,515.5 93,532.8 95,599.9 million 65,633.4 66,976.3 68,918.0 70,437.2 71,993.8 % Growth 2.0 2.9 2.2 2.2 2.3% DATAMONITOR
Figure 1:
United States tobacco market value: $ million, 200610(e)
Source: Datamonitor
DATAMONITOR

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MARKET SEGMENTATION I
MARKET SEGMENTATION I
Cigarettes is the largest segment of the tobacco market in the United States, accounting for 91.9% of the market's total value. The cigars and cigarillos segment accounts for a further 3.9% of the market. Table 2: Category Cigarettes Cigars and Cigarillos Chewing tobacco Loose tobacco Total Source: Datamonitor United States tobacco market segmentation I:% share, by value, 2010(e) % Share 91.9% 3.9% 3.4% 0.8% 100% DATAMONITOR
Figure 2:
United States tobacco market segmentation I:% share, by value, 2010(e)
Source: Datamonitor
DATAMONITOR

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MARKET SEGMENTATION II
MARKET SEGMENTATION II
The United States accounts for 13.3% of the global tobacco market value. Asia-Pacific accounts for a further 50.8% of the global market. Table 3: Category Asia-Pacific Europe United States Africa and Middle East Rest of the World Total Source: Datamonitor United States tobacco market segmentation II: % share, by value, 2010(e) % Share 50.8% 30.3% 13.3% 2.1% 3.5% 100% DATAMONITOR
Figure 3:
United States tobacco market segmentation II: % share, by value, 2010(e)
Source: Datamonitor
DATAMONITOR

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MARKET SHARE
MARKET SHARE
Altria Group, Inc. is the leading player in the United States tobacco market, generating a 53.4% share of the market's value. Reynolds American Inc. accounts for a further 28.2% of the market. Table 4: Company Altria Group, Inc. Reynolds American Inc. Lorillard, Inc. Others Total Source: Datamonitor United States tobacco market share: % share, by value, 2010(e) % Share 53.4% 28.2% 8.5% 9.9% 100% DATAMONITOR
Figure 4:
United States tobacco market share: % share, by value, 2010(e)
Source: Datamonitor
DATAMONITOR

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FIVE FORCES ANALYSIS

The tobacco market will be analyzed taking tobacco manufacturers as players. The key buyers will be taken as retailers, and tobacco leaf farmers and other raw material suppliers as the key suppliers.
Summary
Figure 5: Forces driving competition in the tobacco market in the United States, 2010
Source: Datamonitor
DATAMONITOR
The US tobacco market is highly concentrated, with the top three players collectively accounting for 90% of the total market value. The US tobacco market has seen increasing legislation and government regulation with regards to smoking, which limits existing players and discourages new entrants. Moreover, with a new proposal to post graphic posters warning of the dangers of using tobacco products, is to be approved soon in the later part of 2010. This would certainly bring many more regulations into market. Furthermore, due to the dominance of large players such as Altria Group, Reynolds American and Lorillard, coupled with advertising restrictions in many states, new entrants would find it increasingly difficult to establish a brand. Also, because of the health implications associated with tobacco products, there are a number of benefits to consumers from using substitutes, which is why there is a moderate threat from substitute non-durable goods in this market. Rivalry in the market is boosted by the lack of product differentiation and the pressure placed on market players by the illicit cigarette trade.

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Buyer power
Figure 6: Drivers of buyer power in the tobacco market in the United States, 2010
Source: Datamonitor
DATAMONITOR
The retailers are considered as buyers in the tobacco market. The main retailers for the US tobacco market include independent retailers, service stations and supermarkets/hypermarkets. The concentration of retail outlets is relatively fragmented in the tobacco market, as there are a number of outlets where the products can be sold. In the US, independent retailers are the most dominant distribution channel, with 27.8% share of total distribution. Furthermore, tobacco products are just one of many products sold by most retailers, which illustrates that in most cases retailers are not reliant upon tobacco sales, which increases buyer power. Customers are likely to be loyal towards certain brands, so there is potentially some pull-through of end-consumer demand on retailers, which decreases buyer power to some extent. Overall, the buyer power in this market is moderate.

