Tobacco covers cigarettes, cigars, smokeless tobacco, vapor and heated products, and leaf-tobacco suppliers. MoatScope covers ten companies here. Three have a wide moat, one a narrow moat and six none.
How the industry makes money
Tobacco companies earn high margins on products whose customers are unusually loyal. Cigarette volumes fall steadily, but price increases have long offset the decline, and the business needs little capital, so most of the cash goes back to shareholders. The leaders are also building smoke-free nicotine products.
Where the moats are
Brands are the core, and regulation reinforces them: advertising limits make it very hard for newcomers to build competing brands.
- Philip Morris International: tobacco and nicotine products outside the United States, led by Marlboro.
- Altria: the leading U.S. tobacco company, which markets Marlboro in the United States.
- British American Tobacco: a global portfolio of cigarette and next-generation brands.
Turning Point Brands has a narrow moat. Leaf suppliers such as Universal and Pyxus, and vapor maker RLX Technology, carry none. Philip Morris International scores 72 on MoatScope's quality scale and Altria 70.
What wears moats down
Smoking keeps declining, taxes and regulation keep rising, litigation is a permanent risk, and competition is fiercer in newer nicotine categories than in cigarettes.
What to watch
- Cigarette volume declines versus price increases.
- Growth of smoke-free products.
- Regulation and excise taxes.
Moat ratings and quality scores on this page update as companies report. Price versus fair value for every company in the industry is in the screener.