Product innovation will bolster demand, however slightly, during long-term decline
New York, NY (PRWEB) September 11, 2014
The Cigarette and Tobacco Products Wholesaling industry is in long-term decline. Health conscious Canadian consumers are currently less inclined to pick up smoking than ever before. At the same time, federal and provincial governments have levied higher excise taxes on cigarette products in an effort to raise revenue and reduce consumption.
According to IBISWorld Industry Analyst Will McKitterick, “Tobacco wholesalers also faced heightened competition from the largest Cigarette producer selling in the Canadian market.” Industry operators have been forced to compete with Imperial Tobacco Canada, who produces more than half of the cigarettes sold in Canada. Rising taxes and tobacco prices convinced the industry leader to develop its own distribution divisions in order to bypass wholesalers and sell directly to downstream markets. This allows Imperial to undercut the price of wholesalers, ensuring demand from retailers for cigarettes going to Imperial instead of traditional distributors. This phenomenon, known as “wholesale bypass”, has triggered a swift decline in the number of industry operators.
Industry revenue is expected to fall further during the next five years as wholesalers struggle to stay afloat amidst declining demand. Wholesalers will have to fight for shrinking market share as increasingly health conscious Canadian consumers kick their cigarette habit. “Increased government taxes and regulations will help drive wholesalers out of business as manufacturers and retailers work to make up for higher prices by cutting out middlemen wholesalers,” says McKitterick. In an effort to shore up demand, operators will turn to selling electronic cigarettes and other “alternative” tobacco products, such as snuff and snus. Sales of innovative tobacco products will help bolster demand, but not enough to prevent it from falling at an average annual rate in 2019.
For more information, visit IBISWorld’s Cigarette & Tobacco Products Wholesaling in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry acquires packaged cigarettes and other tobacco products from manufacturers and sells the goods to various retail stores, such as supermarkets, convenience stores, specialized tobacco stores and bars. They may also sell to other wholesalers. The sales and distribution offices of tobacco product manufacturers are included in this industry.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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