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Supplier power
Figure 7: Drivers of supplier power in the tobacco market in the United States, 2010
Source: Datamonitor
DATAMONITOR
Tobacco is an agricultural product and therefore key suppliers to the tobacco market include tobacco leaf farmers. These farmers lack power in the supply chain because of their smaller size, with many farms being family run businesses, particularly those in developing countries. Further inputs to the market include processing aids, humectants (which keep the tobacco moist and pliable), preservatives and brand-specific flavors. Other key inputs include packaging materials, such as paper/card, plastic, and foil to protect and preserve the products of this market. Companies such as Alcan Packaging, who are a leading global manufacturer of tobacco packaging, are key suppliers to the tobacco market. Alcan's inputs include in-line rotogravure printed hinge-lid blanks and soft packs. They are also the world's largest supplier of RYO (Roll Your Own) tobacco booklet covers, as well as printed OPP film (Oriented Polypropylene film), bundle wraps and tobacco pouches. Another global tobacco packaging supplier is Amcor. Due to the relative size of key suppliers, their respective influence over the market is increased. There are limited alternative raw materials in this market, so players are unlikely to switch supplier, which increases supplier power. Overall, supplier power is fairly moderate.

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New entrants
Figure 8: Factors influencing the likelihood of new entrants in the tobacco market in the United States, 2010
Source: Datamonitor
DATAMONITOR
Legislation and government regulation with regards to smoking also continue to grow in this market, for example, restrictions on smoking in public places and pictorial health warnings have been adopted in a number of US states. For instance, in May 2010, the US government proposed that convenience stores and other retailers in certain states be required to post graphic poster warnings of the dangers of using tobacco products. Current tobacco control strategies seek primarily to decrease the demand for cigarettes through measures that encourage individuals to adopt healthier behaviors, raising entry barriers. Moreover, with a possibility of the FDA taking over regulation of tobacco in USA, will bring more regulations in place, making it tough for new entrants. Furthermore, shelf-space in retail outlets is finite and retailers may be unwilling to stock products of an entirely new, unproven brand. Overall, there is a weak threat from new entrants to the US tobacco market.

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Substitutes
Figure 9: Factors influencing the threat of substitutes in the tobacco market in the United States, 2010
Source: Datamonitor
DATAMONITOR
Substitutes in the tobacco market may include various non-durable consumer goods, for example nicotine gum, nicotine patches, and herbal cigarettes. However, there are inter-segmental substitutes apparent within this market, alternatives to cigarettes and fine cut tobacco products include smokeless tobaccos, cigars and pipe tobacco. Players and consumers alike may substitute one tobacco product for another, with players who specialize in the manufacture of cigarettes diversifying into cigars for example. However, inter-segmental substitution still involves essentially the same product. The benefits of substituting tobacco products for alternate non-durable consumer goods are especially notable in concerns to consumer health, largely due to the health implications associated with smoking (e.g. increased risk of lung cancer, heart disease etc.). Furthermore, because of the addictive quality of nicotine present in tobacco products, many smokers who want to quit, attempt to do so by substituting tobacco products for products such as nicotine gum, or patches. These products fulfill the consumer's need for nicotine, without the harmful effects of inhaling smoke. Unlike tobacco products, which face restrictions on advertising in many markets, nicotine replacement products are highly promoted through a range of media. Overall, there is a moderate threat from substitutes in the US tobacco market.

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Rivalry
Figure 10: Drivers of degree of rivalry in the tobacco market in the United States, 2010
Source: Datamonitor
DATAMONITOR
The US tobacco market is highly concentrated, with leading players such as Altria Group, Reynolds American and Lorillard collectively holding 90% of the total market value. Product differentiation is essentially limited between the core tobacco products, which include: chewing tobacco, cigars and cigarillos, cigarettes and loose tobacco, which increases rivalry. Illicit tobacco supplies through smuggling and counterfeit trade impact upon players' revenues, which will serve to boost rivalry. The fairly slow market growth in the US tobacco market compared to other regions does very little to ease rivalry among the players. Overall, there is a moderate degree of rivalry in the US tobacco market.

