Tobacco Industry Facing Tough Market Conditions

Industry analysts say the tobacco industry could see an accelerated decline in sales over the next few years, largely because of more health-conscious consumers and the country’s anti-tobacco movement, according to Dow Jones and the American Wholesale Marketers Association (AWMA).

“We have highlighted accelerated volume declines as one of the bigger risks the industry faces," said Janice Hofferber, a Moody’s Investors Service Vice President who closely follows tobacco and consumer products.

At least one tobacco company said it expects unit volumes of the overall U.S. cigarette industry to decline by 2.5-3% a year for the next several years. The decline rate has historically been about 2% a year.

In general, the decrease in cigarette sales has been driven by public smoking bans, more health-conscious consumers and the steadily increasing prices charged by cigarette sellers in order to offset higher federal and state taxes.

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