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LEADING COMPANIES
LEADING COMPANIES
Altria Group, Inc.
Table 5: Altria Group, Inc.: key facts 6601 West Broad Street, Richmond, Virginia 23230, USA 1 804 274 2200 www.altria.com December MO New York DATAMONITOR
Head office: Telephone: Website: Financial year-end: Ticker: Stock exchange: Source: company website
Altria Group (Altria) is a diversified company which has business interests in tobacco, alcohol, food and financial services. The company operates through its subsidiaries that include Philip Morris USA, U.S. Smokeless Tobacco Company, John Middleton, Ste. Michelle Wine Estates, and Philip Morris Capital Corporation. In addition, Altria has 27.1% stake in SABMiller, one of the world's largest brewers. The company primarily operates in the US. Altria operates through five business segments: cigarettes, smokeless products, cigars, wine, and financial services. The cigarettes segment manufactures and markets cigarettes and smokeless tobacco products in the US through Altrias subsidiary Philip Morris USA. The company markets its products under brands like Marlboro, other premium brands such as Virginia Slims, Benson & Hedges, Parliament; and discount brands such as Basic and L&M among others. The smokeless segment manufactures and markets smokeless tobacco products through the companys subsidiary U.S. Smokeless Tobacco Company (USSTC). The company markets its products under the Copenhagen, Red Seal, Skoal and Husky brand names. The cigars segment manufactures and markets machine-made large cigars and pipe tobacco through Altrias subsidiary John Middleton (Middleton). The companys product portfolio comprises brands such as Black & Mild, Prince Albert, Wine Berry, Carter Hall, Middleton's and Kentucky Club. Altria operates in the wine segment through its subsidiary Ste. Michelle Wine Estates (SMWE), a producer of premium varietal and blended table wines. The key brands of the company include Chateau Ste, Michelle, Columbia Crest, Domaine Ste. Michelle, Villa, Conn Creek and Erath.
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LEADING COMPANIES
Altrias provides financial services through its subsidiary Philip Morris Capital Corporation (PMCC), an investment company engaged in leveraged and direct finance lease investments. The group revised its reportable segments to cigarettes and other tobacco products, cigars and financial services after it spun off Philip Morris International (PMI) in early 2008, and acquired Middleton in December 2007. In 2009, Altria acquired UST Inc., a holding company engaged in the manufacturing and marketing of moist smokeless tobacco products through U.S. Smokeless Tobacco Company and premium wines through Ste. Michelle Wine Estates. In February 2011, it was announced that two Altria Group Inc. subsidiaries plan to test-market "tobacco sticks", a form of smokeless tobacco, an alternative to conventional tobacco products. The company also plans to expand its Marlboro Snus smokeless tobacco nationwide. In May 2011, Altria Group Inc. introduced new filter cigarettes in Lithuania marketed under the L&M USpin brand name. Key Metrics The company recorded revenues of $24.4 billion in the financial year (FY) ended December 2010, an increase of 3.4% over FY2009. The net profit of the company was $3.9 billion in FY2010, an increase of 21.8% over FY2009. During the FY2010, the cigarettes division recorded revenues of $21.6 billion, an increase of 3.4% over 2009. The smokeless products division recorded revenues of $1.6 billion in FY2010, an increase of 13.6% over 2009. The cigars division recorded revenues of $560 million in FY2010, an increase of 7.7% over 2009.

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LEADING COMPANIES
Table 6: $ million
Altria Group, Inc.: key financials ($) 2006 18,790.0 12,022.0 104,270.0 64,651.0 175,000 2007 18,664.0 9,786.0 57,746.0 38,844.0 84,000 2008 19,356.0 4,930.0 27,215.0 24,387.0 10,400 2009 23,556.0 3,206.0 36,677.0 32,573.0 10,000 2010 24,363.0 3,905.0 37,402.0 32,175.0 10,000
Revenues Net income (loss) Total assets Total liabilities Employees Source: company filings
DATAMONITOR
Table 7: Ratio
Altria Group, Inc.: key financial ratios 2006 64.0% (70.5%) (3.4%) (10.5%) 62.0% 11.3% $107,371 $68,697 2007 52.4% (0.7%) (44.6%) (39.9%) 67.3% 12.1% $222,190 $116,500 2008 25.5% 3.7% (52.9%) (37.2%) 89.6% 11.6% $1,861,154 $474,038 2009 13.6% 21.7% 34.8% 33.6% 88.8% 10.0% $2,355,600 $320,600 2010 16.0% 3.4% 2.0% (1.2%) 86.0% 10.5% $2,436,300 $390,500
Profit margin Revenue growth Asset growth Liabilities growth Debt/asset ratio Return on assets Revenue per employee Profit per employee Source: company filings
DATAMONITOR

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LEADING COMPANIES
Figure 11: Altria Group, Inc.: revenues & profitability
Source: company filings
DATAMONITOR
Figure 12: Altria Group, Inc.: assets & liabilities
DATAMONITOR

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LEADING COMPANIES
Reynolds American Inc.

Table 8: Reynolds American Inc.: key facts 401 North Main Street, Winston-Salem, North Carolina 227101, USA 1 336 741 2000 1 336 741 0881 www.reynoldsamerican.com December RAI New York DATAMONITOR
Head office: Telephone: Fax: Website: Financial year-end: Ticker: Stock exchange: Source: company website
Reynolds American (RAI) is engaged in the manufacture and sale of cigarettes. It is a holding company, which was formed to facilitate the merger of RJR Tobacco Company with Brown & Williamson Tobacco Corporation, the US subsidiary of British American Tobacco (BAT) in 2004. RAI manufactures and sells cigarettes either independently or through joint ventures in France, Spain, Italy, and the US. The company operates through two reportable business segments: RJR Tobacco and American Snuff. The RJR Tobacco segment consists of the primary operations of R. J. Reynolds Tobacco Company. The American Snuff segment consists of the primary operations of American Snuff Co. and Lane while the two RAIs wholly owned subsidiaries, Santa Fe Natural Tobacco Company, Inc., referred to as Santa Fe and Niconovum AB is included in All Other segment. RAIs largest operating segment, RJR Tobacco, is the second largest cigarette manufacturer in the US. RJR Tobaccos largest selling cigarette brands are Camel, Kool, Pall Mall, Doral, Winston and Salem. RJR Tobacco also manages a contract manufacturing business through arrangements with British American Tobacco (BAT) affiliates and manages tobacco products sold to certain U.S. territories, U.S. duty-free shops and U.S. overseas military bases.RJR Tobacco owns cigarette manufacturing facilities in the Winston-Salem, North Carolina, and the Whitaker Park complex. The company's central distribution center and a pilot plant for trial manufacturing of new products are located at the Whitaker Park complex, Winston-Salem, North Carolina, the US. RJR Tobacco has a combined production capacity of approximately 160 billion cigarettes per year. RJR Tobacco offers two types of modern smoke-free tobacco, CAMEL Snus and CAMEL Dissolvables. CAMEL Snus is pasteurized tobacco in a small pouch that provides convenient tobacco consumption.

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LEADING COMPANIES
CAMEL Dissolvables include CAMEL Orbs, Sticks and Strips all of which are made of finely milled tobacco and dissolve completely in the mouth. American Snuff is the second largest smokeless tobacco products manufacturer in the US. American Snuff primary brands include its largest selling moist snuff brands, Grizlly and Kodiak. The company also distributes a variety of tobacco products including Winchester and Captain Black little cigars, and Bugler roll-your-own tobacco. American Snuffs primary manufacturing facility is located in Memphis, Tennessee. Other facilities are located in Clarksville, Tennessee, Winston-Salem, North Carolina; Bowling Green, Kentucky and Tucker, Georgia. The company markets its products to distributors, wholesalers and other direct customers, some of which are retail chains. Santa Fe manufactures and markets cigarettes and other tobacco products under the Natural American Spirit brand, as well as manages RJR Tobaccos super premium cigarette brands Dunhill and State Express 555, which are licensed from BAT. In March 2011, Reynolds American Inc. sold off its subsidiary Lane Ltd. to Scandinavian Tobacco Group A/S for $205 million. Key Metrics The company recorded revenues of $8.6 billion in the financial year (FY) ended December 2010, an increase of 1.6% over FY2009. The net profit of the company was $1.1 billion in FY2010, an increase of 15.7% over FY2009. During FY2010, the RJR Tobacco division recorded revenues of $7.4 billion, an increase of 0.2% over 2009. The American Snuff division recorded revenues of $719 million in FY2010, an increase of 6.8% over 2009. The all other division recorded revenues of $482 million in FY2010, an increase of 17% over 2009.

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LEADING COMPANIES
Table 9: $ million
Reynolds American Inc.: key financials ($) 2006 8,510.0 1,210.0 18,178.0 11,135.0 7,500 2007 9,023.0 1,308.0 18,629.0 11,163.0 7,100 2008 8,845.0 1,338.0 18,154.0 11,917.0 6,600 2009 8,419.0 962.0 18,009.0 11,511.0 6,400 2010 8,551.0 1,113.0 17,078.0 10,568.0 5,700
DATAMONITOR
Table 10: Ratio
Reynolds American Inc.: key financial ratios 2006 14.2% 3.1% 25.2% 39.8% 61.3% 7.4% $1,134,667 $161,333 2007 14.5% 6.0% 2.5% 0.3% 59.9% 7.1% $1,270,845 $184,225 2008 15.1% (2.0%) (2.5%) 6.8% 65.6% 7.3% $1,340,152 $202,727 2009 11.4% (4.8%) (0.8%) (3.4%) 63.9% 5.3% $1,315,469 $150,313 2010 13.0% 1.6% (5.2%) (8.2%) 61.9% 6.3% $1,500,175 $195,263
Profit margin Revenue growth Asset growth Liabilities growth Debt/asset ratio Return on assets Revenue per employee Profit per employee Source: company filings
DATAMONITOR

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LEADING COMPANIES
Figure 13: Reynolds American Inc.: revenues & profitability
DATAMONITOR
Figure 14: Reynolds American Inc.: assets & liabilities
DATAMONITOR

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LEADING COMPANIES
Lorillard, Inc.
Table 11: Head office: Telephone: Website: Financial year-end: Ticker: Stock exchange: Source: company website Lorillard, Inc.: key facts 714 Green Valley Road, Greensboro, North Carolina 24708 7018, USA 1 336 335 7000 www.lorillard.com December LO New York DATAMONITOR
Lorillard is a tobacco company engaged in the manufacture and marketing of cigarettes. It offers various cigarette products in premium and discount segments. The company primarily operates in the US. Its products are manufactured at Greensboro, North Carolina facility. The company's flagship brand includes Newport, a menthol-flavored cigarette brand. Newport accounted for 90% of the total sales of the company in 2010. The company also markets cigarettes through five additional brands that include Kent, True, Maverick and Old Gold. These five brands are marketed in 43 different product offerings which vary in taste, flavor, length and packaging. Lorillard uses burley, flue-cured and aromatic tobaccos which are grown in Turkey and other near Eastern countries to manufacture its tobacco products. An affiliate of Reynolds American Inc. (RAI) manufactures all of Lorillards reconstituted tobacco pursuant to its specifications. Lorillard purchases more than 66% of the domestic leaf tobacco from Alliance One International. The company has 29 storage warehouses at Danville, Virginia facility. The company produces cigarettes at their Greensboro, North Carolina manufacturing plant, which has a production capacity of approximately 200 million cigarettes per day and approximately 50 billion cigarettes per year. Lorillards subsidiaries include Lorillard Tobacco Company (Delaware), Lorillard Licensing Company (North Carolina) and One Park Media Services, Inc. (Delaware). Key Metrics The company recorded revenues of $5.9 billion in the financial year (FY) ended December 2010, an increase of 13.4% over FY2009. The net profit of the company was $1 billion in FY2010, an increase of 8.5% over FY2009.

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LEADING COMPANIES
Table 12: $ million
Lorillard, Inc.: key financials ($) 2006 3,755.0 826.0 2,759.0 1,464.0 2007 3,969.0 898.0 2,600.0 1,587.0 2,800 2008 4,204.0 887.0 2,321.0 1,690.0 2,800 2009 5,233.0 948.0 2,575.0 2,488.0 2,700 2010 5,932.0 1,029.0 3,296.0 3,521.0 2,700
DATAMONITOR
Table 13: Ratio
Lorillard, Inc.: key financial ratios 2006 22.0% 5.2% (1.3%) 0.5% 53.1% 29.7% 2007 22.6% 5.7% (5.8%) 8.4% 61.0% 33.5% 2008 21.1% 5.9% (10.7%) 6.5% 72.8% 36.0% 2009 18.1% 24.5% 10.9% 47.2% 96.6% 38.7% 2010 17.3% 13.4% 28.0% 41.5% 106.8% 35.1%
Profit margin Revenue growth Asset growth Liabilities growth Debt/asset ratio Return on assets Source: company filings
DATAMONITOR

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LEADING COMPANIES
Figure 15: Lorillard, Inc.: revenues & profitability
DATAMONITOR
Figure 16: Lorillard, Inc.: assets & liabilities
DATAMONITOR

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DISTRIBUTION
MARKET DISTRIBUTION
Independent Retailers form the leading distribution channel in the United States tobacco market, accounting for a 27.8% share of the total market's value. Service Stations accounts for a further 21.5% of the market. Table 14: Channel Independent Retailers Service Stations Supermarkets / hypermarkets Others Total Source: Datamonitor United States tobacco market distribution: % share, by value, 2010(e) % Share 27.8% 21.5% 11.7% 39.0% 100% DATAMONITOR
Figure 17: United States tobacco market distribution: % share, by value, 2010(e)
Source: Datamonitor
DATAMONITOR

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MARKET FORECASTS
MARKET FORECASTS
Market value forecast
In 2015, the United States tobacco market is forecast to have a value of $106,282.5 million, an increase of 11.2% since 2010. The compound annual growth rate of the market in the period 201015 is predicted to be 2.1%. Table 15: Year 2010 2011 2012 2013 2014 2015 CAGR: 201015 Source: Datamonitor United States tobacco market value forecast: $ million, 201015 $ million 95,599.9 97,695.6 99,818.9 101,968.8 104,146.1 106,282.5 million 71,993.8 73,572.1 75,171.1 76,790.1 78,429.8 80,038.6 % Growth 2.2% 2.2% 2.2% 2.2% 2.1% 2.1% 2.1% DATAMONITOR
Figure 18: United States tobacco market value forecast: $ million, 201015
Source: Datamonitor
DATAMONITOR

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MACROECONOMIC INDICATORS
Table 16: Year 2006 2007 2008 2009 2010(e) Source: Datamonitor United States size of population (million), 200610 Population (million) 298.4 301.4 304.2 306.7 309.1 % Growth 1.0% 1.0% 0.9% 0.8% 0.8% DATAMONITOR
Table 17: Year 2006 2007 2008 2009 2010(e)
United States gdp (constant 2000 prices, $ billion), 200610 Constant 2000 Prices, $ billion 11,509.5 11,733.0 11,697.8 11,288.4 11,627.0 % Growth 2.7% 1.9% (0.3%) (3.5%) 3.0% DATAMONITOR
Source: Datamonitor
Table 18: Year 2006 2007 2008 2009 2010(e)
United States gdp (current prices, $ billion), 200610 Current Prices, $ billion 13,475.5 14,129.5 14,627.9 14,065.8 14,725.5 % Growth 6.0% 4.9% 3.5% (3.8%) 4.7% DATAMONITOR
Source: Datamonitor

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Table 19: Year 2006 2007 2008 2009 2010(e)
United States inflation, 200610 Inflation Rate (%) 3.2% 2.9% 3.8% (0.4%) 1.6% DATAMONITOR
Source: Datamonitor
Table 20: Year 2006 2007 2008 2009 2010(e)
United States consumer price index (absolute), 200610 Consumer Price Index (2000 = 100) 117.1 120.4 125.0 124.6 126.6 DATAMONITOR
Source: Datamonitor
Table 21: Year 2006 2007 2008 2009 2010
United States exchange rate, 200610 Exchange rate (/$) 1.2547 1.3683 1.4633 1.3905 1.3279 DATAMONITOR
Source: Datamonitor

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APPENDIX
APPENDIX
Methodology
Datamonitor Industry Profiles draw on extensive primary and secondary research, all aggregated, analyzed, cross-checked and presented in a consistent and accessible style. Review of in-house databases Created using 250,000+ industry interviews and consumer surveys and supported by analysis from industry experts using highly complex modeling & forecasting tools, Datamonitors in-house databases provide the foundation for all related industry profiles Preparatory research We also maintain extensive in-house databases of news, analyst commentary, company profiles and macroeconomic & demographic information, which enable our researchers to build an accurate market overview Definitions Market definitions are standardized to allow comparison from country to country. The parameters of each definition are carefully reviewed at the start of the research process to ensure they match the requirements of both the market and our clients Extensive secondary research activities ensure we are always fully up-to-date with the latest industry events and trends Datamonitor aggregates and analyzes a number of secondary information sources, including: National/Governmental statistics International data (official international sources) National and International trade associations Broker and analyst reports Company Annual Reports Business information libraries and databases
Modeling & forecasting tools Datamonitor has developed powerful tools that allow quantitative and qualitative data to be combined with related macroeconomic and demographic drivers to create market models and forecasts, which can then be refined according to specific competitive, regulatory and demand-related factors Continuous quality control ensures that our processes and profiles remain focused, accurate and up-to-date

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APPENDIX
Industry associations
International Tobacco Growers' Association No. 30 - A, 1 dt, 6000-081 Castelo Branco, Portugal Tel.: 352 272 325 901 Fax: 352 272 325 906 www.tobaccoleaf.org
Related Datamonitor research

Industry Profiles Global Tobacco Tobacco in Canada Tobacco in Mexico Tobacco in Brazil Tobacco in France Tobacco in Germany Tobacco in the United Kingdom Tobacco in Belgium Tobacco in Italy Tobacco in the Netherlands Tobacco in Spain Tobacco in the Czech Republic Tobacco in Denmark Tobacco in Hungary Tobacco in Norway Tobacco in Russia Tobacco in Poland Tobacco in Sweden Tobacco in Europe Tobacco in Australia
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APPENDIX
Tobacco in China Tobacco in India Tobacco in Japan Tobacco in Singapore Tobacco in South Korea Tobacco in Taiwan Tobacco in Asia-Pacific Tobacco in South Africa

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APPENDIX
Disclaimer
All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, Datamonitor plc. The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the findings, conclusions and recommendations that Datamonitor delivers will be based on information gathered in good faith from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such Datamonitor can accept no liability whatever for actions taken based on any information that may subsequently prove to be incorrect.

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ABOUT DATAMONITOR
ABOUT DATAMONITOR
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INDUSTRY PROFILE

Tobacco in the United States

t: +61 2 8705 6900 f: +61 2 8705 6901 e: apinfo@datamonitor.com

United States - Tobacco

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Market value forecast

United States - Tobacco

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Disclaimer ABOUT DATAMONITOR Premium Reports Summary Reports Datamonitor consulting

United States - Tobacco

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United States - Tobacco

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United States - Tobacco

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United States - Tobacco

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United States - Tobacco

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United States - Tobacco

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United States tobacco market value: $ million, 200610(e)

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United States tobacco market segmentation I:% share, by value, 2010(e)

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United States tobacco market segmentation II: % share, by value, 2010(e)

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United States tobacco market share: % share, by value, 2010(e)

United States - Tobacco

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FIVE FORCES ANALYSIS

FIVE FORCES ANALYSIS

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FIVE FORCES ANALYSIS

United States - Tobacco

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FIVE FORCES ANALYSIS

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FIVE FORCES ANALYSIS

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FIVE FORCES ANALYSIS

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FIVE FORCES ANALYSIS

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United States - Tobacco

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United States - Tobacco

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Figure 11: Altria Group, Inc.: revenues & profitability

Source: company filings

Figure 12: Altria Group, Inc.: assets & liabilities

Source: company filings

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Reynolds American Inc.